The city of Portage is close to maxing out its credit card.
That’s the message Dennis Nachreiner, chairman of the city’s Finance and Administration Committee, took away from City Administrator Shawn Murphy’s presentation to the panel on Monday.
Murphy said he wanted to start a discussion about the debt the city is expected to take on in the coming years, and begin exploring spending priorities and alternative sources of money for proposed projects.
The city’s practice for borrowing, according to Murphy, is to avoid taking on total annual debt in excess of 3.5 percent of the city’s equalized assessed valuation.
In the period that runs from 2017 through 2021, the city’s outstanding debt balance averages about $21.87 million, which Murphy said is within 3.5 percent of the 2017 valuation, a little more than $602 million.
But to keep the debt within 3.5 percent, annual repayment would have to run about $1.7 million, and any new debt that the city takes on shouldn’t exceed the amount being repaid.
That’s what will happen, however, if the city undertakes all of the projects for which city officials plan to borrow money between now and 2021.
Murphy said the city’s capital improvement plan for that time period would result in a debt that is 4 percent of the city’s current assessed valuation.
For 2018, the proposed $1.44 million in debt is within guidelines, Murphy said.
But if the city undertakes every project proposed in the capital improvement plan – and if those project’s costs are at or near estimates – the new debt would go up by $2.94 million next year, $2.1 million in 2020 and $1.5 million in 2021.
Something, he said, may have to be sacrificed or delayed.
That “something,” Nachreiner said, should not include infrastructure or maintenance of city facilities.
“I don’t think we should borrow more money than we pay back,” he said.
But addressing the debt shouldn’t entail skimping on upgrading things like roads or underground utility lines like water and sewer mains, Nachreiner said. The city is paying now, he said, for delays in infrastructure maintenance.
Committee member Mark Hahn – who also is on the Parks and Recreation Board – said he thinks park-related spending might be asked to take the brunt of cutbacks in city indebtedness.
At least one park-related expenditure – upgrading the grandstand at the city-owned Columbia County Fairgrounds – might have to wait if the city is forced to reduce its new debt, Nachreiner said.
Then there’s the Portage Canal. In 2019, the city’s capital improvement plan includes borrowing a little more than $660,000 for improvements to one section of the canal. The amount to be borrowed represents the city’s share to qualify for a federal grant that could pay up to 80 percent of the project’s cost.
The project agreement, dated Oct. 31, 2016, calls for bids to be let in July 2019. If the project isn’t done, Murphy said, the city loses the grant money.
When committee members asked whether the canal project could be delayed, Murphy said it could be pushed back no more than about two years, and the delay would likely be granted only if there’s a fairly firm guarantee that the project will be done.
Although sidewalks and alleys constitute a relatively small part of the proposed annual borrowing — $100,000 per year – Nachreiner suggested the possibility of waiting on installing new sidewalks, and spending instead on fixing or replacing existing sidewalks that have sustained damage.
Nachreiner also suggested the possibility of changes in state and federal fiscal policies in the coming years that might affect the amount of revenue available to municipalities, and their borrowing capacity.
The Finance and Administration Committee plans to talk about the debt issue in more depth at a special meeting March 5.
Other city committees must join this discussion, Hahn said, and do so well in advance of planning for the 2019 budget.
“I would hope,” he said, “that the departments would help us prioritize.”