Certificates of Obligation are bonds issued by a city that don’t require voter approval.

City Administrator Ryan Kelley said that the city has been “working on this park for years” and that the city had hoped to pay for the park with grants.

He added that the city also planned on using bonds or Certificates of Obligation that would be paid back through the city sales tax.

“Because of the recession, when it came time for us to borrow this money, our financial advisor told us that it would be smarter to go with Certificates of Obligation rather than bonds,” Kelley said.

He added that with the current market, utilizing bonds would cost the city from $2.5 to $4 million extra because of a higher interest rate and length of payback.

Kelley said that the bond route would have had a much longer payback timeframe.

According to Kelley, the 4A Community Development Corp. will be responsible for paying back the certificates.

4A President Jonny Williams said that the corporation has the necessary funds in the bank to pay all their bills for the next two yearsif the city were to lose its tax revenue.

Williams added that there is only about a “one-in-a-million chance” that the city will ever have to pay a penny of these certificates.

By using Certificates of Obligation, the city pledges its obligation to pay for any outstanding balance from property tax and wastewater improvement revenue the 4A Corporation couldn’t pay.

“We have the funds in the bank to pay these certificates. Even if sales tax revenues in the city fell off 50 percent, we could still pay our bills for the next four years,” Williams said.

Williams said the reasoning for using the city to secure these certificates and not using just the 4A Corp. was that by going through the city they were able to save the taxpayers millions.

“We can get a tremendously low interest rate with the city participating,” he said. “That’s saving the citizens the millions of dollars which allows us the opportunity to do more projects for the taxpayers.”

Williams said the certificates should be paid for somewhere in the 10-year range.

City councilwoman Patsy Williams said she “encourages any citizen” with questions about this issue to call city hall.

She added that if enough people have questions the city council would consider having a town hall meeting.

The Magnolia City Council is set to vote on the issue at its April meeting.

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