New water tower financing – Who assumes risk?

There is a big risk factor looming in November that could profoundly impact the direction of our economy. Minnetrista will be relying on revenues coming from current and future water users to finance a new $2.3M water tower in the southern sector and while we’ve been enjoying a robust growth period with a booming housing market, what if all that comes to a halt? We’ve seen what happened in 2008 and elections are known to impact the economy in profound ways.

The city council has heard from financial consultants, engineering firms, and staff urging

water tower

the city to act now but none of them are Minnetrista taxpayers. They are stakeholders benefiting, directly or indirectly, from issuing the bond, constructing the tower, or growing the city’s debt and size of the city’s budget. That’s just a fact, but an important fact to consider. They are all competent and good at what they do but their interests are, understandably, their interests.

Don’t get me wrong, we need to build the water tower and we need to do it soon. Our growth numbers show that by 2030, if growth continues at the current rate, we won’t be able to service the southern sector adequately. But it takes about 2 years to get a water tower online and there is no imminent crisis, despite what some stakeholders may assert.

There are two possible ways, with some very important differences, to finance this project. The council, however, was advised Monday night to consider only the first:

  • General Obligation (G.O.) Bonds – Pledge the full faith & credit of the city and require the city to use whatever means possible, including increasing the citywide tax levy, to cover the debt. These are called “General” obligation bonds because they are typically used to finance projects that benefit the general community at large, not just a sector of it. In this case, however, this project only benefits city water users. With a G.O. bond the entire Minnetrista tax base assumes the risk of whether our housing growth and associated water revenue increases at a sufficient rate to cover the bond.
  • Revenue Bonds – Finance income-producing projects and are secured by a specified revenue source, in this case water fees and new connection charges. A revenue bond would rely solely on the revenue coming from water fees to pay for the bond without putting the “full faith & credit” of all Minnetrista taxpayers on the line. That means the city would not be required to increase the tax levy to cover the debt if, for any reason, future water fees weren’t enough. Revenue bonds put the risk on the investor purchasing the bonds rather than all Minnetrista property owners, regardless of whether they’re on city water.

My preference was to hold off on authorizing the bond issuance until after the November elections when the risk associated with our growth projections might be better understood. If it appears the economy will remain on track going forward, a G.O. bond may be a good option then. Considering the economic uncertainly that lies ahead I am not comfortable pledging the full faith and credit of the entire city on a G.O. bond today. A revenue bond wouldn’t do that and is the only responsible choice today, in my opinion, to protect Minnetrista property owners.

Unfortunately the council succumbed to the pressure and voted 4-1 Monday night to pass a resolution (pg 57) amended to provide for the sale of $2.5M in G.O. bonds ($2M for the tower; $500K for CIP) with plans to award the sale of the G.O. bonds on March 9, 2020.

I’ll need to update this debt chart:

debt growth
2016 Includes all debt types, levied and unlevied (revenue pledged)

*The narrative in this post is publicly available by viewing the Monday 2/3/2020 council meeting video and listening to the 2/3/2020 work session recording.

First levy increase since 2012?! I don’t think so

Laker Dec 21 ArticleI blogged about the misuse of statistics back in October and how omitting information, leaving out something significant that, if known, would lead the reader/listener to a different conclusion from what was presented, could manipulate residents. Well, today our favorite local newspaper, The Laker, has been manipulated. But don’t blame the reporter. She was only reporting what she had read on the city’s slide presented at the December 2 public hearing on the 2020 levy increase which said:

“General Fund levy has not been increased since 2012 and had decreased from 2010 before that”

Somehow the reporter got the idea, from the statement above, that the tax levy in Minnetrista hadn’t gone up in eight years. Hmm, I wonder if residents in Minnetrista think the same thing. Anyone familiar with Minnetrista’s tax levy history knows there has been a tax levy increase almost every year since 2012 and we got another whopper 5.66% increase this year.

The byline in the December 21 story on page 18 states “Final levy close to that submitted in September, first increase since 2012” (Emphasis added). Oops, someone actually printed what they were told, and in a very public way. It’s always been okay to mislead people as long as it was done quietly, but headlines advertising the deception are another matter. The reporter was quickly contacted by the city and told to correct the online story and reminded that she should have run the story by the city.

How would a regular citizen interpret this slide?General Fun levy has not increased

Note also how the slide says “Staff is proposing an option reducing the net preliminary tax levy increase….” instead of the reality of staff proposing a 5.66% increase, which, by the way, was adopted on a 4-1 vote (Bruce dissenting).

So what was missing from this slide and why did the reporter need to correct the story? First, there are several funds, other than the “general fund,” included in the tax levy. There is a debt fund, a road maintenance fund, and a CIP levy that, in addition to the general fund levy, comprise the taxable levy. Most people don’t know that and the only reason this statement was on this slide is to take advantage of the fact that most people don’t know that.

Bottom line is the city of Minnetrista wants more of your money but they want you to hand it over without complaining. To do that requires manipulation of the facts and they are very good at that.

 

May 23, 2018

Regarding the private message some of you (perhaps all of you?) received from the person behind the “Our Minnetrista” organization, I WILL PUBLICLY ADDRESS EACH LIE IN HIS MESSAGE:

1. “I supported her candidacy”. Prior to the election my neighbors reported they had found flyers from this organization campaigning against me. I did meet with the Our Minnetrista representatives when I filed to run but as soon as they discovered I wasn’t going to be a rubber stamp for the Mayor or staff they launched an effort to derail my campaign.

2. He claims the road budget was “slashed during the preceding four years.” The point here is that it wasn’t “slashed” 128% and that was the increase being considered. Yes, the road budget needed an increase but 128%, in my opinion, was extreme.

3. He claims “Council Member Bruce refused to answer my questions.” He never asked me a question but rather spoke at a public hearing where he had three uninterrupted minutes to speak. He never addressed a question to me. I, however, did ask the Mayor for an opportunity to respond to his allegations of being misled and stated that all the statements I had made in an op/ed column in the Laker were accurate and I stood behind them.

4. He claims to have been misled to think the 4.35% increase in the city’s tax levy (which just means the city’s budget) translated to a 4.35% increase in his property tax bill. That is just ignorance, but understandable given the complicated nature of property tax calculations in Minnesota. Many Minnetrista residents saw increases of more than 5% in the city portion of their property tax bill for 2018. Those figures are publicly available and easy to prove.

5. Lastly, in the MG blog post that seems to have ignited this smear campaign I was not questioning whether or not it was the “right decision” to pull snow plows off the city roads during a snow storm. I was questioning the decision to make a public announcement on the city’s website that they were being pulled because of blizzard conditions. That announcement, in my opinion, was unnecessary in the first place and, secondly, didn’t state the real reason for pulling the plows which had more to do with staffing levels than anything else. If I make a mistake I will apologize for it but I don’t apologize for what others do.

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