Council debates bondingIn recent years Red Wing City Council has been reluctant to borrow money to pay for projects, preferring a "pay-as-you-go" approach. But that's a luxury Red Wing no longer has, according to city administration.
By: Jon Swedien, The Republican Eagle
In recent years Red Wing City Council has been reluctant to borrow money to pay for projects, preferring a "pay-as-you-go" approach. But that's a luxury Red Wing no longer has, according to city administration.
A pinch on city coffers will force council to choose between issuing bonds to finance large infrastructure repairs or delaying projects such as major street reconstruction indefinitely.
Putting off projects would put undue strain on city streets, public buildings and other infrastructure and could cost taxpayers more in the long run, City Council Administrator Kay Kuhlmann said Tuesday during a budget workshop.
Council members expressed ambivalence toward borrowing. Many said while they'd prefer not to bond for projects, it's likely better than the alternative.
"We're at the stage now where we have to bond for some stuff to keep it from falling apart," Council member Jerry Cook said.
At least one council member, however, wasn't willing to accept that bonding was necessary.
"It's just a way to hide raising the levy," Dean Hove said. He noted annual bond payments would come from the city's general fund, which is supported by property tax dollars. Currently, Red Wing has no debt tied directly to its general fund.
Whether the council bonds for some projects will likely be decided next spring, after state lawmakers wrap up their legislative session. Council members said it would be best to wait until then because they'll have a better idea how much state aid the city will receive in 2011.
In the meantime, a number of projects will be penciled into the 2011 budget. If the council decides not to bond, those projects would be pushed back, Red Wing Finance Director Marshall Hallock said.
The debate whether to bond is not new. Recent talk of using bonding as a means to finance projects dates back to at least 2008.
Falling revenues have prompted the discussion. Since 2002, Red Wing's purchasing power has declined 15 percent, according to Hallock. He said loss of state aid dollars and a number of other factors are responsible.