City Budget Concerns

(Image; KSFY-TV screenshot)

I attended this meeting today that councilor Jamison held. It was actually quite informative.

Greg talked about the different projects going on in the SW district. He also discussed the possible indoor pool at Spellerberg Park. Greg said the city is performing a mail survey right now of the residents in that neighborhood to get a feeling of what they want. Greg also suggested that exploring an indoor pool at the Sanford Sports Complex may be a better idea. Ironically, former councilor Bob Jamison (who attended the meeting) agreed on my idea of locating a public indoor pool at either ONE or ALL of the city high schools. As Bob put it, “We should be encouraging lifetime sports activities in our schools, and swimming is one of them.”

The scary part of the meeting was the discussion of the city’s debt ceiling. Jamison said it is $160 million dollars away. Once that ceiling is gone, we will have to start borrowing money for things like road repairs and sewers. I wonder if we can use the EC as equity – more like a liability.

One other fun fact. Out of the $51 million collected on the 2nd Penny, only $36 million can be spent next year. Why? Because $15 million of that goes toward principal and interest on debt the city has already accumulated.

See what happens when you have two consecutive credit card executives as mayor . . . Remember, when Munson took office the city debt was hovering at $90 million. It is 4x that now. At that rate, our debt ceiling will disappear in about 18 months.

20 comments ↓

#1 GregN on 07.07.12 at 11:17 pm

I wished I could have made it to that meeting, but I couldn’t. Its funny you mention debt. I just asked about it and got some information from a councilor regarding the debt. Between that and looking at the last 9 years of budgets (2002 to present), the city had 102 million in debt in 2002. At the end of 2011 we had 280 million of debt applicable to our debt ceiling. (The debt ceiling for the city moves as a function of population). At the end of 2012, counting added event center debt, and some debt paydown our total debt will be just under 400 million. Looking at 2002 to 2011 (9 years), our debt has risen 12% per year. That’s excluding 2012 and the monster, the event center. Looking at 2002-2012 (10 years with Event Center the average is 14% a year compounded). It should be pointed out that a few large projects (Lewis and Clark – 2007 – 70 million), Drake Springs (35 million I think), and the EC (100+ million) make up a lot of it. But the trend is still clear. In 2002 the percentage of debt to the debt ceiling was about 24%. At the end of 2012, it will be 72%. Next year we will pay 30+ million in debt service payments. The next 5 years are 20-25 million each year. It goes down from there *IF* we don’t taken on new debt. Now we’re talking about bonding indoor swimming pools and such. This IS what you get when you have people who think debt is great to harness running the show. Obviously every dollar that goes to debt service is one less dollar that can be used to do projects you need to do and it leaves you less latitude if you get into real trouble. These half to be paid on time. You can’t defer them like say a road project. Seems to me we could have avoided years and years of rate increases on things like water, and instead used normal CIP funds to make the big capital improvements the water system needed. Instead we pile it into user fees, claim we didn’t raise any taxes, and use the money instead for fun, but optional projects. As pointed out, a lot of our 2nd penny is now beholden to debt service.
I’ve been worried about this for a while, and thinking about talking at public input about it. I’m under no illusion it would accomplish anything though.

#2 l3wis on 07.07.12 at 11:24 pm

Greg – Thank you for that in depth analysis. And I am not being snarky. I have seen this tiny monkey turn into the gorilla in the room overnight. You are dead on.

As for public input. I say go for it. The more citizens on public record, the better. I’m sure the first time Tim Stenga approached the podium, he thought the same as you, but much can be accomplished when you call out our elected officials in a public setting.

#3 Testor15 on 07.07.12 at 11:52 pm

Let’s use Stockton CA and Reno NV as examples of pushing a debt ceiling to the limits. Bankruptcy won’t be fun when you can’t turn on the lights in the EC because XCEL shut them off for nonpayment.

#4 l3wis on 07.08.12 at 12:01 am

Well, if it is a Pink Floyd concert, they will bring there own lights (and hopefully some acid tabs :)

#5 GregN on 07.08.12 at 12:14 am

Does anyone know what the proposed cost of the indoor pool at Spellerberg would be? The 2013-2017 CIP that the Mayor just proposed has a 7 million amount for the outdoor option. It just says that they could optionally do the indoor one and it would require bonding by the council to do that. Has anyone said what the figure would be to do the indoor one?

#6 l3wis on 07.08.12 at 12:18 am

Nope. And that was discussed.

#7 Testor15 on 07.08.12 at 9:33 am

Greg brings up many great items we must keep them in mind going forward.

This town keeps expanding beyond its borders without considering density and services. Why must we keep stretching the city limits when we cannot fix current core infrastructure.

I like nice streets and parks, but why do we have to have city employees, running city equipment, taking away taxpayer businesses from the tax rolls / roles.

Now we have the pension discussion again. I agree with pensions and the contractual obligations brought along. These employees did their jobs, under the rules of the contracts. The only reason employees must be protected by contracts and contractual pensions is p**s poor management.

We keep hiring (electing) salesmen to run our governments. These salesmen don’t have visions of stable civic growth, they have visions of personal greed. Look at the new projects in town and what is being proposed. Most of our current leaders are salesmen, credit card salesmen, bankers, land developers and others tied to the before mentioned groups. The media and leadership pans and makes fun of the only councilors willing to questions.

Now we have found our town’s debt ceiling around the corner. I must admit I did not grow up here and have in the past had little interest in the local governments. This lack of interest has changed once SouthDacola entered my life. Here we actually have a chance to work with L3wis and other policy nerds. Thank you for bringing this important information to the forefront.

#8 rufusx on 07.08.12 at 11:15 am

Just curious about the city of SF’s reserve fund level. Typically, SD cities have 50%+ of their annual budget squirreled away in required reserve funds. Under the home rule charter – is SF rrequired to do this as well? (kinda makes all the panic over the debt ceiling a moot point)

Example, my little town is currently at it’s debt ceiling, but has more than twice the required amount in reserve funds (I.E. they’ve used borrowed money to pay for stuff they could have purchased outright – why?????? Who knows.)

#9 scott on 07.08.12 at 11:42 am

I saw the story last night on KELO. Funny, nothing was mentioned about debt, only an enclosed cement pond.

#10 cr on 07.08.12 at 11:45 am

The cost of the Drakes Springs Pool was capped by a public vote at 4.7 million dollars. (which BTW is a long ways from the 35 million dollar figure mentioned earlier by Greg N.)

In 2007, when our community made the decision regarding the future of Drakes Springs, the indoor pool option was 12.1 million dollars.

The 2007 proposal that was approved by the Council consisted of a zero depth leisure pool, current channel, interactive play features and a separated 4 lane/25 yard fitness/teaching pool. (Source: Interoffice Memorandum from Don Kearney to the Park Board dated March 1, 2007)

What is being proposed at Spellerberg is an indoor 8 lane/50 yard competitive pool, a competitive (collegiate) diving pool, an additional leisure pool and a splash pad.

Both Mike Huether and Don Kearney told citizens at a recent neighborhood meeting that no cost estimate is available because no design work has been done.

What they did NOT say is that tentative plans have already been drawn up by a local architect, TSP. These plans have been viewed by both the indoor pool proponents and representatives of all the swim teams.

Based on the 2007 Indoor Pool Plan at 12.1 million, I am guessing that the Spellerberg Indoor Pool will come in at 18-20 million dollars.

Their plan is to allot some funds through the second penny sales tax (CIP) and bond for the rest (Quality of Life Bond IV).

Both the Indoor Ice Association and Sioux Falls Tennis Association have been working along with the Chamber to raise private dollars for their new facilities. Both Snowfox and Seal swim teams openly advocated for an indoor pool in 2007. What have they done over the past five years to raise private dollars for an indoor facility!!??

More importantly, do Sioux Falls citizens want to invest 15-20 million dollars in an indoor aquatic center? (voted down in both the 2005 Rec Center Vote and once again in the 2007 Drakes Springs Pool Initiative)

#11 GregN on 07.08.12 at 4:17 pm

Sorry for length of this reply in advance…

Thanks CR, good info.
I have now been told that the council has not been given a hard number, but the expected cost is 20+ million.

The other point CR made – the citizens voted this type of thing down twice. I’m afraid the desire and appetite for these facilities largely comes from a small, but powerful and well connected, group of people. I’m not a stick in the mud, and I’m not against these types of projects all of the time. I just wish we’d pay for them. I’m not sure our CIP funds should be used so extensively to pay for ‘quality of life’ bonding for things that aren’t ‘necessary’ and really in many cases benefit small groups of citizens. Full disclosure – I have a membership to Family Wellness, I have and do enjoy indoor swimming privately. I get the idea and benefit of year round swimming. There’s plenty of places to find it already though. If you want everyone to have access to it, pay for it, and I like the idea Scott’s thrown out more than once to combine it with say a school where you can double up the benefit of it (and probably reduce cost vs standalone).

I have to check into the reserve funds issue, how much we have. I think there is a legal requirement, I just don’t remember what it is.

Regarding the debt ceiling. There are 3 ceilings. The regular one, then two special purpose ones. My point is not to say we are about to hit a crisis and run out of money and go bankrupt. My overarching point is that spending, particularly on projects that while nice are not critical, is increasing far faster than inflows, which can’t continue forever. My argument is largely about attitude and philosophical (how do you pay for things, when is debt OK). My point is that it can’t continue like this forever, but I see no appetite to slow down or pay down debt we do have on anything of an accelerated schedule, and, higher debt service robs you of options and imposes opportunity costs. Money is finite – period. If we have to pay 9 million dollars next year in event center bonding debt, that’s two libraries that can’t be built, a bunch of road projects, etc. I guess one could say to me the voters made their choice, stop complaining. Fine. I would point out the average voter I talked to in the days before the vote weren’t sure where the LOCATION of the event center would be. They certainly were not informed (and were misinformed purposely by others) or in any position to understand the impact of their vote on the city budget.

Here is the debt limit info from the SD constitution (I said previously the limit was a function of population – I was mistaken – its a function of total property tax valuation in the city):

Legal Debt Limit: The City is subject to Article XIII, Section
4, of the South Dakota Constitution, which limits the amount
of bonded debt to a percentage of the assessed valuation of
the taxable property therein for the year preceding that in
which said indebtedness is incurred. The categories are as
follows:
1) Not to exceed 5.0 percent for the year preceding the
year in which said indebtedness is incurred.
2) An additional indebtedness not to exceed 10.0
percent for the year preceding the year in which said
indebtedness is incurred for the purpose of providing
water and sewage, for irrigation, domestic uses,
sewerage, and other purposes upon a majority vote
in favor thereof of the electors.
3) An additional indebtedness not to exceed
8.0 percent for the year preceding the year in which
said indebtedness is incurred for the purpose of
constructing street railways, electric lights, or other
electric plants upon a majority vote in favor thereof
of the electors.

#12 l3wis on 07.08.12 at 5:33 pm

Greg, you are becoming the new Costner :) You are not Costner? Are you :(

#13 Perplexed on 07.08.12 at 6:01 pm

How exactly does an elected official’s experience in the credit card industry make his or her’s administration more likely to take on debt?

#14 l3wis on 07.08.12 at 6:15 pm

You didn’t really ask that question? Did you? LOL!

#15 Jake Sonyou on 07.08.12 at 9:57 pm

I can’t wait until the wet blankets (like cr and Stehly) attempt to derail this indoor pool. Because really, Sux Falls needs another pathetic excuse for a pool that’s open for less than 25% of the year. Which, if you can justify spending $5M on a garbage-y pool (Drake Springs), I’m not sure why it doesn’t make sense to spend $20M on a pool that’ll be open 4X as much.

Sorry for the interruption. Back to the regularly scheduled hateblog.

#16 Testor15 on 07.08.12 at 10:12 pm

I actually like the question Perplexed asks and here is why.

Something a marketing manager for a high interest debt industry or credit card company learns early on are:
1. how to take advantage of naive people
2. how to sell debt as a simple cost with no strings attached
3. don’t be afraid of taking on debt, especially if the manager will be gone before the damage from debt will start affecting services
4. the manager makes connections in the debt world easily used in future adventures
5. Debt? What debt? All I see are investments.

The debt industry in Sioux Falls has warped many ‘leaders’ perception of what money and future growth of money is. We are seeing our city leaders spending future moneys because our current funds are soon all gone.

#17 l3wis on 07.09.12 at 3:41 am

Stehly has DECLINED to get involved in any way.

#18 GregN on 07.09.12 at 9:10 am

BRAVO, Testor15. Couldn’t have said it better myself. In regards to being a ‘wet blanket’ or a ‘hate blog’, I’m not necessarily opposed to pools and quality of life. Just PAY FOR IT and do it reasonably, and make sure its worth the cost for the public benefit. Just don’t insult my intelligence by bonding it, using up even more CIP funds for debt service on play things, and then crank up every fee there is to make up the required monies to keep up infrastructure and tell me you didn’t raise my taxes and no projects were impacted by it. I will admit to being a little more surly than usual the last few days – a combination of things has me in a bit of a mood. I’ll try to relax and be nice :)

#19 Detroit Lewis on 07.09.12 at 9:46 am

Greg is right, if there is a NEED for these things and we can pay for them without bonding, I say go for it.

#20 l3wis on 07.10.12 at 10:16 pm

This comment was sent to me anon;

The Sioux Falls Parks and Recreation is holding it’s second Master Plan Public Meeting, Thursday, July 12, 2012 from 5:30 to 7pm at the Oyate Community Center Gymnasium, Garfield Elementary School. The address is 2421 15th Street. Questions will be what renovations does the public want to see and how does the public envision the park in the future. Also asked will be, should the pool be replaced with an indoor aquatic facility.

The first meeting, held May 9, 2012, presented the architect drawings of the planned removal of facilities and the new construction. The initial spokesperson was one of the architects talking about the project layout followed by another architect providing general comments.

The plan includes leveling the current pool and space south of the pool to build a parking lot for 260 cars. Access to the new parking lot will be from Western Avenue. Based on the drawings, the parking lot will bank up to the sunken area on 26th and Western where kids sled in the winter. The current tennis and volleyball courts will be leveled and built again further north and west beside the current park area where the swings and various kids play equipment is. The volleyball court will be to the east of the new tennis courts. The play equipment will remain. The current tennis court location will be replaced with the facility which will house the indoor pool, leisure pool, lap pool, changing rooms and a special occasions room. The ball field in the corner of 22d and Western will remain.

The basis for the construction project is the swimming pool is only open 3 months a year and Sioux Falls needs an indoor pool. The cost for use of the pool and facilities by the public was not discussed at the first meeting.

The cost of building the entire project was not discussed.

There were about 20 people in attendance of the first meeting not including the city personnel and a few of the city commissioners who were there. All notifications of the meeting were mailed by name to some but not all areas around the park.

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