EDITORIAL
City can't simply borrow into the black
Many of us have been tempted to do it — heck, a lot of us have: borrow money from one source to repay a loan borrowed from somewhere else.
We know it doesn't make sense to acquire debt simply to retire debt, but there are times when it seems to be the only viable answer.
But when you are a government, the choice becomes a little trickier. Since leadership in government tends to change from election cycle to election cycle, this process amounts to saddling future administrations and tomorrow's taxpayers with today's debt.
That's the charge, anyway, that is being fired with increasing heat at Mayor Jeremy Harris and his administration. Faced with a stagnant economy for almost his entire administration and a public fiercely opposed to property tax increases, Harris has had to find other ways to balance the budget.
Some of that comes by trimming costs, consolidating, modernizing and automating city services. But those ideas can only take you so far. At some point, it becomes impossible to balance the budget without adding new money.
As reported Monday by Advertiser Staff Writer Johnny Brannon, the Harris administration has restructured its bond debt to help make things balance out. This is akin to refinancing one's mortgage when interest rates are low. Yes, you end up paying more in the long term and your mortgage goes on longer, but your monthly payments are less so you can balance the family budget.
Does this make sense at the municipal level? Only up to a point, and the city is dangerously close to going past the point where such restructuring is prudent.
By taking on new, low-interest loans, the city will be able to pay off some $52.8 million in debt and interest that is about to come due. But there's a price: Over time, taxpayers will have to fork over an additional $46.5 million in interest in the new borrowing. That's a long-term price to pay for a short-term gain.
The more serious numbers show up in the overall level of debt being carried by the city. By the year 2008, city projections say debt service will rack up to more than $300 million compared with the $153.2 projected for next year. Today, debt payments are the third biggest part of the city budget, after public safety and sanitation. By 2008, however, debt payments will be the single biggest chunk being taken out of the budget.
A lot of heated rhetoric is being thrown at this picture, some of it unfair. After all, Harris and Co. don't really have a lot of options. But the City Council is right to put the borrow-now, pay-later program on a slow track.
Harris will be gone long before the bills come due, as will most if not all of the current council. But the obligation will remain. Before that taxpayer nightmare is launched into the future, the city must be absolutely certain that there are no other options.
