The time has come to limit the total amount of debt our city can have outstanding at any time. By adopting an outstanding debt limit of 3% of total real market value of property in the city, the best of both worlds can be achieved – limits on total outstanding debt and flexibility to preserve and enhance infrastructure of our city. Regardless of the debt (voter approved general obligation bonds, revenue bonds, full faith and credit bonds, line of credit or other kinds of issued debt), the city can impose reasonable limits and maintain flexibility. Let’s examine the elements of debt limitation.
1) Is there a current limit on any kind of city issued debt? Yes, by state law the city can’t issue general obligation (voter approved) debt exceeding 3% of the total real market property value in the city. At this time, the total real market value of the city is approximately $7.6 billion. State law limitation applies only to voter approved general obligation debt and not to other city issued debt.
2) What is the current general obligation limit? The city limit for 2014/15 is approximately $228 million.
3) How much general obligation debt is outstanding? The city has $11.1 million of general obligation debt outstanding.
4) Does the general obligation debt limit change year to year? Yes, in 18 of the last 20 years the general obligation debt limit has increased reflecting changes in the market value of property in the city.
5) Does the city have other outstanding debt obligations? Yes, they are: West End Building short term loan ($17.6 million outstanding); non revolving line of credit for the Lake Oswego Redevelopment Agency (LORA) ($2.5 million outstanding); revenue bonds for surface water and water ($8.5 million outstanding); full faith and credit bonds for wastewater, LORA and water ($174.8 million outstanding).
6) Does the city pay down debt every year? Yes, each year some portion of overall city debt is paid down. At this point, all existing city debt will be repaid in 24 years.
7) Is there additional debt issuance planned? Yes, later this year the city will issue $5.0 million of voter approved (November 2012) debt for the Boones Ferry road project. Within the next couple of years, completing Phase 1 of the Boones Ferry project may require an additional $17 million of debt. If the Wizer development proceeds, approximately $5.0 million of debt will be issued. The Public Safety project may require debt.
8) What is the total amount of city debt outstanding? – $214.5 million as of today with plans for an additional $27 million for a total of $241.5 million.
By adopting a 3% cap ($228 million currently) of total real market value of property in the city for all outstanding city debt, the best of both worlds will be achieved – limits on total debt and the flexibility to work within the total limit. A 3% limit obligates the city to establish priorities in what city projects should use debt to preserve and enhance city infrastructure. Flexibility is provided as debt is paid down and/or as total market value of property generally increases each year. As debt is repaid, the city has the opportunity to consider the use of additional city debt.
The time has come for a city imposed total debt limit.