The city of Bettendorf's debt now exceeds 80 percent of the state-allowed limit, far more than city officials projected less than a year ago.
During last year's mayoral election, the city debt was the most discussed issue. Alderman Greg Adamson even called for a special budget presentation by City Administrator Decker Ploehn and City Finance Director Carol Barnes to refute campaign flyers raising questions about the ballooning municipal debt.
At that presentation, Ploehn displayed charts showing the city debt at $106 million, or 72.5 percent of the state-imposed limit as of June 30, 2011. And, in the fiscal 2011-12 budget, the city projected the debt margin would peak at 75 percent and decline to 73 percent of the state-imposed limit this fiscal year.
However, in its most recent budget documents posted at the end of June, the city reported its legal debt margin had reached more than 80 percent, with overall city debt of more than $119 million. That leaves the city only $29 million in additional debt capacity, or a debt margin of less than 20 percent.
Just six years ago, the city debt was $60 million, half the current level and the debt margin was 51 percent of the limit.
The city significantly increased the general obligation bonds it has issued over the past four years for street construction and repairs, park land acquisition, golf course improvements, downtown streetscaping, land acquisition for development at I-80 and Middle Road, recreational trails, and sewer and stormwater projects. It also issued bonds to finance construction of the downtown events center, which are being repaid with Tax Increment Financing (TIF) revenues from the second Isle hotel.
City officials in their presentation last October defended the issuance of bonds for capital improvements saying interest rates were low and the added debt had not hurt the city's bond ratings.
In this year's budget, nearly 40 cents of each property tax dollar from city residents goes to pay the principal and interest on the debt.
The shrinking debt capacity comes despite robust growth in the city's overall property assessments, on which debt margin calculations are based.
As of June 30, total assessed valuation of city property was $2.97 billion, up more than 20 percent from the $2.47 billion in assessed value June 30, 2008.
The debt margin is 5 percent of the city's total assessed valuation, which was $148 million as of June 30, 2012.
The city currently has $91.44 million in general obligation bond debt, $11.925 million in Tax Increment Financing (TIF) debt (general obligation and revenue bonds) and $15.68 million in enterprise general obligation debt (primarily for sewer and stormwater improvements).
Together, the total debt amounts to more than $119 million, or 80 percent of the legal allowed debt limit of $148 million.
Based on the most recent fiscal year and Comprehensive Annual Financial Reports available, Bettendorf has the highest debt level percentage among all major communities in the state.
Several Iowa cities set their debt limits even more stringent than the state-imposed debt margin.
In Muscatine, the city has a self-imposed limit of 60 percent of the permitted state debt level, and Cedar Rapids has set an upper ceiling target of no more than 80 percent of the state imposed level.
In Ames, the city policy calls for a reserve of 25 percent of the available debt capacity as set by the state formula.
