Two weeks ago in this space I stated my hope that during this election campaign, the welcome discussion on City matters would be fact-based. Over the weekend I opened a daily newspaper to read some fictitious statements concerning City debt. This topic has been covered before, but let’s review it again, with a few more points to consider.
Point One is that debt is inevitable for most cities, not unlike the situation in which the typical family finds itself. The typical family cannot make large purchases, like a home, without borrowing money. Yes, this puts them in debt… but it also makes them better off in the long run. Houses tend to appreciate in value, so building equity in a home is a good risk.
Cities are similar in this regard. There are major (capital) projects that must be done, projects that the City cannot afford to pay for within its annual budget. These are projects that the City cannot afford to save up for because the savings period would take too long. When utilized appropriately, the issuance of debt can lead to a more equitable tax burden across generations of citizens and taxpayers who use the asset being funded.
The Auditor General’s website has various tables that list cities by population category. In our population category, Florida cities of 6,000 to 14,999 population, every city reported long term debt. It is unlikely that there will be a time when our City does not have some level of debt.
Point Two is that when the typical family borrows money, it is paid back in a set payment schedule that indicates that both principal (the amount borrowed) and interest are partly being paid back with each payment. The City also makes debt service payments according to a payment schedule, which includes both principal and interest. In compliance with this schedule, the City pays down its debt every year. In the current fiscal year, the City will pay down over $2.6 million in principal and make over $1.2 million in interest payments.
Point Three is that the City is required by its Charter to prepare a 5-year capital improvements plan every year. This plan lists the major capital projects that are needed and how the City is going to pay for them. In the current fiscal year the plan calls for capital expenditures of over $18 million. Many of those expenditures come from money in the current year budget – like the purchase of police cars, library books, water meters, and various equipment items. It is anticipated that the funding source for some items will be grant funds – like the airport runway extension.
Out of 45 capital projects or items listed to be accomplished in this fiscal year, there are only a handful of large utility projects that are scheduled to come from new debt. Some of these projects are driven by growth, and others are of a lower priority. All of those projects will likely be put off to another year. The one large utility project that cannot be put off is one that the City has been working on for several years: improvements needed at the City’s wastewater treatment plant. It is anticipated that this year the City will borrow over $8.5 million to fix the wastewater treatment plant, which is now more than 20 years old and in need of repairs. In addition to repair work, the requirements for the quality of the treated wastewater and sludge, the two products that the plant produces, are quite stringent. The state regulatory agencies and the federal EPA monitor these products to ensure that the City has the proper quality controls in place. Several years ago the City suffered a $6,000 fine from the EPA for an inadequate sludge quality control process.
Again, a comparison is helpful to put this matter in perspective. Even with this new amount of money to be borrowed this year, the City would still have the lowest principal debt amount in comparison to two similar sized cites nearby, Haines City and Auburndale.
Good government needs an active citizenry, one that is fully informed. Information is available on the City’s website or at City Hall, with helpful City staff members to answer any questions. Discussions are welcomed and encouraged, and every citizen is cordially invited to participate… but let’s stick to the facts!
Showing posts with label debt. Show all posts
Showing posts with label debt. Show all posts
Tuesday, April 7, 2009
Tuesday, March 24, 2009
Facilitating a Fact-Based Discussion
At election time every year there are healthy discussions on what the City has done or should be doing. Some of the topics currently being considered are the City’s tax rate, the level of debt, and spending on two capital projects: the Rails to Trails, and the 1919 building. Let’s explore these topics to facilitate a fact-based discussion.
In this space I have noted before that debt is a necessary method of providing funding for large capital projects.
To date, three of the buildings have been restored, with grant funding for one of the buildings, the former elementary school being leased to the Boys and Girls’ Club. The Club paid the matching funds required for that restoration grant. The other two restored buildings, the Kirkland gym and the Little Theatre, were restored with City bond proceeds and (non-city) funds raised by the Little Theatre, respectively.
The 1919 building has to date utilized $1,869,711 in grant funds and $300,000 in Community Redevelopment Agency (CRA) funds towards rehabilitation. There have also been $154,285 in private donations and $17,124 in other city funds used for the project. The next phase of restoration is currently being planned, and it will use $350,000 in grant funds and $300,000 in CRA funds. Beyond the next phase, it is estimated that it will take $1,011,087 to open the building for use and another $712,787 to completely finish the building, grounds, and parking. The spreadsheet detailing all of these figures (as well as the City budget and millage history noted above) is now available on the City’s website at http://www.cityoflakewales.com/.
The City Commission has established an advisory committee to work on the fund-raising needed to complete this building. Applications for membership are available at the City Clerk’s office.
It is anticipated that when this magnificent structure is completed its focus will be on musical education and performance. Lake Wales has a long tradition of musical excellence at our High School. The recent establishment of McLaughlin Middle School as a “School of the Arts”, and the strong music program being built at Bok Academy will greatly enhance this tradition. We look forward with the vision of the new advisory committee raising the remaining dollars necessary for our children to learn and perform at this wonderful new facility, which will richly add to the definition of our community as a place for both the arts and education.
Tax RateThe City’s tax rate for the current fiscal year is 7.3277 mills. An examination of City budget history reveals that the tax rate approved by the City Commission for the current fiscal year is the lowest tax rate in 17 years! The tax rate for FY ’91-92 is the next lowest. As noted in a previous column in this space, in the last four years the City Commission has reduced the City’s property tax rate 22%.
City DebtThere has been much discussion on the level of City debt, but I have yet to hear anyone mention how our City’s principal debt amount (i.e., the amount owed on the original borrowed amount, without adding in interest payments) compares to that of other similar cities. The cities of Auburndale and Haines City are often used for purposes of comparison. For the 2007-2008 Fiscal Year, these three cities ended the fiscal year with these respective amounts of principal debt:
- Auburndale - $54,143,338
- Haines City - $45,360,648
- Lake Wales - $32,725,486
In this space I have noted before that debt is a necessary method of providing funding for large capital projects.
Rails to TrailsThe first phase of this project was a Florida Department of Transportation project, and no city funds were involved. That section of trail begins at Fourth Street and ends at Kiwanis Park.
The extension of the Trail to Buck Moore Road was a City project, paid for with grant funds that required a match of $133,000. The matching amount came from City Recreation Impact Fees, which can only be used to expand or provide new recreation facilities.
1919 Building (Hardman Hall)The 1919 building project started with high hopes after the property was acquired from the county school board in 1995. An article in this newspaper on June 8, 1995 stated that the buildings would be renovated with funding “…from a variety of sources in the form of grants.” It was also noted that “… the entire project cannot be completed at one time but can be done in phases.”
To date, three of the buildings have been restored, with grant funding for one of the buildings, the former elementary school being leased to the Boys and Girls’ Club. The Club paid the matching funds required for that restoration grant. The other two restored buildings, the Kirkland gym and the Little Theatre, were restored with City bond proceeds and (non-city) funds raised by the Little Theatre, respectively.
The 1919 building has to date utilized $1,869,711 in grant funds and $300,000 in Community Redevelopment Agency (CRA) funds towards rehabilitation. There have also been $154,285 in private donations and $17,124 in other city funds used for the project. The next phase of restoration is currently being planned, and it will use $350,000 in grant funds and $300,000 in CRA funds. Beyond the next phase, it is estimated that it will take $1,011,087 to open the building for use and another $712,787 to completely finish the building, grounds, and parking. The spreadsheet detailing all of these figures (as well as the City budget and millage history noted above) is now available on the City’s website at http://www.cityoflakewales.com/.
The City Commission has established an advisory committee to work on the fund-raising needed to complete this building. Applications for membership are available at the City Clerk’s office.
It is anticipated that when this magnificent structure is completed its focus will be on musical education and performance. Lake Wales has a long tradition of musical excellence at our High School. The recent establishment of McLaughlin Middle School as a “School of the Arts”, and the strong music program being built at Bok Academy will greatly enhance this tradition. We look forward with the vision of the new advisory committee raising the remaining dollars necessary for our children to learn and perform at this wonderful new facility, which will richly add to the definition of our community as a place for both the arts and education.
Tuesday, December 9, 2008
Update on FDOT projects
This week is a holiday grab bag of items. Let’s start with a welcome, a quick update on FDOT planned activities, and a reply to the letter in Saturday’s paper on debt.
The FDOT 5 year Capital Improvement Program lists a number of projects in our area:
WelcomeWe were sad to see Sylvia Edwards leave last July to become the Finance Director of Sanibel. The City now welcomes our new Finance Director, Dorothy Pendergrass. Dorothy’s experience includes working as the Finance Director for the cities of Deltona, Florida and Monett, Missouri. She also has seven years’ experience as a public auditor. She has a BA in Business Administration and has held a Missouri CPA license for 13 years. Welcome, Dorothy!
Road and Street ProjectsMany people are not aware that planning and maintenance responsibility for streets in our town is shared between the City, the County, and the State depending on the particular street. Most streets and alleys are the City’s responsibility. Certain streets, including Buck More Road, Burns Ave, South 9th Street (south of the railroad tracks), South 11th St, and Hunt Brothers Road are the County’s responsibility. The State, through its Department of Transportation (FDOT), is responsible for State Road(SR) 60, SR 17 (Scenic Highway), and US 27.
The FDOT 5 year Capital Improvement Program lists a number of projects in our area:
- SR 60, construction of medians between 11th St and Capps Road: FDOT staff is planning to conduct an open house meeting with the anticipated date to be in early February. The plan for this project is available for review in the Planning and Development office at City Hall.
- SR 60 re-surfacing projects:
- Scenic Highway overpass to 11th Street;
- Peace Creek to US 27
- Scenic Highway: Two sections of Scenic Highway are scheduled for resurfacing:
- Starr Ave. to Waverly Road; and
- Ray Martin Rd. through downtown to Mt. Lake Cutoff Rd.
- Scenic Highway drainage improvements are planned between Seminole and Osceola Aves. City staff is working with FDOT staff on this project.
Planning continues on the intersection at Scenic Highway and Mt. Lake Cutoff Road.
City Commissioners and staff have been involved in several of the FDOT projects (as well as the county projects) to urge those agencies to take action. For example, the construction of the traffic signal at Scenic Highway and Mt. Lake Cutoff Road has been a high priority for the City for years. This project involves funding from both the state and the county, a request for a property donation from the Mountain Lake Corporation to accommodate turn lanes in all directions, and continued monitoring by FDOT staff to determine if that intersection meets all FDOT requirements for a traffic signal.
Other ProjectsRecently the City Commission approved an agreement with FDOT to provide an upgrade of the railroad crossing at South 9th Street. This railroad crossing, just south of the Whispering Ridge subdivision, crosses south 9th Street at an unusual angle. The improved crossing will have flashing lights and cross arms and will be installed by the railroad. The City and the railroad will share the annual maintenance for the crossing, with the City’s portion initially capped at $1,573 annually plus future cost adjustments.
A Reply to a letter in Saturday’s paperA letter in Saturday’s paper again questioned debt figures and information I provided in last week’s column. All of the information provided in that column is accurate and responsive to the earlier letter. The date I used for discussing the City’s principal balance is the first reporting date after I arrived in July, 2001, and all of that debt was in place before my arrival. Again, this and other financial information is available on the City’s website, http://www.cityoflakewales.com/.
Tuesday, December 2, 2008
City Debt Level
Last Wednesday’s edition of this paper published a letter to the editor concerning the City’s level of debt and how it has changed over the last seven years. Unfortunately, the conclusions presented were based on a flawed analysis of numbers in existing documents. A meaningful comparison of financial schedules from one time period to another requires an “apples to apples” comparison. Let’s take a quick look at the City’s debt and what has changed over the last seven years.
In the current fiscal year, total City debt service is budgeted at $3,847,134, of which the CRA will pay $752,381. For the next fiscal year, the total debt service will be about $4,000,000, with the CRA again paying a significant share. The exact amount of the total debt service next year depends on the drawdown of the wastewater improvement line of credit and the structuring of that loan, which is scheduled for October 1, 2009. The letter writer quoted a figure of “over $6,000,000,” which is incorrect.
That is apparently what happened in this case. The letter writer asked for information on debt. Without asking any questions, it appears that the letter writer assumed that a debt report 8 years ago included the same type of information that it did in last year’s report. The report format had changed over time, and hence the analysis was flawed. In addition, the $6,000,000 figure for next year’s debt service incorrectly assumes the City would pay off a wastewater line of credit in one year rather than using an amortization schedule with payments over time.
There is a tremendous amount of information available about City operations on the City website (http://www.cityoflakewales.com/) or at City Hall. Asking a few questions is also a good idea.
The Basics of City DebtWhen we talk about City debt, we are referring to money that the City has borrowed and must pay back over a period of time. The City’s “payback” is divided into principal payments and interest payments, with the principal being the amount of money borrowed in a particular loan. The term “principal balance of debt” refers to what part of the principal is left to pay back at a given point of time and does not include interest to be paid.
City of Lake Wales Debt at October 1, 2001On October 1, 2001, the principal balance of City debt was $25,584,934. (The letter writer stated that it was $18,845,000…?) The money borrowed went to pay for a number of items including the new City Hall, the new fire station, a new fire truck, a wastewater collection alarm system, and a wastewater system upgrade.
City of Lake Wales Debt at October 1, 2008On October 1, 2008 the principal balance of City debt was $33,215,612… a 30% increase, not “nearly double” as the letter writer claimed. Additional City debt in the seven year period includes:
- Two short term loans for two new fire trucks, replacing worn-out fire trucks;
- A lease-purchase for new police and fire radios, replacing obsolete radios; and
- Two projects to upgrade the wastewater treatment plant.
Debt ServiceThe term “debt service” refers to the amount of principal and interest payments to be made in a fiscal year.
In the current fiscal year, total City debt service is budgeted at $3,847,134, of which the CRA will pay $752,381. For the next fiscal year, the total debt service will be about $4,000,000, with the CRA again paying a significant share. The exact amount of the total debt service next year depends on the drawdown of the wastewater improvement line of credit and the structuring of that loan, which is scheduled for October 1, 2009. The letter writer quoted a figure of “over $6,000,000,” which is incorrect.
The Sunshine LawSo how did the letter writer get off track? Simply by not asking questions. The Sunshine Law requires that nearly every document in City Hall is open for review. (Records not open include items like police officer and code enforcement officer home addresses, etc.) However, the law does not require city staff to do research to create records. For example, someone once asked for the amount of City funds spent to host the Mardi Gras celebration over the last twenty years. That number does not exist in a single report, but the person interested in that figure is welcomed to dig through 20 years of City budgets to determine that number… City staff is not required to assemble a report.
That is apparently what happened in this case. The letter writer asked for information on debt. Without asking any questions, it appears that the letter writer assumed that a debt report 8 years ago included the same type of information that it did in last year’s report. The report format had changed over time, and hence the analysis was flawed. In addition, the $6,000,000 figure for next year’s debt service incorrectly assumes the City would pay off a wastewater line of credit in one year rather than using an amortization schedule with payments over time.
There is a tremendous amount of information available about City operations on the City website (http://www.cityoflakewales.com/) or at City Hall. Asking a few questions is also a good idea.
Subscribe to:
Posts (Atom)
