City Council unanimously approved a plan for fiscal year 2018 that would help the city become healthier financially during its meeting Tuesday.
The plan, which was created by Finance Director Hyun Kim, asks that the city accelerate payments for its $27 million debt on the raw-water line, bring a ballot question to voters this June to refinance that debt and put more money into reserve funding as it becomes available.
“This November the voters gave us approval to use capital improvement funds to pay off our last remaining debt,” Kim said. “The voters have given us permission so I think we should accelerate those debt payments by at least fiscal year ’18, maybe sooner.”
The city has recommended in the past that debt payments for the raw-water line be accelerated by $750,000 annually.
Councilman Rich Shuman said that he supports Kim’s recommendation to pay off debts early, but still had a few reservations.
“Accelerating payments is something we should do and we have the voters’ permission to do that, but I do have questions about whether it is good for a city to be completely debt free?” he said.
Some debt necessary
Kim said he would not recommend a city be completely debt free because large capital projects would put undue burden on citizen tax dollars.
“Without any form of debt future capital items that cost $14 (million) to $20 million to complete will be too much for taxpayers to pay off in one year,” Kim said. “While the city is looking to accelerate debt payments now, you could always obtain more debt in the future. Our finances are in good shape. We have a $200 million debt capacity and we are currently only at $27 million, so that is a very healthy number.”
The financial plan also calls for the city to refinance its current debt, an idea Kim wants to bring before voters in June. The question, which Kim admitted was still in its infancy and not fully realized, would seek to refinance water-line debt from a 4.4 percent blended interest rate to 3 percent.
A blended interest rate is a rated charge on a loan that combines previous and new rates.
“I want to refinance our debt so we can get a better interest rate that will decrease the duration of our loans and allow us to put money into the bank.”
Councilman Duncan McCoy said he supports the move to refinance city debt and urged Kim and the city clerk’s office to figure out a way to get this question on the ballot in June.
“We should have the flexibility to refinance,” McCoy said. “Every other body that has debt refinances and we need to figure out how we can bring this to voters.”
Kim also urged council to begin putting more money into city reserve funds. According to his plan, the city would need to build up the rate stabilization reserve in the utility fund to $3 million and the city’s long-term capital reserve in the utility fund to $5 million. The financial plan recommended that the city put $250,000 annually into each account until reserve fund goals were met.
Kim said both of these funds are necessary to ensure the city has enough money stashed away for a rainy day.
“We really should be putting the recommended monies into these accounts because we have some big costs coming to our utility infrastructure,” he said. “I understand we will not be able to put money into the reserve every year but when we can we should start saving.”
The rate stabilization reserve has close to $737,000 in it while the long-term capital reserve currently has $850,000 in the account.
Kim admitted that the city does not yet have the money to save the recommended $250,000 each year, but urged council members to pursue additional revenue through leasing solar land and selling off other city assets such as property.
Councilman Cam Walker said he supports putting money into reserve funds, but felt that the current number was too arbitrary and should be based off actual metrics and benchmarks.
“I think we need benchmarks before we start throwing numbers out there,” Walker said. “It would be nice to have a sister city and see how they do it because maybe there is a pattern to look at.”
Walker said he was concerned that without benchmarks citizens would be paying more than their fair share.
“I am all for building up bank accounts but not on the backs of our citizens,” Walker said. “Current residents paid for the last 30 years so they shouldn’t have to pay for the next 50.”
With the city’s financial plan in order Kim and the rest of the city staff will begin the process of creating a tentative budget. Kim said that he hopes to have his first public workshop on the year’s upcoming budget by the second week of February.
In other news, council:
n Approved a resolution urging the Nevada Legislature and Gov. Brian Sandoval to increase state funding for Meal on Wheels, a program that brings meals to homebound and disabled elderly. The resolution was brought to the council by Nevadans for the Common Good, a faith-based volunteer group.
Council urged state lawmakers to increase funding for Meals on Wheels by $5 million every two years, citing a waiting list for elderly seniors to get on the program in Las Vegas and Henderson.
“I think in a state where our legislatures can have a serious discussion about spending hundreds of millions on a football field they can use millions of dollars to feed the elderly,” McCoy said.
Mayor Rod Woodbury thanked a large group of volunteers that came in support of the resolution.
“The volunteers in the public supporting this resolution are some of the best people our city has to offer,” he said. “We are lucky that our Meals on Wheels program does not have a waiting list, but many do and if our state lawmakers could see all the good this program does, funding it would be a no-brainer.”
Contact reporter Max Lancaster at mlancaster @bouldercityreview.com or at 702-586-9401. Follow him on Twitter @MLancasterBCR.