Your June 14 editorial “It’s deficit time in Petuniaville” regarding proposed city bond financing missed the mark. The financing will be used for authorized citywide capital projects by leveraging the city’s share of property taxes that will be realized from downtown commercial properties when the Central Loop tax increment district expires.
The implication that the financing would be used to balance the city’s operating budget is wrong.
The financing ordinance lists possible legitimate non-operating uses for proceeds, including capital and infrastructure needs. Proceeds of the financing, when issued at a future date, will not be used for recurring operating expenses.
The city’s current fiscal constraints within the corporate fund are the result of declining revenues in economically sensitive taxes, including income, sales and utility. Proceeds from the proposed financing are not being used to offset these corporate fund revenue shortfalls.
In connection with the first series of bonds issued in August 2000 using this structure, the city did not capitalize or borrow the cost of paying the debt. In fact, the city refunded certain outstanding general obligation debt and used the revised debt service on the refunded bonds to service the debt in the initial years. That financing approach is to be replicated in the proposed financing.
The financing proposed uses a structuring technique that does not increase property taxes but allows the city to leverage its reasonable share of property taxes that will be available upon expiration of the Central Loop tax increment district for citywide capital projects now.
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