Buoyed by the confidence Decatur can take on more debt, the City Council appears poised to borrow the estimated $7 million it will cost to implement a Sixth Avenue streetscape plan.
“Decatur is in a very, very advantageous position,” said Johnny Dill, who frequently advises the city on financial matters.
Dill, executive vice president of Frazier Lanier Co., said Decatur is rated AA by Standard & Poor’s, and Aa2 by Moody. The ratings are not the highest offered by the bond rating companies, but reflect a low risk of default.
The proposed streetscape involves a 1 mile section of Sixth Avenue from Wilson Street Northeast to Prospect Drive Southeast. The city would replace much of the center turn lane with a landscaped median and would revamp the appearance along the sides of the street.
The plan, prepared for the city by Volkert Inc., also would eliminate two sets of traffic signals and change traffic flow around Delano Park to one way. Volkert received a $100,000 fee for the plan, most paid by a state grant.
Stratton Orr, chairman of a Decatur-Morgan County Chamber of Commerce subcommittee focused on the project, said the $7 million cost is a rough estimate and the number could change as Volkert finalizes the plan.
Orr said Decatur is in line to apply for an $800,000 state grant that would fund sidewalks with conduits underneath so utilities and cable can be buried. The grant would require a $160,000 city match.
The council will consider Monday approving the grant application. A previous application for the grant was turned down, and Orr said there’s no guarantee Decatur would receive it this time.
Council President Jacob Ladner and fellow councilmen Carlton McMasters, Kyle Pike and Hunter Pepper agreed the city can afford to increase its debt, and they don't see a need to delay the project until the state decides whether to award the grant.
With a $56 million annual budget, Chief Financial Officer Kyle Demeester said, the city owes $50.85 million on six different warrants payable through 2037. This year’s debt service is just over $4 million, and the highest annual debt service — just over $6 million — is due next year. The debt service then falls annually until it’s paid off.
Dill said rates on tax-exempt bonds are at a 100-year low, and the city is well positioned to borrow more.
“Their debt service compared to their overall budget is very low,” Dill said. “They have the capacity in which they can afford a lot on an annual basis. That’s why their ratings are so high.”
Dill said the bond market "changes every hour and every minute," so interest rates can change quickly. While they're extremely low now, he predicts inflation will drive them higher.
A bond at a 2% interest rate would mean a $370,000 per month debt service over a 20-year period, Dill estimated.
"That's conservative," Dill said. "And I haven't had any specific discussions on the amount and range of the bonds they would want to purchase. They determine what they want."
He said the city can lock in this low interest rate “so people now can enjoy projects just as much as people in the future can."
Dill said the City Council is in a position “where they have the ability to do more projects now."
Pike said he supports going to the bond market for the Sixth Avenue project because “it was the No. 1 topic in One Decatur,” a comprehensive plan developed in 2018 that received input from about 1,000 Decatur residents.
“I’ve had tons of good feedback in District 2,” Pike said. “And we’re in a good position to fund the project.”
'The only way'
Pepper said he doesn’t like going into debt but “this is the only way” and the city’s entrances need help. He said he wishes the city could afford to improve all of its entrances.
“I want people to say, ‘Oh wow, this place is nice!’” Pepper said. “The bridge is beautiful and the river is great, and we don’t take advantage of the waterfront like we should.”
Ladner said the council has the financial ability to do some “quality of life” projects like the Sixth Avenue streetscape. He pointed out that the city has $25 million in reserves, including about $6 million in its unassigned fund balance.
“If we don’t put this money to good use, the taxpayers are going to want their money back,” Ladner said. “This is a quality of life project that will drive residential growth.”
Councilman Billy Jackson said the city has at least four other main entrances to go along with this Sixth Avenue entrance from the north. These are U.S. 31 South from Hartselle, Alabama 67 from Interstate 65 and Priceville, Alabama 20 from Courtland and Town Creek and Alabama 24 from Moulton.
"We have so many entrances and they only want to do a fifth of our entrances," Jackson said. "It makes no sense to spend so much money on one corridor."
Jackson said the council shouldn't go to the bond market just because Dill says it should because "his job is to get us to go to the market." He added the council needs to create a priority list "before it runs to the bond market just because the chamber or (Decatur Downtown Redevelopment Authority) wants us to do one of their projects. We need to do projects that have an actual impact on the city of Decatur."
Orr said Volkert consultants Bryan Bays and Jay Dickson are finished with most of the plan, which will need Alabama Department of Transportation approval because Sixth Avenue is a state road.
He said Volkert is only waiting on AT&T to finish a study on how much it would cost the city for AT&T to move its lines underground. Earlier this month, the City Council approved paying AT&T $18,000 to do this study.
McMasters said he supports the streetscape project but he would like to know the ongoing maintenance costs that the city would take on after its completion. Portions of the plan would include landscaping that would have to be maintained by Parks and Recreation.
Parks and Recreation manages the contractor for landscaping maintenance of city rights of way and properties, and Superior Lawn Care currently has that contract.
However, Parks and Recreation Director Jason Lake said Superior officials couldn’t get an estimate on the ongoing upkeep from the proposed streetscape because they don’t know the kind of planned greenery or how much would be needed.