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Editor’s Note: This story was updated at 7:07 a.m. on Jan. 27, 2025, to reflect how much of the city’s debt is applied against the debt limit.
MOUNT VERNON — City officials have embarked on a listening tour to collect residents’ feedback on the city’s three proposed new municipal buildings: police station, city annex, and courthouse/justice center.
A big question on everyone’s mind is how the city will pay for the buildings.
“I think the underlying question is, are you going raise my taxes to pay for this building?” Safety-service Director Tanner Salyers said. “The answer is we have no intention of raising the water or sewer bill to pay for these buildings.”
By law, money raised through water, sewer, and stormwater utilities cannot go into the general fund. The city has to use it for those designated purposes.
At a recent information session about the police station, a Knox Pages reader noted city officials have talked about issuing bonds or taking out loans to help pay for the buildings.
“But what is the city’s current bonding and debt payment situation?” our reader asked.
Knox Pages talked with Salyers and City Auditor Paul Mayville to find out.
Outstanding debt status
The first thing readers should know is the Ohio Revised Code caps the amount of debt a city can assume without voter approval at 5.5% of the city’s tax valuation. The amount of debt with voter approval is capped at 10.5%.
Mount Vernon’s tax valuation is $398,261,890, so the numbers look like this:
•Without voter approval, the city is capped at $21,904,404 of debt ($398,261,890 x 5.5%)
•With voter approval, the city is capped at $41,817,499 ($398,261,890 x 10.5%)
The city has $8,721,923 in outstanding debt spread across nine projects: one bond and eight loans. It paid off one bond in December 2024 and one loan this month.
However, only $1 million of the $8.7 million debt counts against the city’s debt limit because the other debt has a specific revenue repayment mechanism. For example, water utility fees pay for the water plant loan.
Six projects have an interest payment. Three projects are 0% interest loans from the Ohio Public Works Commission.
Mayville said the estimated principle and interest payment for 2025 is $2,037,213. Payments are made twice a year.
Maturity dates on six of the projects range from Dec. 1, 2027, to Jan. 30, 2040. Mayville said he is working through documentation to verify maturity dates on three of the loans.
Savings and investments
The other side of the coin to debt status is how much the city has in cash and savings. As of Jan. 15, that equals $37,994,132.41.
Investments total $31,794,031.72 and include the reserve balance account (aka rainy day fund), treasury bills, certificates of deposit, and money market accounts.
The “checkbook” holds $6,200,100.69.
Salyers said how much the city dips into these accounts depends on a case-by-case basis.
“Obviously we don’t want to dip into the rainy day fund, but we have the CDs, we have the money market funds. Those would be opportunities that we would look at first if we need to,” he said.
Salyers said the general fund and revenues fund daily operations and there is no reason to dip into savings or investments at this point.
“It’s better to have the liquidity as leverage to get cheaper money now and use it as debt structure than it is to spend it,” he said.
Reserve balance account
City council members recently capped the reserve balance account at 13% of anticipated revenues for the year.
The fund’s balance is just over $3 million and exceeds the 13-percent cap. Salyers said the 2025 interest will exceed what council could put into the account.
“We could take a quarter of a million dollars out of it right now and it would still be over the 13 percent,” he said. “So we have a free $250,000 we could use if we needed to.”
If 2026 revenues are much higher than 2025, council members might have to put some cash into the account, but Salyers noted it would probably not be a large amount.
City council can withdraw money from the reserve account for one of three reasons. One reason is for an economic opportunity, which for Salyers includes a match for a grant.
“If we had an opportunity where an organization would give us $1 million if we’re willing to put $250,000 up, I’d pay $250,000 to make $1 million any day,” he said.
“We already have $250,000 and it won’t even dip below 13 percent. That is a justifiable reason that council could take money out of the rainy day fund and put it toward the police station.”
Ultimate cost of the buildings
Because the city has not finalized designs or determined locations of the buildings, Salyers cannot state a cost for each project.
However, ballpark estimates for renovating buildings in the Midwest range from $225 to $275 per square-foot. New construction ranges from $470 to $580 per square foot.
Salyers said feedback through the listening sessions, online survey results, and city council discussions shows residents are okay with the police station on Sychar Road.
However, he noted that the design will shift as the current design is just a planning document.
Regarding the annex and justice center, he said, “People really want us to consider the rehab of Heartland Commerce Park and the administration building down there. Well, that saves millions of dollars.”
Salyers reiterated that the city will use a market basket of funding streams to pay for the buildings, including bonds, loans, grants, private donations, cash, and hopefully the state’s one-time strategic fund.
Whatever the ultimate combination is, Salyers said the city is in a good financial situation.
“We’re having record withholding every year, and we anticipate that will keep growing as we grow,” he said.
“However, the best thing that we can do is determine a full picture of our financial situation and determine whether or not everything that we have proposed is necessary.
“The best way to save money is look at the most expensive building that we have proposed and determine whether or not we need to build it in the first place,” he added.
Missed opportunity
Salyers believes the city missed capitalizing on the low interest rates over the past several years.
“We were in a financial situation where we could have pulled the trigger on at least one or two of these things. That had nothing to do with bonds and had everything to do with loans,” he said.
Salyers said the quicker the city moves on the new buildings, the sooner it can move employees out of the deteriorating Plaza Building.
“We have the bond capacity, we have the liquidity to get good interest rates on our loans. I think we have a good track record of getting grants and getting assistance with the state,” he said.
City officials will work with State Reps. Mark Hiner and Beth Lear and Sen. Andrew Brenner to get into the state budget this year.
“Then there will be another capital budget cycle that we’ll try to get into as well,” he said.
“I don’t want to put all the weight of this debt on the people. We’re talking about our bonding capacity; we’re talking about our loans. We’re being as creative as we can, but we have a lot to do real fast, and we’re trying to meet the demands of a growing region and a growing community.
“All of those things together, we’re going to take the weight off of the taxpayer.”
