Council Member Raises Debt Ceiling Issue
Steve Webb, the lone dissenter in Buena Vista City Council’s recent vote to pursue more formal financial modeling for a new pre-kindergarten through seventh grade school, has a simple reason for his “no” vote. He believes the city can’t afford such an expensive undertaking.
Speaking on behalf of the city’s budget and finance committee meeting at last week’s City Council meeting, Webb reported that the amount the city can afford to borrow, based on taxable reassessment values that became effective last July 1, is nowhere near what the estimated costs are likely to be to construct a consolidated PreK-grade 7 school next to Parry McCluer High School – the favored option of a joint school facilities committee composed of City Council and School Board members.
According to the latest reassessment totals, the city’s debt ceiling is an estimated $46 million, or 10 percent of the roughly $460 million value of the city’s taxable real estate. According to the latest audit, the city has existing debt of about $10 million, with another approximately $15 million in looming debt to pay for the city’s share of costs for a state mandated upgrade to the wastewater treatment plant.
That would leave just $21 million for the city to borrow for a new school, and that’s likely overstated because the standard practice of most localities, according to City Manager Jason Tyree, is to limit debt levels to 5 percent of the value of a municipality’s real estate. (State code prohibits a locality from incurring debt of more than 10 percent of its total taxable real estate value.)
There are a couple of caveats to these calculations. Debt that is repaid by revenue bonds should not be used in determining the city’s debt ceiling. And, if the city is successful in securing a Water Quality Improvement Fund Grant through the Department of Environmental Quality, the city’s share of costs for the WWTP upgrade could go down.
Even so, a somewhat higher debt ceiling capacity isn’t likely to come close to the cost estimates that have been tossed around for the new school project. Those estimates have ranged from $47 million to $67 million, depending on design choices.
Given these fiscal facts, Webb suggested that the city might want to consider less expensive school options such as rehabilitating an existing facility.
The next step in the process is for Tyree to find out what it will cost to have a consulting firm conduct formal financial modeling for a new PreKgrade 7 school. The city manager plans to present those costs to City Council in April. Council will then need to determine if it wants to incur those costs to determine more precise price estimates for a school project it may not be able to afford.
