Columbiana council accepts $4.475 million supplemental SRF loan for sewer project, warns debt service will rise

The Columbiana City Council voted to accept a $4,475,000 supplemental State Revolving Fund (SRF) loan from the Alabama Department of Environmental Management (ADEM) to help complete a $15.1 million sewer improvement project.

At the meeting the council reviewed project costs, the city’s existing debt service and how the new SRF funding would affect annual payments. The city’s finance presentation said the overall project cost is estimated at $15,100,000, including about $14.5 million for construction, $531,000 for engineering and $128,000 for environmental services. The council was told the city currently has roughly $5.5 million in committed funding and that the newly approved $4,475,000 supplements that amount as part of a larger SRF financing package.

The finance briefing outlined the impact on the city’s debt service. Council materials and the presenter said the city’s current annual debt service before the sewer SRF loans was about $793,000; the SRF loans already accepted (including a prior $2,775,000 loan at 1.99%) raised this year’s debt service to roughly $9.45 (thousand? indicated in presentation as shorthand), and adding the supplemental loan would increase average annual debt service for SRF financing to approximately $757,000. Taken together with existing obligations, presenters said total annual debt service could reach about $1.6 million in fiscal year 2026 — an amount the presentation characterized as roughly 25% of recurring taxes and fees in the current budget and above a commonly cited 15% benchmark.

Council members and staff discussed options to close a reported $284,000 shortfall in sewer fund coverage this fiscal year, including reducing expenditures, increasing fee revenue (sewer or sanitation fees) or pursuing alternative debt structuring. The city noted that it already raised the sewer fee by 10% in the current year and that further ad valorem tax increases would require voter approval. The council also said it will meet with investment bankers who have proposed debt-structuring options intended to reduce near-term payments without changing the total amount owed.

A motion to introduce and accept the supplemental loan resolution (Resolution 062504) carried on a roll call vote; council members voting "yes" in the roll call were recorded as Lily, Marcel, King, Phillips and Graham Mitchell. The resolution authorized staff to proceed with SRF loan documentation and continue working with bond counsel and the SRF program prior to final execution of loan agreements.

Council members said they will continue budget planning and that any final decision on the long-term financing structure will return to the council for approval.

The meeting packet referenced two SRF funding letters from ADEM and noted those funds drew from multiple state/federal funding buckets. The presentation also said additional SRF funds of approximately $5.1 million remain under consideration; staff will return to council for any additional loan acceptances or final execution steps.