UPDATE III: Should new Sewer Plant bonds be paid for through user fees?

Before I give you my answer to that question, first, I want to say I don’t think it is fiscally feasible. The bond payments combined with current debt service will easily exceed $25 million a year. A question councilor Stehly has been asking but not getting an answer on.

Don’t you think it is kind of bizarre we planned out $260 million in water reclamation upgrades over 7 years, a rate increase model and a 1st reading on Tuesday, yet NO ONE has an estimate of what those bond payments will be.

Yeah . . . right . . .

UPDATE II: Here are the projections;

UPDATE III: Here is the full report and answers to Stehly’s questions from Tuesday’s informationalCouncil Stehly Response – 11-16-18

Reminds of the SFSD and how they ran from the $300 million dollar bond repayment number.

So what is the justification of paying the bonds down through user fees besides the enterprise fund model that former mayor Bucktooth and Bowlcut concocted with Turdbak? They feel that bonds for infrastructure should be paid for through user fees. (I partially agree, but we will get to that in a moment).

Let’s be clear, like the Pavilion, the Denty has never made one dollar’s worth of payments towards the bonds and debt service which is around $9 million a year for the facility. That payment comes directly out of a fund we pay into when we purchase anything in Sioux Falls, groceries, clothing, etc. The 2nd penny is supposed to be for things like infrastructure (sewer plants) and roads, but we use it now to pay down the bonds on entertainment facilities. Does the Denty make money? Well kind of. They have tons of sponsorships* which offset the operational costs and any money left over above and beyond doesn’t even go back to the city. It goes into a revolving fund that the city maintains financially but that SMG uses to promote the EC. While it doesn’t cost us anything to operate the facility, we get ZERO from it to pay down the bonds. It’s like paying a mortgage on a house you can’t live in and the renters keep their rent payment, but do invite you over for an occasional BBQ – BYOB of course.

Something that was suggested long ago was a ticket fee attached to each ticket that would go directly to the bond payment. It was nixed by SMG because they said promoters don’t like it. But if it is written into city ordinance promoters and artists would have to obey. The 7th penny, which is the entertainment tax was used to pay down the Pavilion bonds, it was supposed to sunshine after that but never did and now is used for the maintenance of the Pavilion and EC and CC.

It is hypocritical to say we need to raise sewer rates to pay these bonds since the EC, the Pavilion, The Midco Aquatic Center and many other play palaces in SF have never paid down their bonds through user fees.

The user fees for sewer should go towards operating and maintaining current sewer lines. We should pay the bond for new sewer infrastructure out of the fund that was created for that, the 2nd penny.

When I have suggested this, many have said, “Then where will the debt service come from for the entertainment facilities?” My response is the same as Public Works Director Cotter’s, FROM USER FEES!

It’s time we change city ordinance so that the play palaces can start paying their own way. Clean water is essential to the health and well being of a growing city, seeing Garth Brooks 20 times in a row isn’t. We need to look at our fiscal responsibilities more closely.

*UPDATE: I wonder how the sponsorship negotiations are going with most of the sponsors at the Denty? Most of those agreements expire in 2019 (except the main naming rights). Makes you wonder if SMG’s latest termination has anything to do with this?



6 comments ↓

#1 Consevative here on 11.16.18 at 10:06 pm

Holy shit! I 100% agree with you. I was pissed we keep buying all this entertainment stuff I feel is unnecessary. We all use water and sewer, it’s important and trumps pools, event centers, heck even 300 million in schools. What I don’t get is this has been discussed for a while now one seems to be doing math anywhere. See we can agree on something. Love the Garth Brooks analogy

#2 D@ily Spin on 11.17.18 at 12:35 am

When desperation is realized, the Aquatics Center can be repurposed and renamed the Huether Sewage Treatment Plant. His name is best associated with crap. The wall of shame can be tipped over for filtration.

#3 Warren Phear on 11.17.18 at 4:37 pm

Your Update II? Is this all the info you got from the city? If it is, they left out a whole lot more than they included. In 2019 alone, the city will need $62,000,000 to make this work.

#4 l3wis on 11.17.18 at 4:48 pm

WP – Thanks, I posted the entire report and answers to Stehly’s questions above.

#5 Warren Phear on 11.17.18 at 9:55 pm

Update III helped answer some questions. In theory, with a lot of luck, growth wise, weather wise, inflation wise, existing upgrade wise, user fees might come close to covering this. But the margins are just way too close. In 2019 total projected revenue, including bond proceeds is 63 million. Total expenditures, including debt repayment is 62 million. Would you feel comfortable with a monthly income of $6,300 and monthly payments of $6,200? Debt repayment for 2019 is 12.7 million. But debt repayment just five years from now will be nearly 25 million. The math says rate increases of 6% to 5% to 4% to 3% is a pipe dream. We might as well get used to permanent 6%, or more, a year sewer rate increases. Unsustainable if the city plans on keeping baby boomers on fixed incomes here. I for one, am a baby boomer ready to leave this town. Too many cost increases.

#6 l3wis on 11.17.18 at 10:05 pm

Isn’t it crazy? People often scratch their heads when their wages may only go up 2% a year (if they are lucky) while healthcare costs go up 10-15 to 30% a year, property tax increases, utility rate increases, etc. I have also wondered why the State PUC doesn’t review these increases? How is a sewer rate increase any different than electric rates of a private company?

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