#04 - City Debt Discussion - Laserfiche WebLink

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STAFF REPORT DATE: July 9, 2024 WORKSHOP AGENDA ITEM: City Debt Discussion FROM: Clarissa Hadler, Finance Director REVIEWED BY: Nicole Miller, City Administrator BACKGROUND: The City currently issues debt for the majority of large street and infrastructure projects. The discussion below will outline existing and projected future debt and levies and provide a comparison to an alternate funding structure. This alternate is provided as a comparison only; the possibilities are many and funding structures would be determined annually based on the projects, financial status of the city, interest rates, etc. ISSUE BEFORE THE CITY COUNCIL: 1) Should the city contemplate changes to its project funding practices? DISCUSSION: The charts on later pages provide insight into the City’s existing and projected debt. The City currently funds the majority of large projects via debt through the issuance of bonds. Our average since 2010 is approximately $7 million per year, which includes the City Hall project, which accounted for about $10 million in debt in 2021. Current debt load sits at just under $60 million. The City’s debt load is high in comparison to some of our neighboring cities, as evidenced by some of the comparisons charts at the end of this report, a couple of which are shown here. This is not inherently bad, per se, from a policy/practice standpoint, as we are still viewed as having a strong financial status by our auditors and by Moody’s. However, it does leave us highly leveraged, which does impact our bond rating in that category; A, instead of Aa or Aaa, as we have in other categories. (See chart on later pages.) It also requires that we hold more cash to maintain our Liquidity Ratio in our rating “scorecard”. And it makes us less resilient to economic or environmental upheaval, and begs the question of how sustainable our financial position is long-term.