Council withholds final approval on $1.6 million loan that mayor says will cut debt payments by $11,000 per year
During an emergency meeting last Thursday afternoon, the Flomaton Town Council gave its tentative approval to Mayor Dewey Bondurant, Jr., to borrow about $1.6 million to consolidate most of the town's debt and reduce monthly debt payments by about $11,000 per month.
Bondurant said he sought proposals from Escambia County Bank, United Bank, Bank of Brewton and First Bank. He noted Escambia County Bank could not commit without more financial information but told the council United Bank had agreed to the loan of $1,557,890 for 15 years with a ballon every five years. The interest rate will be fixed at 2.919 percent for 60 months with a collateral being a general obligation warrant.
Bondurant said he sent letters to four banks and received quotes from United Bank and Bank of Brewton.
Bondurant told the council the loan would pay off most, if not all, of the town's debt and increase the cash flow by about $11,000 per month.
He said the money would be used to pay off the lines of credit at United Bank and Escambia County Bank, as well as debt on town hall and the debt associated with the four-laning of Highway 113.
Bondurant said he and town accountant Robert Hudson would use the loan to formalize the budget and report back to the council on what debt would be paid off. He did note that the town has a debt with John Deere at 0 percent and would not be included in the consolidation.
“I'd like to get the ball rolling and Robert and I can work on a budget,” Bondurant said.
He said he would bring a budget for the council to approve at its December meeting.
Councilman Charlie Reardon said the town needed to quit going to the lines of credit if this is done.
Bondurant also told the council that cuts in expenses will be included in the new budget. He added that the debt on town hall is at 5.5 percent currently and would be paid off with the lower interest rate.
The mayor said he and Hudson would look at the town's debt and recommend which debt should be included in the payoff, based on the interest rates currently charged.
He also informed the council that the town will be receiving about $50,000 from the CARES act, due to COVID-19.
“I promise you I am trying to do everything I can,” Bondurant said.
Councilman Jim Johnson made the motion to accept the United Bank offer, noting a motion needed to be made to continue discussion. Councilwoman Lillian Dean issued the second.
Dean said if the town is going to borrow $1.6 million she would like to see what the town would be paying off before the town entered into the agreement.
“As Robert and I do the budget, we will decide which ones we will pay off,” Bondurant said. “I cannot do a budget without this loan. It won't work.”
“We're going to pay off everything we can and decide that when we do the budget,” Bondurant added.
He also said the council would hold a budget workshop so everybody would know exactly what was being paid off before the budget was brought to the table.
Town Attorney Chuck Johns told the council that at the current interest rates and what the town is paying each month, the town cannot balance the budget.
“I agree with Mrs. Dean,” said Councilman Roger Adkinson. “I understand the need to have the loan before the budget. But that information could have been put on a piece of paper to show what we will pay off. Before we agree to get the loan, we need to be privy to that information.”
“We're sitting here to give you permission to get a loan and you and Robert decide what to pay off,” Adkinson said.
Bondurant said he would not sign the loan documents until the council approved it.
He did ask that the council vote to approve the loan in principal that he would bring it back to the table for final approval, which should be at the Dec. 14 meeting.
Bondurant said the town is currently paying 5 percent on the lines of credit and 5 percent on town hall. He also noted that town has lost about $120,000 per year in Alabama Power franchise fees since Air Products shut down and noted that Church's Chicken closed which had generated sales tax revenue for the town.
