Pay-as-you-go option for capital improvement passes in Alabama

Alabama local governments have an alternative way to fund capital improvements after voters approved a Nov. 8 ballot measure that will open up special tax revenue for pay-as-you-go projects.

Amendment 6 allows local officials to access a pool of funds traditionally set aside for bond debt service payments to now pay up front for piecemeal capital improvements.

By granting access to a pre-determined funding framework, the measure will give city officials more flexibility in determining the size or timeline of a particular project, while limiting the amount of interest-bearing debt needed to fund improvements, state rep Mike said of the District 10 Ball, which presented the funding proposal to the state legislature in February. Ultimately, this translates into net savings for municipalities.

The Alabama State Capital Building in Montgomery, Alabama.

Bloomberg News

“The constitutional amendment was already in place, the tax was in place and the money is coming in,” Ball said. “Municipalities didn’t want to have to go into debt to fund projects.”

The measure received strong bipartisan support from state legislatures ahead of the vote.

Mayor Ron Anders Jr. of Auburn, Mayor Tommy Battle of Huntsville and Mayor Randall Woodfin of Birmingham in commentary urged voters to approve the measure, saying Alabama’s capital funding system is “antiquated” and based on “decades-old deep regulations.” within the legal system of Alabama.”

“Some cities have to borrow money at interest to build a fire station instead of paying for it with their earnings,” the trio said in the comment. “It hurts the citizens of Alabama when their local governments have to shoulder cumbersome interest and loan closing costs in situations where they should be able to pay.”

Ball said the approved proposal means city officials now have the ability to quickly access smaller sums of money than is possible through traditional bond issuance, expanding the scope of projects that cities and counties can independently undertake.

This will help communities match projects and funding to the pace of their individual economic development, Ball said.

Huntsville, the state’s largest and fastest growing city, has nearly doubled its population in the last 10 years and its economy is growing rapidly. The city, and others like her who seek wide-ranging improvements in transportation and business infrastructure to accommodate economic growth, will benefit from the proposal and the additional flow of funding that will result.

“There’s tons of stuff, and I’ll let the big heads of town figure it out,” Ball said. “But we’ve got more things to do in Huntsville than we’ll ever have money because we’re growing so fast, and this is going to help to be one step ahead of the growth.”