At their last meeting, the Town Council of Fort Myers Beach agreed to a Debt Management Policy proposed by the Audit Committee. The recommended policy set a limit on the most the Town could possibly borrow and set a framework for long term funding processes that could be adjusted by Council at any time. The policy does not sit well with some residents and one councilman, however, who say that the limit set on borrowing is too high.
Town Administrative Services Director Maureen Rischitelli explained that the policy is something that staff can use as a ‘tool’ when they apply for loans for high dollar upcoming capital improvement projects like stormwater.
“When you go to get a mortgage, you have to bring in your W-2 and all your financial information – this is similar,” she said. “Before the Town can apply for funding or for a loan, this policy needs to be in place.”
The policy adopted by Council will be adopted into the Town’s Administrative Code and sets the Finance Director as overseer and sets policies including that the use of debt financing shall ‘not be considered appropriate for any recurring purpose such as current operating and maintenance expenditures except for’: projects included in the Town’s capital improvement plan and consistent with the Comprehensive Plan, projects whose useful life will extend past the financing term; projects where there are sufficient revenues to cover the debt; and equipment purchases for over $100,000 that will last longer than 5 years.
“ ‘The Town’ may borrow money, contract loans, and issue bonds from time to time to finance the undertaking of any capital or other authorized project and may pledge the funds, credit, property and taxing power of the Town for the payment of such incurred debts,” the document reads.
The policy covers the types of debt the Town can accrue and how it should be governed, the sales process for long-term bonds, the setting up of a finance team and requires the Finance Director to prepare an annual Capital Improvements Plan (CIP) to address – at a minimum – the amount of debt projected over the next 5 years and is to be submitted to Town Council as part of the annual budget process. It also sets the limit of indebtedness of General Obligation Bonds to a number not to exceed 1.0% of the value of taxable property within the Town.
It is this last provision that has drawn the concern of residents who worry that – should the Town Charter be revised to allow the Town to borrow for longer than 3 years – it would give Council authority to borrow as much as $2.88 million (1% of the Town’s taxable value for the current fiscal year) for as long as they want to.
Rischitelli says that would never happen.
“We can only borrow what we can pay back,” she said. “Right now, that’s pay back in three years. But even if the charter referenda passes and we can lock in lower interest rates by borrowing for longer periods, no one is going to give this Town a $2.8 million loan because we’d have to show we could pay it back.”
Maureen says that staff asked council for a debt policy so ‘we can put our house in order’ as the Town moves forward with big dollar projects.
“Nothing we borrow goes forward without Council approval, meaning every project will have to have public input,” she said. “For capital projects, we want to be able to do them holistically – meaning we determine what we can afford and how we’re going to fund it. All of this is decided in each year’s budget talks.”
Councilman Alan Mandel cast the lone vote against the new Debt Management Policy, saying he is concerned that the Town will be getting into too much debt.
“This policy needed to be put in place because otherwise people won’t believe we have a way to raise revenue,” he said. I would have liked the Audit Committee to have taken into account the existing debt the Town has already accrued. To me, there is no concern for the economic viability of our residents because it doesn’t matter whether we’re asking for fees or taxes – we’re still asking people to pay $500-$600 more per household.”
When we asked him how he got to that number, he explained that the Town is already $20 million in debt for potable water, a number that may increase to $60 million for stormwater management depending on what comes out of the Facilities Plan and what Council decides.
“That amounts to $300-$400 per household,” he said. “On top of that, the Audit Committee recommended that the Town be allowed to borrow up to another $28 million. How does the Town get to borrow that when it doesn’t have the revenue? By raising taxes! So, between fees for the water projects and fees for revenue bonds, an average household may end up paying $500-$600 more per year than they are paying now.”
Jim Rodwell, a member of the Audit Committee who worked on the policy, said there’s nothing in it that determines what the Town’s debt should be.
“That would be up to Town Council,” he said. “We set a cap on ad valorem debt – stormwater and other water projects are not included because those are user fees – but what the Town does is up to them.”
Like Rischitelli, Rodwell explained that the Town needs a Debt Management Policy if it wants to enter into any long-term debt.
“If you’re going to go into long-term debt, you need a document that covers all the possibilities related to it,” he said. “How much we’re going to need for projects like stormwater has yet to be decided because we still don’t know how much we’re going to do. Even if we only do a little piece of it, that’s still going to be long-term debt.”
Keri Hendry Weeg