Bettendorf plans to issue more than million of general obligation bonds this spring that would boost the city's debt to more than $133 million, or nearly 86 percent of its legal debt limit. The city's debt would be the highest in the state of Iowa as a percentage of the legal limit at 85.52 percent.
However, City Administrator Decker Ploehn voiced his confidence to the city council about the plan to issue millions in new general and corporate bonds, telling aldermen the city has ample capacity to raise property taxes should it need additional funds for unexpected future projects or expenses.
Bettendorf is one of just a few Iowa cities with a general fund property tax levy well below the maximum allowed $8.10 per $1,000 assessed valuation, according to Ploehn. The city's general fund levy currently is $5.44 per $1,000 assessed valuation. "This allows for future growth capacity of 48 percent, equating to nearly $5 million of potential property taxes," Ploehn stated in the budget presentation he made earlier this month.
According to statistics compiled by the city, even though Bettendorf ranks high in total debt and the debt service tax levy, Bettendorf is the third lowest when combining property taxes, storm water fees, sewer charges and solid waste disposal fees for an average homeowner (median home value of $165,260) among 30 Iowa communities of 10,000 people or more.
He also points to the city's Aa1 bond rating in support of the decision to add debt, rather than raise property taxes, to pay for new capital projects.
While investors may feel secure in buying the city's bonds (debt), city taxpayers end up paying more for every new street and municipal improvement since interest costs on the bonds add to the total price of those improvements.
Most cities issue general obligation bonds for large community improvements, but most rely on a balance of bonds and revenues from their general fund (property taxes) to fund capital improvements.
Like an individual paying with a credit card, the full cost of buying on credit involves not just the purchase price, but interest costs on that expenditure until the debt is paid.
For the city, bonds are usually issued with payback periods from varying from 10- to 30-years. As interest rates have trended down over the past 10 years, the cost of adding new debt has been decreasing, but principal and interest payments on the city debt now consume 40 percent of all property tax revenue each year. In the coming fiscal year, city taxpayers are expected to pay $9.7 million in principal and interest on the debt.
The large amount of municipal debt was an issue in the last mayoral campaign in 2011 when former alderman Patricia Malinee expressed concern that the debt had reached $111 million, or more than 70 percent of the city debt limit at the time. Bob Gallagher, Jr. in his mayoral campaign mailings to voters promised to address the debt issue, and in 2011 Ploehn told the council and public budget hearing attendees that the debt margin would peak at 75 percent and then decline to 73 percent in 2012.
While the total debt remained flat in 2013, $119.3 million at the end of last June, the planned issuance of new bonds this spring is projected to push city debt to more than 85 percent of the state-imposed limit.
The projected $133-million city debt equates to just over $4,000 for each of the city's 33,217 residents. On a yearly basis, the average homeowner in Bettendorf would pay $412 in principal and interest on the city debt in fiscal 2013-14.
Here's a list of what the city wants to spend the bond proceeds on in the coming fiscal year:
Capital equipment requests for the coming fiscal year include: $520,000 for a new hazardous material/rescue vehicle, $335,000 for new trucks for the public works department, $265,000 for an armored emergency rescue vehicle, $211,000 for vehicle and mowers for parks, and $176,000 for a garbage packer/truck.
