By Keith McCoy
City City Hall 2
Mountain Brook is a debt-free city.
On Oct. 1, the city paid off its balance on bonds from 2007. At that time, the city had issued $5 million in bonds, said the city’s finance director Steven Boone, and was paying 3.75 to 4 percent interest on the bonds. The choice to pay off the bonds was made because the city had the cash to pay them and interest rates had dropped.
“The reason we paid the debt off is basically because we were paying 4 percent interest, and we could either refinance at 2 percent or pay them off,” Boone said.
The city paid the principal amount on the bonds, around $3.7 million, and will now save $360,000 a year in debt service payments. Boone said the city will set some of that money aside in case unplanned expenses come up in the future.
“We’re very fiscally conservative, as a result we have implemented a funding depreciation program,” Boone said. “…We put money away every year to pay for those long-term costs.”
Long-term costs include new police cars, fire trucks, equipment or new buildings. The city plans for when those items need to be replaced and sets aside a fraction of the cost each year. That way, Boone said, the city can pay for the item in full rather than incur debt.
In addition to the city’s fiscal conservatism, Boone said the city council plays a large role in the city’s ability to save and pay off debt. Even with savings growing over time, Boone said that money “doesn’t burn a hole in their pocket.”
“I think it speaks a lot to the prudence of our elected officials,” Boone said. “It’s not common. Most cities have debt.”
Mountain Brook City Manager Sam Gaston said Boone’s work also helps keep the city financially sound.
“Because we have the best financial director in the Southeast and a very fiscally conservative city council and a great set of department heads, it enables us to be debt free,” Gaston said.
The city could remain debt-free for a while longer, Boone said, and he doesn’t foresee any plans that would require the city to issue debt. Most of the buildings, including the municipal complex, were built recently and should not need to be replaced.
Two of the city’s fire stations are older and might need to be redone, Boone said, but he thinks planning can prevent the need for more debt.
“Because of this funded depreciation program we have, I think we’d have enough cash in the bank to plan it,” Boone said.
