Council to consider bonds for Distillery District, other projects

bfortune@herald-leader.comDecember 3, 2009 

  • Other projects

    The city also will consider whether to sell bonds for these projects, among others:

    Street resurfacing: $3 million

    Design for new government center: $1 million

    Computer equipment: $1 million

    Jail security system: $980,000

    Purchase of Development Rights: $2 million

    Bell House: $135,000

    Shillito Park: $260,000

Tough choices face Urban County Council members Thursday when they must decide which of about 90 city projects to finance with city bonds — and which ones to keep on the waiting list.

"These are all projects we have approved. They are all good projects. They will all get done. It's a question of when," said 6th District Councilman Kevin Stinnett.

Work has already started on $48 million worth of those projects, including renovation of the Lyric Theatre and the South Limestone streetscape project.

Added to those is a $3.2 million last-minute request from developer Barry McNees for infrastructure improvements along the blighted Manchester Street for his Distillery District.

Stinnett is chairman of the council's bond workshop committee that has been meeting regularly for several weeks to decide which projects should be priorities when the city issues bonds next month.

"The difficulty we face is how much can we afford to pay in debt service on those bonds," said Stinnett, also chairman of the Budget and Finance Committee.

Earlier this year, Mayor Jim Newberry made the decision to pay off the $246 million unfunded liability in the police and fire pension fund.

This fiscal year, the city issued a $70 million bond for the Policemen's and Firefighters' Retirement Fund. It is scheduled to add a $35 million bond to the fund for each of the next five years.

"Morally, that was the right thing to do, and council concurred. But that is soaking up about half our bonding capacity," said 9th District Councilman Jay McChord.

"When all the bonds are up and running, we will be making payments of between $23 (million) and $25 million a year for 20 years," said 12th District Councilman Ed Lane.

"That's going to eat up most of the money we normally allocate for bonds for infrastructure projects like roads, police cars, parks, road surfacing," said Lane, vice chairman of the Budget and Finance Committee.

Exacerbating the government's financial dilemma is an estimated $13 million revenue shortfall that Newberry announced last month. He directed city division directors to look for ways to reduce expenses 5 percent. That could include layoffs, pay cuts, furloughs and elimination of city programs in 2010.

That also may cut into the amount of money the city has available to pay debt service, Stinnett said.

At weekly bond workshops over the past month, council members were shown a list of almost 90 projects they have approved in the past two years to finance with bonds totalling $114 million.

These include new computer equipment, fire and police vehicles, road resurfacing, maintenance of city-owned buildings and traffic signals.

"We are committed to those," Stinnett said. "Because right now, some of those have not been bonded, we're paying for them with cash, out of our bank account."

In addition, Newberry asked that $13 million in projects he considers a high priority be added to the list. They include the Purchase of Development Rights program and streetscapes for parts of Main and Vine streets.

At the bond workshops, council members decided to include the $48 million in projects that have been started, plus Newberry's $13 million.

To that will be added the $35 million bond for the police and firemen's pension.

The addition of the Distillery District project would bring the total to $99 million in bonds the city would take to market to sell on Jan. 14.

That would mean the annual debt-service payment would be slightly more than $30 million, compared with this year's debt payment of $19 million.

"The question is how much can we afford in debt service," McChord said.

Stinnett said that if the city can maintain its $279 million budget for 2010 without cuts, it could sustain $30 million in debt service.

But because of the estimated $13 million revenue shortfall, it is possible the city may not be able to make debt-service payments of $30 million, meaning that the council may have to cut into the list of projects it can pay for with bonds this year.

The list has to be finalized at the council's bond workshop Thursday afternoon and given two readings at council meeting Thursday night.

Reach Beverly Fortune at (859) 231-3251 or 1-800-950-6397, Ext. 3251

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