Editor’s Note: The following is excerpted from an email sent by Henderson City Council member Elissa Yount to Reggie Ponder of The Daily Dispatch.
[Yount is ]quoting from Municipal Government in North Carolina, by David Lawrence, the book from the classes Yount has attended on local government:
P. 396 “Outstanding debt and the annual debt service that a city must pay affect its financial condition and are crucial factors in determining its ability to finance future capital projects. If a city is already heavily in debt and making large annual debt service payments, it is unlikely to be able to borrow major new amounts of money to finance new capital projects. One measure of whether more debt can safely be issued is annual debt service on net (non-self-supporting) general obligation and other tax-supported debt, as a percentage of general operating expenditures and debt service. Some authorities say this should ordinarily not exceed 15 to 20 percent. Most North Carolina local governments hold it to less than 10 percent.
“A second measure of safety in borrowing is outstanding general obligation debt as a percentage of the appraised value of taxable property. The statutes in fact set a legal limit on this percentage according to G.S. 159-55,the net debt for any city may not exceed 8 percent of its taxable property valuation. Net debt is total authorized and outstanding general obligation debt plus other forms of general debt (for example, certificates of participation and lease purchase agreements), less debt issued for utility facilities and certain other deductions. Although the legal net debt limit is 8 percent, virtually all cities restrict outstanding net general obligation debt to a percentage far below 8 percent of taxable valuation…
“Per capita debt is another measure widely used to compare the debt burdens of cities and other local governments. As of June 30, 1994, outstanding and authorized and unissued general obligation bonded debt, excluding enterprise debt, for all North Carolina’s cities with such debt was $347 per capita. Excluding authorized and unissued debt but including enterprise debt, per capita debt for all North Carolina’s cities with such debt was $468.” (I used to know this figure- I think you get it by dividing $36 million by 16,000 residents and this can change as population dwindles- I think this is the figure that always scared me to
death.)
Editor’s Note: $36 million divided by 16,000 residents is $2,250 per capita.
P. 415: “By statute the General Assembly has required that new general obligation debt incurred for a few purposes always be approved by the voters. The purposes in this category are auditoriums, coliseums, stadiums, convention centers, and like facilities; art galleries, museums, and historic properties; urban redevelopment; public transportation and cable television systems.” (I believe the Embassy was a redevelopment and no vote was taken and that is another reason that the general fund was raided.)
There is a lot more in this chapter–I hope this helps. No one on the council wants to be Penny Henny and cry the sky is falling. We see the big picture of the debt we owe and the needs we have and the shrinking tax base to pay for it all. While we know we can’t save our way to prosperity we sure have seen that you can mortgage your future and pay your way to the poor house. I believe the Local Government Commission still expects a pay-back to the city for Embassy money. If they knew that this money was not coming back to us, that Watkins refused to give the city a promissory note, then I think they would ask very probing questions.
I have always said that the Local Government Commission failed to watch over our city sufficiently.
If you need a copy of this book, Sandra Wilkerson has one as does our attorney and City Manager Jerry Moss.