The city of Commerce’s hope of using some of the next round of special purpose local option sales tax revenue to help pay off water and sewer debt has been dashed.
Most of the debt Commerce is trying to cover comes from the state-mandated construction of the new waste treatment plant.
City can't use SPLOST on bond debt
“They are revenue bonds,” noted Mayor Charles L. Hardy Jr. at a recent city work session for SPLOST. “They’re not general obligation bonds.”
That difference is the sticking point.
Revenue bonds obligate the city to repay the debt from revenue generated by the utility system — water and sewerage in this case. Sales tax revenue cannot be applied toward making the bond payments.
Commerce residents, starting in 2011, will have to pony up an additional $375,000 a year to make payments on $12.7 million in bonds issued in 2006. The city, when it set up the revenue bonds, opted to make interest-only payments for the first five years in the hope that it could spread that $375,000 over more people and minimize any rate increases.
Instead, a housing bust shut off residential growth, and a drought resulted in a per capita reduction in the use of water just as the higher payments come due.
Currently, Commerce has a flat rate that is the same for residential and commercial. It could move to a tiered rate under which those who use more water also pay higher rates, or it could implement higher commercial rates - or do some combination of the two.
The city council again discussed the matter at its work session Monday night, looking over three scenarios for rate increases ranging from 50 cents per thousand gallons to $1 per thousand increases each for water and sewer. At the request of Ward 4 councilman Clark Hill, staff agreed to come up with a specific dollar amount of an increase that will cover the legal requirements of the bond document.
That difference is the sticking point.
Revenue bonds obligate the city to repay the debt from revenue generated by the utility system — water and sewerage in this case. Sales tax revenue cannot be applied toward making the bond payments.
Commerce residents, starting in 2011, will have to pony up an additional $375,000 a year to make payments on $12.7 million in bonds issued in 2006. The city, when it set up the revenue bonds, opted to make interest-only payments for the first five years in the hope that it could spread that $375,000 over more people and minimize any rate increases.
Instead, a housing bust shut off residential growth, and a drought resulted in a per capita reduction in the use of water just as the higher payments come due.
Currently, Commerce has a flat rate that is the same for residential and commercial. It could move to a tiered rate under which those who use more water also pay higher rates, or it could implement higher commercial rates - or do some combination of the two.
The city council again discussed the matter at its work session Monday night, looking over three scenarios for rate increases ranging from 50 cents per thousand gallons to $1 per thousand increases each for water and sewer. At the request of Ward 4 councilman Clark Hill, staff agreed to come up with a specific dollar amount of an increase that will cover the legal requirements of the bond document.
What gets me about this article is about SPLOST usage. How long have these guys been in their elected office? You would think that a mayor with this kind of tenure would know the law and what the difference in bonds is.