Municipal adviser briefs McAlester council on sales-tax, ad valorem and long-term debt options
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Summary
A municipal financial adviser told the McAlester City Council the city faces major infrastructure costs and outlined how sales tax, ad valorem levies and borrowing interact with existing bond schedules and reserves.
A municipal financial adviser told the McAlester City Council that the city faces a choice among sales-tax increases, ad valorem (property) levies and borrowing to meet large infrastructure needs and to manage debt that extends into the early 2030s.
The adviser said ad valorem financing differs from sales tax because “The only condition on the ad valorem is that we have to buy something. We have to, we have to own something,” and contrasted that with sales tax, which is percentage-driven. He also warned that some older bonds are noncallable and will remain on the city’s books through 2034.
Why it matters: Council members pressed the city for options after describing street, water and sewer needs that could total many millions. The adviser presented sample costs and financing programs and reiterated trade-offs among paying as you go, using sales tax revenue, or advancing projects with borrowed money.
Key points - Ad valorem vs. sales tax: Ad valorem financing is structured around a dollar amount the city wants to raise and then converts that into mills; sales tax increases are percentage-based and produce ongoing revenue for as long as the levy remains in place.
- Existing schedule and reserves: The adviser said the city has a one-cent sales tax currently earmarked to pay older bonds and that a portion of current sales tax receipts have been reserved so those debts can be serviced. He noted the one-cent levy is scheduled to fall off Nov. 30, 2031, which affects planning for projects that would be financed beyond that date.
- Borrowing programs and rates: The adviser described state revolving fund loans through the Oklahoma Water Resources Board (OWRB) as a subsidized, long-term option — citing a past 30-year loan at 1.9% the city secured for a drinking-water project — and said current SRF-like rates were roughly 3.22% at the time of the presentation.
- Cost examples and timing: The presentation used illustrative figures: infrastructure repair or replacement can run into millions per mile for streets and utilities, and a wastewater plant estimate of about $42 million was discussed as a sample project that would require advance funding rather than pay-as-you-go. The adviser repeatedly cautioned that inflation and recent material-cost spikes increased project costs and that delays can make projects more expensive.
Council reaction and next steps Council members asked for time to consider the adviser’s comparisons and asked staff to provide follow-up materials. The adviser left comparative charts and amortizations the firm had prepared and offered to return for further meetings.
The adviser characterized the briefing as preparatory: councilors were asked to prioritize projects and decide whether to pursue revenue measures (sales-tax extensions or new levies), to use utility-rate adjustments, or to seek long-term borrowing backed by the city’s revenue streams.
Ending The adviser recommended that council members weigh project urgency, the availability of subsidized loan programs and the city’s appetite for additional debt before committing to a specific funding plan. He left detailed handouts for staff and said he would return to answer follow-up questions.
