CEDAR RAPIDS — Costs to the city for basic infrastructure fixes are colliding with costs for flood-recovery work and those for not-universally-popular projects like the city’s hotel and Convention Complex in a way that will require the city to sell more new annual bond debt than any time in its history.
Even so, the City Council this week, without hesitation, unanimously gave the go-ahead to take on some $67 million in new general-obligation bond debt, which is significantly more new debt that the council typically takes on in a given year.
In each of the last three post-flood budget years, the city sold between $30 million and $33 million in new general-obligation bond debt, according to city figures.
Casey Drew, the city’s finance director, reported Wednesday that previous council action this fiscal year actually will make the upcoming bond sale even larger and put it in the ballpark of $86 million. That, he said, would make for the largest annual bond sale in city history.
According to Drew’s estimates, the proposed new bond sale will raise the city’s total outstanding general-obligation bond debt from the current $282 million to $341 million. The new total will bring the city to within 73.6 percent of its debt limit, a limit that is an amount equal to 5 percent of the value of property in the city. The city now sits within 62.25 percent of the debt limit.
The proposed bond sale will come in the form of multiple bond sales at once to raise revenue for a variety of projects. Much but not all of the debt will be paid back with revenue from property taxes over 20 years, and in some instances, perhaps over 30 years. However, revenue from the downtown hotel, slated to reopen in 2013 as a DoubleTree by Hilton, is expected to pay most of the debt payments for the hotel renovation while parking revenue is expected to pay most of the debt payments for a new parking ramp across from the hotel, Drew noted.
Drew said the largest amount of revenue, an estimated $37.5 million, from the upcoming bond sale will go for the renovation and acquisition of the hotel.
The $11.8 million to be spent for a new parking ramp at the Physicians’ Clinic of Iowa’s new medical facility and improvements in the city’s new Medical District will be paid for with the incremental increase in property-tax revenue that comes as a result of the new PCI investment and other new investment in the Medical District.
City Council member Scott Olson said that all of the spending for which the city is issuing debt had been approved previously by the City Council as it voted on the city budget. The vote in March on the budget for the fiscal year beginning July 1 was unanimous.
At the same time, council member Don Karr acknowledged, “These are large numbers.” But he added that the new debt needed to be seen in the context of the city’s 2008 flood disaster, which he said caused more than $1 billion in damage.
“I guess when you have a billion-dollar loss, you got to spend some money to come back,” Karr said.
Council member Monica Vernon agreed, putting the damage in the city in the $6 billion range.
Vernon said the new debt that the City Council is taking on will finance projects that the council has analyzed and endorsed over the last couple of years. Some of the revenue from the bond sales is needed for flood recovery work and some to support projects that will make Cedar Rapids better in the future, she said.
Mayor Ron Corbett pointed out that disaster funds coming to the city from the federal and state government has benefitted the city’s flood recovery greatly, helping to limit the city’s need to go into even greater debt as it gets back on its feet.
“Unfortunately, the federal and state governments don’t pay for 100 percent of recovery,” Corbett said.
In February, City Manager Jeff Pomeranz cautioned the council during his annual budget presentation that the city may need to raise the city’s property-tax rate a year from now to cover increasing debt payments.
The council’s budget for the fiscal year beginning July 1 did not raise the city’s property-tax rate, though residential property-tax payers on average will see a 4.5-percent tax increase in the city portion of their property-tax bill because of some property valuation increases and because of a change in a state formula that increases how much of a home’s value is subject to property tax. Commercial and industrial property owners will pay the same property tax to the city.
Where bond revenue will go
- $11.6 million: Basic infrastructure repairs and city equipment needs
- $37.5 million: Hotel renovation and acquisition
- $10.15 million: Construction of convention center
- $10.6 million: Convention Complex/hotel parking ramp
- $1.32 million: Replacement of Roosevelt apartments’ fire escape
- $11.8 million: New parking ramp associated with the Physicians’ Clinic of Iowa’s new medical facility and improvements in the city’s new Medical District
- $2.9 million: New riverfront amphitheater and renovation of the underground parking ramp on May’s Island and the new City Hall
Source: City of Cedar Rapids