Good debt and bad debt

Gazette Editorial Board

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There are plenty of bad reasons to go into debt, such as avoiding fiscal realities and the tough decisions necessary to live within your means.

There are good reasons to borrow, too. Say, to take calculated steps toward a more prosperous future, or to recover equilibrium after an unexpected emergency.

That's why we're not overly concerned that the City of Cedar Rapids assumed more debt this month than at any point in city history. After a disaster the scale of the 2008 flood, it's reasonable, even necessary, to expect local government to take on more debt to help the community move forward and speed up recovery.

Earlier this month, the city took on $82 million in general-obligation bond debt and another $6 million in revenue bonds. About $60 million will go toward the city's costs for the downtown convention complex and parking ramp, and renovation of the downtown hotel the city rescued last year.

The additional debt involving those projects led Moody's Investors Service to add a cautionary asterisk when it renewed the city's top Aaa bond rating. The convention center/hotel project does involve some increased risk, but it also is a measured investment with the potential to do more for the community and local economy long-term than just pay for itself.

Mayor Ron Corbett compared this unusual spike of debt to the bulge you see when a snake eats a “big rat” - noticeable at first, but gradually diminishing. Not an appetizing analogy, but apt.

And it points to civic leaders' balanced commitment to assuming debt to deal with exceptional circumstances - not to avoid tough fiscal decisions about keeping everyday operations within budget. Which the city is.

Yes, progress comes with a price. Spending still has limits. But not investing enough in the future can cost a lot more down the road.

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