Urban Ledger: Albany's obligations

2013-02-01T09:00:00Z 2014-01-03T16:45:58Z Urban Ledger: Albany's obligationsCathy Ingalls, Albany Democrat-Herald Albany Democrat Herald
February 01, 2013 9:00 am  • 

As of June 30, 2012, the city owed $111 million for projects, including the water and wastewater treatment facilities and road improvements

City debt: What is it used for, and why is it deemed necessary? Is there a cap on how much debt a city can have?

Albany City Councilor Floyd Collins answered those and other questions so residents could have a better understanding of how public money is spent before they vote on a debt-limiting measure in the March 12 special election.

If passed, Measure 22-117 would restrict the city of Albany’s total debt to what it was as of Feb. 28, 2012. No new debt or debt extensions would be allowed without voter approval.

City officials declined to answer questions about debt, saying the definition of the word in this instance is not clear, and they don’t want to influence voters by choosing to define it a certain way. (A state ruling prevents paid local government employees from providing their opinions once measures move to the ballot.)

Staff also declined to provide a dollar amount for the city’s debt as of Feb. 28, 2012. However, Albany’s Comprehensive Annual Financial Report indicates that as of June 30, 2012, the city had about $111 million in debt. (For details, see box above.)

Councilor Collins is familiar with city operations and spending because he was Albany’s public works director for about four years, retiring in 2002. Previously he spent 15 years as the city of Salem’s assistant public works director.

“My opinions,” he said, “are based on my experience, the reading of state statutes and relevant opinions at the state level.”

Here are questions posted to Collins and his responses:

 

Why do cities incur debt?

Most cities borrow funds to pay for things like roads and swimming pools and to improve water and wastewater systems.

“Much like a home mortgage, most of us would not be able to afford a home if we had to pay cash as opposed to securing a loan to be repaid in 15 to 3o years,” Collins said.

The city does not borrow money to pay for routine operation and maintenance of existing programs, which makes its debt different than that of the federal government.

How much debt does Albany have?

If “debt” refers to long-term and voter-approved debt, the amount is about $111 million as of June 30, 2012.

There is $3.76 million in general obligation bonds, a common type of municipal bond that requires voter approval and is paid off largely via tax revenues. These bonds were used to improve Elm Street, Salem Avenue, and Santiam and North Albany roads, among other projects.

The city has other long-term obligations of about $107 million, generally loans from the state or federal government for projects such as the recent expansions at the water and wastewater treatment plants.

Collins wonders if other city operations might also be construed as “debt,” such as wages owed to city employees or money owed to a contractor hired to repair a street.

 

How quickly is the debt being paid off?

The general obligation bond principal in Albany goes down about $1.2 million per year, which should result in a June 2015 pay off. At that time, the city will no longer have any voter-approved general obligation bond debt.

Non-tax-supported obligations are reduced annually according to their individual terms.

Last year, the city reduced its principal owed on all outstanding obligations by almost $8 million.

How much interest is paid each year on city debt?

The interest rates range from 2 percent to 7.36 percent, which reflects the market conditions when the bonds were issued. Those rates are reviewed periodically to see if bonds could be refunded at a lower rate.

Is there a debt cap?

For general obligation bonds, the state constitution limits debt to 3 percent of the true cash value of the city, generally referred to as real market value. On June 30, 2012, the RMV was $3,929,652,978 and the limitation was $117,889,589, of which the city was using $3.76 million.

How does the city use revenue bonds versus general obligation bonds?

Revenue bonds — which are repaid through revenue from rates charged customers — are typically used for projects that generate income, such as water and sewer improvements.

General obligation bonds normally go to make street or park upgrades, and in Albany’s case to construct fire stations 13 and 14.

Normally, general obligation bonds carry a lower interest rate than revenue bonds.

 


Albany Urban Renewal Manager Kate Porsche fielded question for the city: Is the Central Albany Revitalization Area plan part of city debt?

No, she said, the debt incurred by the Albany Revitalization Agency is not part of city debt. The agency is a separate government entity and was not named in Measure 22-117.

However, ARA’s borrowing could be affected under the measure if the agency and the city chose to back the tax increment financing revenue stream with the full faith and credit of the city to achieve the lowest borrowing cost. If the city’s ability to borrow is limited, then the city’s full faith and credit could be restricted as well.

According to the Comprehensive Annual Financial report, CARA debt totaled $5,548,200 as of June 30, 2012.

Next up: The Urban Ledger series will continue Sunday with a detailed look at Albany’s urban renewal district, the Central Albany Revitalization Area, and Linn County’s four other districts, three in Lebanon and one in Harrisburg.

Cathy Ingalls is the city government reporter. She can be reached at cathy.ingalls@lee.net or at 541-812-6094.

Copyright 2014 Albany Democrat Herald. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

(7) Comments

  1. FocusOnFacts
    Report Abuse
    FocusOnFacts - February 01, 2013 10:18 pm
    “$25K loan approved for W.R. Grace facility”
    On Jan 31 the Democrat Herald posted this story. It relates: “The Linn County Board of Commissioners has approved a $25,000 forgivable loan to assist with a $14.7 million expansion project by the W.R. Grace Co., formerly Synthetech.”

    So where is MR G ???

    When the Albany council did this he was calling them criminals, giving payoffs to donors and friends. It was all crony capitalism, theft of public money. Theft of his money. Illegal. Incompetent. More...

    He railed about this kind of economic development, and he and his buddies Tom and Jim ran around town with their petitions.

    But when Roger Nyquist and the Linn board DID EXACTLY WHAT ALBANY HAS DONE to foster economic development... silence.

    No bluster. No condemnation. No talk about the founding fathers. No talk about the free market.

    All these hypocrites. Slam Albany but give the county a free pass. Double standard, which is what they truly believe in. This isn’t really about CARA, as much as it’s about trying to get revenge. It’s a political hack job, clear as the mud they sling.
  2. FocusOnFacts
    Report Abuse
    FocusOnFacts - February 01, 2013 10:12 pm
    Actually, it takes 4 votes to pass anything (6 councilors - mayor only votes to break a tie).

    Maybe you ought to compare that with the Linn County Commissioners where it only takes 2 votes to control their $80 million in revenues. Add to that the fact that they get paid $80,000+ a year, compared to Albany council that gets about $2,000 a year.

    Albany as a city has been growing and improving. Linn county just keeps going further downhill.
  3. Ray Kopczynski
    Report Abuse
    Ray Kopczynski - February 01, 2013 6:05 pm
    For you folks unable to (or unwilling to) gather information about how OPEN the city of Albany regarding it' finances, visit this site and compare Albany to other Oregon cities...

    http://sunshinereview.org/index.php/Evaluation_of_Oregon_city_websites

  4. Ray Kopczynski
    Report Abuse
    Ray Kopczynski - February 01, 2013 6:00 pm
    Mr G-
    "Why is the ADH, and the City, misleading the readers on this issue?"

    They are not doing so. I inquired of city staff: "ARA is a blended component unit of the City of Albany under generally accepted accounting principles (GAAP). It is a blended component unit because the governing body of ARA is appointed by the City Council. GAAP requires a blended component unit to be included in the financial reporting of the primary government.

    By definition, a blended component unit is a separate legal entity. Obligations of a blended component unit are not obligations of the primary government unless there is an agreement or other legal arrangement that creates the obligation. There is a difference between financial reporting and legal form."
  5. GidBiddler
    Report Abuse
    GidBiddler - February 01, 2013 3:17 pm
    They are being misleading, and fighting tooth and nail to keep their special honey pot of spending going. 3 people have total control over 65 million dollars in tax payer funds, that aren't even collected yet! You bet they don't want voters to have to approve these projects! Use this litmus test: HAVE YOU EVER SEEN THE CITY FIGHT SO HARD AND MAKE SO MUCH PRESS ABOUT ANY ISSUE OTHER THAN CARA? That is how you know we are kicking them in the good parts with this one. If you have any interest in the financial stability of your city please vote YES on both special measures. If you think that massive amounts of city debt, given to pet projects that Sharon and her crony team choose (like special sidewalks and trailer parks) then by all means, move to California and take her with you.
  6. scorpion
    Report Abuse
    scorpion - February 01, 2013 11:17 am
    I was just looking at the picture that accompanies this article and was thinking that it TOTALLY reminds me of CARA for some reason.

    Yeah...that water is full of it too..........
  7. Mr G
    Report Abuse
    Mr G - February 01, 2013 9:20 am
    Perhaps Cathy and other in the City should read the CAFR again. Here's a quote from page 12 -

    "At June 30, 2012, the City had $121,978,228 in debt outstanding..."

    Below this statement is Table 5 which shows every debt of the City. Included in the list are the things in Cathy's article plus CARA debt, unfunded PERS liability debt, and a few other small debts.

    CARA debt is City debt. The CAFR says so.

    Why is the ADH, and the City, misleading the readers on this issue?
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