MOUNT VERNON — The city will reduce its debt by more than $1 million over the next three years, which Mount Vernon officials say leaves room to take on debt for the new police station.
City Auditor Daniel Brinkman said MountVernon pays a little over $2 million annually in debt service.
A bond for Hiawatha Water Park and a bank loan for the Mount Vernon Avenue bridge both expire in 2027.
“The total the city spends on these per year is $759,000,” Brinkman said, adding that $362,000 comes out of the general fund.
Another $325,000 will fall off the end of 2029, saving the general fund $137,000. That debt is a Chase bond for a wastewater project and a U.S. bank bond for the Blackjack Road improvement project.
“So between those two [groups] alone, you’re looking at right around $1.1 million in the next three years of our total debt service falling off, and $500,000 coming off of our payments out of the general fund,” Brinkman said.
Other debt will expire between July 2032 and April 2036:
• July 2032: Ohio Water Development Authority loan, annual payment $403,000. Brinkman said it does not directly affect the general fund, but there are ways it could help it.
• December 2033: A Zion bank loan payment of $211,000 for a bridge project, paid entirely by the general fund.
• April 2036: COTC building, saving $323,000 a year.
Brinkman said that when the water/wastewater and income tax services relocate to the municipal center, a portion of the COTC building debt payments can be allocated to those departments.
Four smaller Ohio Public Works Commission loans account for about $22,000 in annual debt payment.
What’s Mount Vernon’s capacity to borrow?
Council members passed on the third reading an ordinance authorizing the city to issue up to $29 million in bonds to build the new police station.
Andrew Brossart of Bradley Payne said $29M is within the three debt limitation factors:
•Direct debt limitation. The net amount of unvoted debt, excluding exempt debt, cannot exceed 5.5% of the total assessed valuation of property in the city that is taxed.
Because the city will apply income tax revenue to repay the debt, it is exempt from this limitation.
•Indirect debt limitation (10-mill limitation). Total countywide debt cannot exceed 10 mills. Brossart said that taking into account the city’s $29 million, the county still has about $65 million capacity left.
The city plans to convert the notes into an income tax revenue bond next year. Because income tax revenue will repay the loan, it becomes exempt from this limitation at that time.
•Ability to repay. The city will use $11 million in income tax revenue to pay the debt. According to lending calculations, the city could actually borrow around $82 million.
“I think that’s incredibly important for everyone to understand. We’re not talking about increased rates or new taxes. This is within our current tax rates.”
Councilman and Budget and Finance Chair James Mahan
Law Director Rob Broeren said income tax revenue comes in three buckets: the 1% unvoted tax, a 1/2% voted tax, and a second 1/2% income tax voters approved in 2017.
The city will only use the 1% unvoted income tax to repay the loan; the two 1/2% taxes are restricted to police and fire.
City financial officers comfortable with moving forward
Auditor Brinkman acknowledged that $29 million gives him pause.
“None of us would be doing our job if it didn’t,” he said. “Hopefully, the bid comes back less. … But I will say the more I went through the numbers, the better I felt about it.”
He noted the expiring $1.1 million in debt and a $500,000 reduction in the general fund payments over the next three years.
Brinkman also said there are several things the city has or can do to “lessen the blow.”
Last year, the city moved approximately $1 million in annual EMS billings from the general fund into the safety funds.
“That helped stabilize police and fire quite a bit,” he said. “So much so that they’re doing pretty well right now.”
He said safety services could pay part of the debt service.
Additionally, there are legitimate administrative fees the city could levy on the utilities to reduce the load on the general fund.
A third option is changing the distribution allocations from the 1% unvoted income tax.
City Treasurer David Stuller said the city has $3.1 million in the rainy day fund, although it does not plan to use it to repay the debt.
“I think the income tax receipts are going to come in fine this year again. … They’re going to be pretty stable,” he said.
“As long as we have an atmosphere in Mount Vernon that people can work, I think we’ll do fine.”
