Holly Springs aims to borrow $18M for capital projects
03/11/2014 4:11 PM
02/15/2015 10:41 AM
Town leaders hope to pay for $18.1 million in capital projects without compromising the town’s ability to borrow money in the future and without raising taxes.
They think they’ve found a way.
Town Council members agreed at their recent planning retreat in Southern Pines that they want to take out a front-loaded, 15- to 20-year loan to finance a new police station, part of the North Main Athletic Complex and improvements to Avent Ferry Road and Main Street.
Holly Springs plans to seek bank offers over the next couple of months.
Before signing on to more debt, the town will need permission from the Local Government Commission, a branch of the N.C. Treasurer’s Office that regulates municipal spending.
Holly Springs owes about $37.6 million already. Borrowing another $18.1 million would put the town further into violation of its own financial policy, which prohibits debt payments from exceeding 15 percent of annual expenditures.
Holly Springs is paying $4.1 million in debt this year, which makes up about 17 percent of the town’s expenditures. The debt is scheduled to rise to 18.2 percent of annual expenditures next year, and up to 20.7 percent if the town takes on new debt.
Most towns would be ill-advised to take on that much debt.
But Holly Springs is an exception, independent financial consultants told town leaders.
“We don’t see this (the town’s financial policy) as an impediment to do what we’re talking about,” said Ted Cole, senior vice president for Davenport & Co., a financial services firm with a branch in Raleigh.
The town’s tax base is growing fast, which equates to an increase in revenues, Cole said. The population of Holly Springs has tripled to 28,000 since 2000, and the town expects that number to grow to 36,300 by the end of 2018.
Holly Springs also has a good credit score, Cole noted. Standard & Poor’s raised the town’s bond rating to AA+ from AA last month.
“This is a significant achievement in light of the nationwide recession and subsequent slow economic recovery and the uproar these events have created in the banking industry,” State Treasurer Janet Cowell wrote in a letter to Mayor Dick Sears.
The improved bond rating may lead to lower interest rates.
“We think you’ll be able to take that debt on and still demonstrate that you’re favorably rated,” Cole said. “The ability to take it on is there.”
The need is there too, Holly Springs leaders say.
The town’s population boom is putting a strain on Avent Ferry Road and Main Street – two of the busiest roads in town. More than 21,000 vehicles travel on Avent Ferry Road each day, though it was built for up to 15,000.
The police department has grown to 60 employees, nearly triple the number of workers it had in 2002 when it moved into its 3,500-square-foot space behind Town Hall.
Now the town wants to build a 28,500-square-foot police building near the intersection of Holly Springs Road and Bass Lake Road.
The town is also eager to build the second phase of the North Main Athletic Complex.
Construction will soon be underway for the first phase of the project, which includes eight regulation-size tennis courts, four youth tennis courts and a synthetic turf the size of two high school soccer fields.
But Holly Springs can’t maximize the area’s revenue and entertainment potential until it builds an 1,800-seat stadium fit for concerts and a Coastal Plain League collegiate summer baseball team.
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