City Hall debt mounts as big projects approach

City Hall debt mounts as big projects approach

Alexandrias debt remains well within established guidelines, but after quadrupling in the past decade and with more big-ticket projects looming, some officials want to temper spending.

From 2001 to 2011, the citys debt services the amount paid annually in interest on outstanding debt rose from $12.4 million to $37.9 million, according to Bruce Johnson, Alexandrias chief financial officer. During that same period the citys debt burden rose from $108 million to $460 million. 

Projects like the reconstruction of T.C. Williams High School and the police headquarters building certainly added to the citys debt, Johnson said. Metro capital costs, sewer work and expanding the Dash fleet were among the other costs Alexandria has shouldered since 2001. 

In the 1990s, city officials outlined borrowing guidelines, including keeping debt services spending below 10 percent of total government spending. Currently, City Hall budgets about 5 percent toward interest, Johnson said. 

Considering the array of projects planned for the next decade, the citys debt services burden would flirt with 8 percent of city spending around 2018 or 2019, he said.

Which is why City Councilman Frank Fannon wants a good cost-benefit discussion to take place.

In this challenging economy, we really need to separate our wants from our needs, he said. There are lots of things we want out there in the community, but one of my real concerns is that we have taken on a lot of projects and spent a lot of money while taking on a lot of debt in the last couple of years.

More spending could jeopardize the citys AAA bond rating, Fannon warns, though he is quick to point out that Alexandria remains in good fiscal shape. While the city has the means to pay back its debt, he worries less thrift now will translate into higher real estate taxes down the line. 

Our homeowners and business owners are the ones paying for the majority of our projects, Fannon said. Were very careful in the City of Alexandria. Were in a position to repay these bills, but the way we get our money is from the real estate tax.

Vice Mayor Kerry Donley believes future projects will require a built-in revenue stream dedicated for debt servicing to get off the ground, like the special tax district to fund proposed Potomac Yard Metro station or a commercial-add on tax for new infrastructure improvements.

The debt service guidelines were established to preserve the citys high bond rating, Donley said and exceeding those guidelines puts that bond rating at risk.

Debt services is not an item in the budget that can be altered it is an obligation and its not like other line items where you can cut them, Donley said. 

City spending is not a subject lost on Alexandria Taxpayers United President John Stephenson. Growing debt means City Hall has left the purse strings loose for too long, he said. 

Theyve got a wish list of priorities and they need to realize that in these tight economic times they need to cut back on their wish list we cant have everything, Stephenson said. Its really a shame. When people cant afford things, they dont buy them, but with the cities and states, they end up borrowing.

Resident J.J. Smith, an old hand at analyzing the citys budgets, doesnt see a problem with the citys outstanding debt. Owing $460 million isnt putting the citys bond rating at risk, he said.

Yes, it has gone up, but it does not seem that threatening to me, he said. I also have noted the debt ceiling where we might jeopardize our bond rating and our head room is quite a bit more.

Johnson agrees. Alexandria has one of the strongest credits in the municipal bond market, which keeps interest rates low. As staff adjusts the citys capital improvement plan during the budget season, theyll continue to stick to the 10 percent or less target laid out two decades ago, he said.