The approval of a $25 million bond issue should not add to Rowlett's tax rate. Here's why:
Although this is a little bit of an over-simplification, the following is basically correct. Rowlett has been servicing debt for at least $25 million for several years. This bond debt is now paying off, or nearly paying off. Within a relatively short time, all should pay off. We need the city manager to tell us exactly what the payoff dates are. In addition, we need to know what the weighted average interest rate we have been paying on the old debt. That information, too, is pain free when reporting to the citizens.
Now, when you know the amounts of the debt, when it is paying off, and the weighted average of the interest rate, you can calculate how much money we have been paying each year against that debt. This is money we have been paying for years, and like it or not, we're used to it.
Just for grins, let's pretend the average interest rate on $25 million of "old" debt is 5%. Although some of the "old" debt is paid off, probably a little remains, but will be paid off soon. We need to know that information, too. Now, lets assume the interest rate on the new $25 million bond debt is 1.5% (which has been reported). We can now make an interesting calculation. I won't amortize the loan because I don't know the term of the debt, however I can show you the first years' interest cost difference. The first year's interest at 5% for $25 million is $1,250,000. The first year's interest cost for the same $25 million @ 1.5% is $375,000. The 5% rate costs 3.33 times more. Replacing $25 million of old debt with $25 million of new debt at 1.5% interest will save Rowlett $875,000/year in the first year.
The new bond debt should not cost Rowlett any additional money when the old debt is paid off. In fact, using the example above, a substantial amount of money is saved. If the tax rate remains the same, this extra money becomes available, in addition to the new bond revenue. That ain't a bad deal. However, that doesn't mean much unless you know what the $25 million + tax savings is going to be spent on.
Now, we are told some of the $25M will go toward street and alley maintenance. Well, if we need money for that, it also means that the streets and alleys are suffering from deferred maintenance. If that is true, then it's true that sufficient money hasn't been spent to keep streets and alleys up to standards. That would certainly keep the taxes lower, but it also means Rowlett has adopted the formula for maintenance that Balch Springs did many years ago. You can make up your own mind as to where that got Balch Springs.
So, we're back to a familiar stop. What is Rowlett "officialdom" sharing with you? Do you have enough information to reach a meaningful conclusion? This is an old question that keeps resurfacing. How much information did you learn about the library? How much information did you get about The Villages? Have you ever seen a single piece of paper that said all the land in North Shore should be Office/Warehouse. I certainly never did. I think Rowlett "officialdom" has done an abysmal job of informing the citizens of Rowlett. I think maybe 10%-15% of this problem is because "officialdom" is trying to hide something. I think the other 85%-90% is because the city just doesn't know how to talk to the citizens. They seem to have an image in their heads that elected officials need to act a certain way. Frankly, I think it's foolishness.
You will soon (5/9/15) be asked to vote on the bond issue. Do you know enough to vote? Get the City Council to publish a list of what they need the $25M spent on.
If we don't get our hands on a good, well intentioned, list, then we have to vote "no." Personally, I want to help in developing Rowlett's future. I would support spending some money on the future.....something that wears well for Rowlett. The arithmetic says $25 M in new bonds are good deal, but by cracky I want to know what I'm voting on!!! Cut the gobblygook!! Quite sliding information out to the public at an oblique angle!!!
Although this is a little bit of an over-simplification, the following is basically correct. Rowlett has been servicing debt for at least $25 million for several years. This bond debt is now paying off, or nearly paying off. Within a relatively short time, all should pay off. We need the city manager to tell us exactly what the payoff dates are. In addition, we need to know what the weighted average interest rate we have been paying on the old debt. That information, too, is pain free when reporting to the citizens.
Now, when you know the amounts of the debt, when it is paying off, and the weighted average of the interest rate, you can calculate how much money we have been paying each year against that debt. This is money we have been paying for years, and like it or not, we're used to it.
Just for grins, let's pretend the average interest rate on $25 million of "old" debt is 5%. Although some of the "old" debt is paid off, probably a little remains, but will be paid off soon. We need to know that information, too. Now, lets assume the interest rate on the new $25 million bond debt is 1.5% (which has been reported). We can now make an interesting calculation. I won't amortize the loan because I don't know the term of the debt, however I can show you the first years' interest cost difference. The first year's interest at 5% for $25 million is $1,250,000. The first year's interest cost for the same $25 million @ 1.5% is $375,000. The 5% rate costs 3.33 times more. Replacing $25 million of old debt with $25 million of new debt at 1.5% interest will save Rowlett $875,000/year in the first year.
The new bond debt should not cost Rowlett any additional money when the old debt is paid off. In fact, using the example above, a substantial amount of money is saved. If the tax rate remains the same, this extra money becomes available, in addition to the new bond revenue. That ain't a bad deal. However, that doesn't mean much unless you know what the $25 million + tax savings is going to be spent on.
Now, we are told some of the $25M will go toward street and alley maintenance. Well, if we need money for that, it also means that the streets and alleys are suffering from deferred maintenance. If that is true, then it's true that sufficient money hasn't been spent to keep streets and alleys up to standards. That would certainly keep the taxes lower, but it also means Rowlett has adopted the formula for maintenance that Balch Springs did many years ago. You can make up your own mind as to where that got Balch Springs.
So, we're back to a familiar stop. What is Rowlett "officialdom" sharing with you? Do you have enough information to reach a meaningful conclusion? This is an old question that keeps resurfacing. How much information did you learn about the library? How much information did you get about The Villages? Have you ever seen a single piece of paper that said all the land in North Shore should be Office/Warehouse. I certainly never did. I think Rowlett "officialdom" has done an abysmal job of informing the citizens of Rowlett. I think maybe 10%-15% of this problem is because "officialdom" is trying to hide something. I think the other 85%-90% is because the city just doesn't know how to talk to the citizens. They seem to have an image in their heads that elected officials need to act a certain way. Frankly, I think it's foolishness.
You will soon (5/9/15) be asked to vote on the bond issue. Do you know enough to vote? Get the City Council to publish a list of what they need the $25M spent on.
If we don't get our hands on a good, well intentioned, list, then we have to vote "no." Personally, I want to help in developing Rowlett's future. I would support spending some money on the future.....something that wears well for Rowlett. The arithmetic says $25 M in new bonds are good deal, but by cracky I want to know what I'm voting on!!! Cut the gobblygook!! Quite sliding information out to the public at an oblique angle!!!
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