Bettendorf aldermen will begin discussing next year's capital spending plan later this month after closing the books on the past fiscal year with a mountain of debt – $132.2 million to be precise.
It is hard to know where the city will find sufficient funds to pay for a plate full of projects discussed in recent months: rebuilding sections of Middle Road; combining or renovating community recreational facilities; enhancements to the new Forest Grove Park; redevelopment projects in downtown and along the riverfront; extension of sewer and water lines north of I-80; and development of a I-80/Middle Road sports complex.
The $132-million debt is nearly 85 percent of the legal limit set by the state (as of June 30), and substantially above the 73 percent level city officials projected the debt margin would fall to in 2012. Not incidentally, that projection was made during the last mayoral election year when the debt – $111 million at the time – became the focus of political debate.
Just the size of servicing the enormous debt costs the city $12.6 million annually. That's the largest operational expense by far for the city, $2 million higher than the annual outlay for police and fire protection services and three times higher than the amount spent on public works. In the most recent fiscal year, 40 cents of every dollar of property tax paid by residents went to pay the principal and interest on the city debt.
City Administrator Decker Ploehn and City Finance Director Carol Barnes seem unfazed by the growing level of debt – saying the city has plenty of room to boost its property tax levy if needed while urging aldermen to back aggressive capital spending because of the historically low rates on general obligation bonds.
And, It appears there is little dissent on the council about the high debt level. The only public comments to date from aldermen have been in support of the city continuing to issue more than $10 million each year in new general obligation bonds to pay for capital projects ranging from renovation of the Family Museum to rebuilding of streets and construction of new roads to serve new residential developments in the north of the city.
Even with low interest rates, the city is paying in excess of $4 million in interest on its debt each year. That's $4 million that can't be spent on roads, parks, or other city services like police and fire. And, that's $4 million each year added on to the cost of each road project and civic improvement.
Like an individual with a large credit card debt, the interest costs become a bigger part of each month's bill, and those new shiny purchases may be worn out and broken long before the cost of the items, with the ongoing interest, is finally paid.
For city taxpayers, those nice smooth streets will likely be cracked and in need of repair and replacement long before the final bills – with interest – get paid.
CLICK HERE to download the full fiscal year 2013-14 year-end report submitted to the State of Iowa November 29.
