Town of Signal Mountain officials are considering changing the town’s debt policy for the 2016-17 budget year in regards to how they seek to limit the town’s annual debt obligations each year.
Currently, the town’s debt policy states that the Town Council must “seek to limit total outstanding debt obligations to 25 percent of operating expenditures.”
However, officials said trying to meet that standard has been next to impossible, considering the $7 million loan that was taken out for Signal Mountain High School and the recent $3 million dollar loan for a new Public Works facility, as well as numerous other construction projects for the town.
“Right now we’re just looking at options at how we can make this policy more suitable for the town,” said Town Manager Boyd Veal. “We have to reasonably be able to try to accomplish meeting our policy.”
The town reviews its debt policy annually in conjunction with its budget process. Veal said that review was what brought up discussion of potentially changing the policy.
“It’s not something that jumped at us out of nowhere,” he said.
Along with the 25 percent cap as compared to the town’s operating budget, the current debt policy includes a 35 percent soft limit on variable-rate debt. Veal said both were borne of an era with a different economy and tax environment.
The council is still discussing how exactly they might change the policy, he said. Options such as adjusting the allowable total percentage of debt compared to the operating budget and changing a minimum that the town must pay on its outstanding debt obligations each year are being considered, though Veal said there is still a lot of conversation to be had.
However, two things, he said, were clear.
First, the council would not change how the town approaches searching for the best available loan and debt options.
“We’ve always tried to limit overall exposure to debt,” he said. “Practicality has been what we aim for.”
Second, the council isn’t looking to heavily restrict how much debt the town could take on. Town officials at a recent planning meeting said they were concerned that such a restriction would prevent the town from pursuing certain loans.
“If you get too wrapped up in debt limits, we could miss good opportunities,” Mayor Dick Gee said during the meeting. “We don’t want to limit the town strategically.”
The town currently has several capital projects that loan options could be used for, such as the new Public Works building and a new fire station. Officials said “responsible” loan options may also be considered for the MACC, which is facing a potential rehabilitation project and construction in the future.