The city of Waupaca’s debt policy now includes new guidelines.
That is after the Common Council approved several changes related to the policy.
Last month, the council voted 10-0 to include the equalized valuation in the city’s eight Tax Incremental Financing districts in the city’s borrowing capacity.
The policy was reviewed after a discussion earlier this year about how the city should finance future capital projects.
The city’s previous policy guidelines were put into place about 10 years ago.
“Remember, we were in a different time back then,” Mayor Brian Smith said. “We felt the TIF districts would generate enough revenue to pay off all the debt.”
This year, the city is using tax dollars and enterprise dollars to pay off TIF debt, he said.
“It makes sense,” the mayor said, “to put TID back in, since we are using those dollars.”
Brad Viegut, of Robert W. Baird & Co., is the city’s financial adviser, and he explained to the council the impact of including TID in the city’s borrowing capacity.
Doing so puts the city more in line with its peer communities and provides guidance to city staff, he said.
The guidelines of the city’s debt policy now include:
• Tax-supported general obligation debt should not exceed 2.5 percent of the city’s equalized valuation. After the council’s vote to include TID in that amount, the city may now borrow up to $6.7 million.
Under the previous guidelines, the city’s available debt capacity was $5.2 million.
• The total general obligation debt of the city should not exceed 3.75 percent of the city’s equalized valuation. This debt includes funds from such services as water and sewer fees, as opposed to tax revenues. Previously, the general obligation debt capacity was $389,530.
Now, the city’s available debt capacity from non-tax supported funds is $2.7 million, following the council’s vote to include TIF districts as well.
Viegut stressed that whether the council decided to leave the debt policy as it was, change it or take out pieces of it, it does not change the fact that all projects and financing still must go before the council.
“It’s really just a policy document,” he said.
When asked why some municipalties decide to include the equalized valuation of TID in their borrowing capacity, Viegut said he thinks there is a stronger foundation for leaving TID in the amount because that is consistent with state statutes.
The city’s previous policy was more conservative than the state standards, he said.
The council also approved another change that affects the city’s debt policy.
Under the previous policy, the city’s annual debt service on tax supported debt could not exceed 15 percent of the city’s total General Fund revenue.
Last month, the council voted 8-2 to change it to 25 percent. Jillian Petersen and Scott Purchatzke voted against it.
“Ultimately, if and when we decide to borrow money, the council has to approve it,” the mayor said. “This debt policy puts us into a situation that compares us to many more communities Brad already told you about. I don’t think we’re reinventing the wheel. We’re changing it, so TID is in instead of out. It’s going to be helpful obviously to have a decision before we start the budget process for 2015, which is in August.”