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Tuesday, August 27, 2013
Should local governments have debt? According to one candidate running for the Roanoke County Board of Supervisors, the answer is “No.” This is unrealistic. As a taxpayer and the retiring board member of the Hollins District, I want our citizens to know the facts about the county debt or, more specifically, the rest of the story.
In 2005, the county was faced with budget pressures to fund services mandated by the state and expected by citizens (such as schools, police, fire, social services, trash collection and parks) and mounting maintenance costs associated with aging school and county buildings.
Both are critical parts of the budget, and we needed to find a balance between the competing needs. Working together, the board of supervisors and school board created a capital financing plan that would identify funding to repair, renovate or replace aging school and county buildings.
The plan includes using unspent budgets at the end of each year (which encourages frugal spending throughout the year) as cash down payments on the capital projects rather than borrowing. It also includes both boards setting aside $300,000 each year to pay for the debt payments on future bond issues for planned capital projects. Using this plan, the county and schools have paid cash for $56 million in capital projects since 2005.
Proof of the success of this plan is not hard to find, and includes:
n The county consistently maintains excellent bond ratings by national rating agencies.
n The real estate tax rate has been reduced twice since this plan was implemented in 2005, and has remained level for the past six years despite the loss of millions in state revenues for schools and declining local tax revenues for the county.
n The county paid $56 million cash for capital projects since 2005.
As for the Hollins district specifically, because the county can borrow money at a low interest rate, the following projects were completed:
n Mountain View Elementary renovation.
n Bonsack Elementary addition.
n Northside High renovation.
n Burlington Elementary addition.
n William Byrd High renovations.
n Fleet maintenance facility.
n New Hershberger Road fire station.
n Green Ridge Recreational Center.
Like your home, county and school buildings must be maintained, and with some of our buildings more than 70 years old, the capital costs cannot be ignored or deferred into the future. They must be addressed over time, and paid for with a methodical funding stream and solid financing instruments. All school and county borrowing is obtained with low financing rates, based on our solid bond ratings, and paid off over 20 years (with the exception of one lease revenue financing that is a 30-year loan).
Few of us would be able to buy our homes without borrowing money, and the same applies to businesses. The county’s loans are paid off quicker than the average homeowner is able to pay off a mortgage. As interest rates fluctuate, we routinely refinance our loans to lock in lower rates — just like you might do with your home mortgage.
The county has adopted strict guidelines for all debt, which keeps Roanoke County’s debt well below the state’s debt limit for local governments. The fact is, the county has $187.7 million in debt — of which $109.8 million is for school construction. This is a responsible and reasonable level when comparing the amount of debt to the total county/school budget of $238.2 million.
Most people under the age of 50 would consider themselves fortunate if their total debt — including mortgage, automobile and credit cards — was only 79 percent of their total household income. If you are a young adult and you own your home, car and have no debt, you must have been born into that privileged class that the rest of us only read about.
That is the rest of the story.
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