Bettendorf's elected officials must be getting the message from constituents about the city's sky-high debt.
No, they haven't reined in their free-spending ways; the city just issued another $10.2 million in general obligation (GO) bonds.
But they have figured out how to make the city's debt appear smaller to voters, particularly prior to municipal elections.
The first tactic employed by city officials was to delay issuing new general obligation bonds until after June 30, the end of the fiscal year, and even after the November city election.
That way, the new debt – the $10.2 million issued in mid-November – doesn't officially get added to the state debit margin calculations until the following June 30. By then, a higher city assessed value used to compute the debt margin will make the debt ratio smaller even if the total amount of debt stays the same or increases.
For example, the city's debt stood at $112.2 million, or 70 percent of the legal debt limit, as of last June 30. If the new $10.2 million debt had been issued before June 30, the debt would have increased to $122.4 million, or to 77 percent of the legal limit.
In addition to the advantageous timing of its general obligation bond issue in November, the city council also opted to issue revenue bonds – despite higher interest rates – to finance storm water and sewer improvements. In the past, those capital improvements were normally financed by lower interest GO bonds.
But revenue bonds aren't used in computing the city's debt limit because they are secured by sewer and storm water rates of users and not general property taxes.
Going with lower interest rate GO bonds for sewage and storm water projects would have added $5 million in debt and pushed the debt margin to nearly 80 percent, or more than $127 million.
But the "best" news for city officials – and politicians running in this fall's election – had nothing to do with tightening city spending. The Isle of Capri Casino this spring decided to pay off $10.1 million in Tax Increment Financing (TIF) bonds early.
Those TIF bonds were issued by the city, but were being paid off with revenues from the "incremental property taxes" from the Isle's two hotels and riverboat casino. By law, those bonds counted as city debt because city taxpayers were on the hook for repayment if the Isle, for some reason, was unable to pay its taxes.
The Isle, however, was very well motivated to pay off those TIF bonds early.
By doing so, the Isle was no longer bound to an $85-million minimum assessment of its properties and was able to get 12 years of tax rebates on the new land-based casino scheduled to open for business this summer.
The legal fine print in the city/Isle development agreement means most of the new tax value from the $60-million land-based casino now will escape city coffers for more than a decade.
In a truly lose-lose proposition for taxpayers, the Isle's TIF bond payoff also enabled city officials to issue another $10 million in general obligation debt without so much as a nudge of the debt margin needle.
But what if the Isle didn't pay off those TIF bonds early? And what if the city decided to save taxpayers interest money and used general obligation bonds to finance the sewer and storm water projects?
Well, that would have meant city debt at the end of 2015 now would total more than $137 million, or 86 percent of the city's debt limit under state law.
So, a toast to the Isle of Capri Casino for bringing down the city debt and a tip of the hat to the city council for "lowering" municipal debt without really trying.
