The Meridian City Council is further exploring a potential bond issue to pay for infrastructure improvements and recreation upgrades.

Tray Hairston of Butler Snow, LLP, who has assisted the city in previous bond issues, gave the council an update on where the money would come from during a work session last week. 

Hairston said his understanding is that the city wants a $15 million bond for roads and bridges. That amount, over a 20-year repayment plan and roughly 4.5% interest would make the city’s annual debt obligation between $1.1 million and $1.2 million per year, he said, which could be paid for using the city’s allocation of internet use tax.

Hairston said he used the 4.5% interest rate as a conservative estimate for his calculations, but the city was likely to receive a rate closer to 4%.

Currently, the city brings in between $2.2 million and $2.4 million in internet use tax funds under the Mississippi Infrastructure Modernization Act, which was created by the legislature in 2018. MIMA sends a portion of the 7% sales tax for online and out-of-state purchases back to local governments for infrastructure improvements.

In the legislation, the portion of the tax sent to local governments would increase each year until maxing out in 2023. Hairston said Meridian is projected to receive about $3 million in use tax annually beginning next year.

The Meridian City Council previously passed a $6 million paving bond in 2020 and a second $6 million paving bond in 2021, with the debt payments made using the use tax funds, Hairston said. The total debt service for the two bonds, he said, is about $1.2 million each year.

Should the council choose, Hairston said the city’s use tax revenue should be enough to cover the two previous bonds and a new $15 million bond. The city, however, would be issuing general obligation bonds which are not tied to a particular funding source. Any changes or shortfalls in the use tax revenue over the 20-year repayment term would have to be made up by cutting from other line items or through a tax increase.

While no council members voiced opposition to the bond issue, Ward 2 Councilman Dwayne Davis and Councilwoman Ty Bell Lindsey, of Ward 5, expressed concern over how the potential bond funds were to be spent.

Both have previously said they felt the council was not given enough say over allocating the previous bond funds and would like to have their suggestions carry more weight in any future bond discussions.

In addition to fixing roads and bridge, Mayor Jimmie Smith said he would also like to explore an additional $5 million bond for projects for parks and recreation.

Approximately $1 million would be used on the Frank Cochran Center, he said with the rest of the funds going toward projects on city-owned properties throughout town.

Internet use tax funds are restricted for road and bridge infrastructure and cannot be used to pay debt service on a bond for recreational upgrades. Instead, Hairston said, the city’s three mill tax increase passed in September appears, at first glance, to be enough to cover the $5 million recreation bond.

Hairston said he would need to work with Chief Financial Officer Brandye Latimer to double check the figures, but the money appeared to be there to support such a move.

Smith said one of the concerns he had was the rising interest rates making it more expensive to borrow. The $6 million paving bond passed in 2021, for example, was at an interest rate of 1.72%, where as the city is planning for interest rates around 4% for the $15 million and $5 million bonds. The council, he said, would need to move quickly to get a lower rate locked in.

Hairston said he would draw up a resolution for the council to vote on in its December 6 meeting to officially begin the process of issuing a bond. Once the resolution is passed, he said he could reach out to banks and have interest rates for the council to review in January.