Three years after its adoption, the city’s financial plan is guiding it toward a financially stable future.
The plan was adopted by the City Council in May 2011 as an ordinance, requiring that a five-year financial plan be reviewed and approved annually by the council. The 2015 financial plan was adopted at the council’s Feb. 11 meeting.
“This plan is basically the same as its been since Day One, with some adjustments,” Finance Director Shirley Hughes told the council.
The plan’s objectives are reducing or eliminating the city’s debt, providing money for capital improvement and rainy-day fund balances, and creating reserves to prevent property tax and utility rate increases.
The plan calls for the city to aggressively pay off debt ahead of schedule by leveraging the increasing lease revenue from the city’s solar facilities in Eldorado Valley. The city estimates it will receive more than $46 million over the next 10 years from solar leases and, in that time, will be able to reduce its overall debt by 65 percent, which amounts to $68 million with interest.
Of the lease revenue, 80 percent will go to the city’s general fund and 20 percent to the capital improvement fund, which is only to be spent with voter approval.
The primary general fund debt includes about $7 million in revenue bonds from the construction of Boulder Creek Golf Club. The bonds require an annual payment from the general fund of about $775,000. With normal payments, the bonds are set to be paid off in 2025. However, the financial plan calls for additional payments of $1.25 million each year through 2016 and $550,000 in 2017. With the advance payments, the debt should be paid off in 2017, saving about $1.5 million.
A general fund debt from an interfund loan from the utility fund to the general fund of $5 million is scheduled to be paid off one year early, in 2019.
The city has utility fund debt of about $5 million for its portion of building the Southern Nevada Water Authority’s third intake valve. To quickly pay off that debt, the financial plan calls for adding $700,000 from the capital improvement fund to the regular $1.1 million annual payment. The accelerated payments are scheduled to have the obligation paid off in 2017, 16 years early, saving $11.5 million.
The city also has a $30 million utility fund debt for revenue bonds to build a raw water line in 2006, which is scheduled to be paid off in 2036. It cannot be scheduled for accelerated payment until 2017, but the plan calls for accelerated payments beginning in 2018 that will reduce the term of the bonds by nine years, saving $15 million.
The financial plan also created a rate stabilization reserve to protect against potential utility rate increases. As of June, the reserve had a balance of $750,000, but the financial plan recommends that the fund contain at least $2.5 million.
Even with the reserve, Hughes said a utility rate increase may be necessary in the future because of a new $476,000-and-rising annual infrastructure surcharge the water authority began charging the city last year.
“This infrastructure surcharge certainly wasn’t on the horizon when the plan was initially created,” Hughes said.
A long-term capital reserve also was established in 2011 for the emergency replacement of major components of the city’s electric infrastructure.
As of June, the reserve had a balance of $750,000, but the plan recommends at least $4 million.
Although the financial plan is not yet meeting all of its goals, Hughes said it is a good plan.
“It gets you out of debt and, in the long run, if you can get to a point where you don’t have a lot of debt on your books, it makes for better financial stability.”