Bond Q & A
In addition to the merits and demerits of each of the bonds -- these will be discussed next -- there are certain overarching economic questions voters will be asking as they go to the polls.
Q. Will the City spend the money as promised?
A. Yes. You can trust the City on this point, because law forbids anything else. Funds obtained through general obligation bonds may not be put to any use other than those which are stated in the ballot language.
Q. Is this a good time for the City to borrow?
A. Yes, assuming commercial credit is available. Interest rates are low, making this an excellent time to borrow. Moreover, general obligation bonds (GO bonds) are eligible for lower interest rates than other bonds -- because GO bonds, by requirement, are those which have been put to a vote of the people. Lending institutions know they can count on repayment when the bond is backed by the will of the people.
Q. But isn't the City near its credit limit?
A. No. In fact, the City still enjoys its AA rating from Standard & Poor's. This is the best credit rating available to a City of American Fork's size, and it reflects the City's debt limit as well as its record of money management.
Q. Still, isn't it wiser to save money through accrual accounts--you know, pay-as-you-go?
B. Not necessarily. The rationale for bonds is that they allow a local government to put in tomorrow's improvements at today's prices. As we saw with the cost of the pressurized irrigation project -- which escalated from $9 million when it was first proposed to $48.95 million when it was finally approved -- it is often cheapest to bond and improve now rather than to wait and pay cash later.
Q. You already raised my property taxes this year, and tripled my water bill. Is this really the right time to ask for more money?
A. Not in my opinion, no. But remember, we're not asking me. We're asking you.
Q. We all want City services, especially essential services like roads and public safety. The majority of us want quality of life services like the library, arts, parks and recreation. But wouldn't it be wiser to wait for better times to ask for more money?
A. Yes, in my opinion. Gas prices may be down, but grocery prices are sticky, and the unemployment rate is climbing, even in Utah.
Q. These are all one-time needs. Is it right to raise property taxes (on-going funds) for one-time needs?
A. This is another question you will have to decide. Remember the truth in the old saying, that there's no such thing as a temporary tax. Twenty years from now, when these bonds are retired, other needs will have presented themselves -- but presumably, this revenue would then be in place to serve those needs. Combine this much revenue with a good long-range plan, and prudent City officials ought never again to need a tax increase beyond the regular inflationary adjustments necessary to keep up with Truth in Taxation.
But I haven't seen a long-range plan, so I can't promise that there will be no more tax increases in the next twenty years, and you wouldn't believe me if I did.
===============
Disclaimer: Articles posted at my blog are personal opinion. In posting this series on the bonds, I do not claim to speak for the City or the City Council. This blog does not represent any official position of American Fork City, and no City resources have ever been used to finance this blog.
Q. Will the City spend the money as promised?
A. Yes. You can trust the City on this point, because law forbids anything else. Funds obtained through general obligation bonds may not be put to any use other than those which are stated in the ballot language.
Q. Is this a good time for the City to borrow?
A. Yes, assuming commercial credit is available. Interest rates are low, making this an excellent time to borrow. Moreover, general obligation bonds (GO bonds) are eligible for lower interest rates than other bonds -- because GO bonds, by requirement, are those which have been put to a vote of the people. Lending institutions know they can count on repayment when the bond is backed by the will of the people.
Q. But isn't the City near its credit limit?
A. No. In fact, the City still enjoys its AA rating from Standard & Poor's. This is the best credit rating available to a City of American Fork's size, and it reflects the City's debt limit as well as its record of money management.
Q. Still, isn't it wiser to save money through accrual accounts--you know, pay-as-you-go?
B. Not necessarily. The rationale for bonds is that they allow a local government to put in tomorrow's improvements at today's prices. As we saw with the cost of the pressurized irrigation project -- which escalated from $9 million when it was first proposed to $48.95 million when it was finally approved -- it is often cheapest to bond and improve now rather than to wait and pay cash later.
Q. You already raised my property taxes this year, and tripled my water bill. Is this really the right time to ask for more money?
A. Not in my opinion, no. But remember, we're not asking me. We're asking you.
Q. We all want City services, especially essential services like roads and public safety. The majority of us want quality of life services like the library, arts, parks and recreation. But wouldn't it be wiser to wait for better times to ask for more money?
A. Yes, in my opinion. Gas prices may be down, but grocery prices are sticky, and the unemployment rate is climbing, even in Utah.
Q. These are all one-time needs. Is it right to raise property taxes (on-going funds) for one-time needs?
A. This is another question you will have to decide. Remember the truth in the old saying, that there's no such thing as a temporary tax. Twenty years from now, when these bonds are retired, other needs will have presented themselves -- but presumably, this revenue would then be in place to serve those needs. Combine this much revenue with a good long-range plan, and prudent City officials ought never again to need a tax increase beyond the regular inflationary adjustments necessary to keep up with Truth in Taxation.
But I haven't seen a long-range plan, so I can't promise that there will be no more tax increases in the next twenty years, and you wouldn't believe me if I did.
===============
Disclaimer: Articles posted at my blog are personal opinion. In posting this series on the bonds, I do not claim to speak for the City or the City Council. This blog does not represent any official position of American Fork City, and no City resources have ever been used to finance this blog.
posted by Heidi Rodeback at 10:55 PM
1 Comments:
My thanks to Dale Gunther and George Brown for pointing out at last night's town meeting the numbers for the City's debt limit and the current City debt. Those numbers are $185 million and $77 million, respectively.
Of that $77 million, $48.95 million represents the pressurized irrigation project.
One of the good lines of the evening came from George Brown after a quibble with Mayor Thompson over the $77 million figure. "A million here, a million there," he said. "Pretty soon it adds up to real money."
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