As we get closer to the Bond election, there seems to be more conversation about the Bond issue in general, and individual expenditures in particular. That's okay. That's the American way.
For this little short exercise, I don't want to discuss the particulars. We can do that on another post. For example, I am having a hard time supporting the expenditure for a Public Service training facility. Apparently, we have been renting time from Garland to rent their facility for training. A number I would like to know is the cost of renting Garland's facility each year. I don't have a clue what we spend for tower training each year for police and firemen. However, for all expenditures we have to invest in, I would always want to have no less than a 10 year payback. That's roughly a 10% per year return on investment. If we are spending $250,000 per year renting Garland's facility, it would roughly support a $2.5 million capital improvement expenditure. If we could rent that facility to other cities, that would speed up the payback, thus making the return on investment better. I could support that bond issue. But.......what if we don't spend $250,000 per year renting a facility? That certainly changes the arithmetic. If we can rent the facility to others, that would also change the arithmetic.
I simply don't have enough info. If Rowlett "officialdom" wants me to support the Safety training facility, I need more information. In conversations with city leaders, I have said that they do not do a good job at communication with the citizens. They already know how I feel about that.
Each of the budgets, or allocations, of the proposed Bond program has it's own similar story. Essentially, its what we get for the money.
We all have to make our individual decisions on the details above. However, the concept of using bond funding rather than cash flowing out of our tax revenue is quite another analysis.
Just for purposes of discussion, lets say we need $20 million for "stuff." We don't have $20 million. We can get a loan. That's what a bond issue is. We are borrowing money from people who buy our bonds.
It's the same as buying a car and getting a loan from a bank. If you don't have $25K in the bank to buy the car, you get a loan to pay for the car. Then you pay off the loan in accordance with the terms you can afford.
Notwithstanding the details mentioned above, the bond issue is much the same as trading in our old car. We have about $25 million of old bond debt that is retiring. We have been making payments on that bond debt for many years. That debt will be gone in a few months. However, we now need some repairs.......about $25 million in repairs. We can take the money that we now will have because we have retired the old bonds, and start making improvements. Under this scenario, we will not incur any more bond debt.........but it will take us many, many years to make the repairs, because the absence of bond debt does not create the immediate cash to make all repairs at the same time. So......there are two alternates: 1) raise the tax rate to get more cash sooner, or 2) float new bond debt for $25 million.
Let's say we're selfish. Let's say we don't want the tax rate to go up and we want all the repairs done NOW.
That only leaves one option. A new bond issue. A good thing about a new bond issue is that the interest rate on bonds issued now have a substantially lower interest rate than earlier bonds. I have mentioned this before. I feel that Brian, the City Manager, should issue a public notice telling the public what the weighted average of the old bonds carry vs. the interest rate of the new bond issue. You should see a noticeable difference. Our interest cost of $25 million of bond debt should go down considerably from the earlier bond debt. That good for us and takes some upward pressure off the tax rate. HOWEVER, other pressures may exert upward pressure on the tax rate. That is a different discussion.
The sale of cheaper bonds will provide the immediate $25 million to make all the proposed repairs as we could get to them. And, our cost should still go down a little.
It's just like buying a new car, except we're buying new streets, alleys and parks at a lower interest rate.
You do not save money by rejecting the bond issue. You only change to a pocket that never has enough money in it.
For this little short exercise, I don't want to discuss the particulars. We can do that on another post. For example, I am having a hard time supporting the expenditure for a Public Service training facility. Apparently, we have been renting time from Garland to rent their facility for training. A number I would like to know is the cost of renting Garland's facility each year. I don't have a clue what we spend for tower training each year for police and firemen. However, for all expenditures we have to invest in, I would always want to have no less than a 10 year payback. That's roughly a 10% per year return on investment. If we are spending $250,000 per year renting Garland's facility, it would roughly support a $2.5 million capital improvement expenditure. If we could rent that facility to other cities, that would speed up the payback, thus making the return on investment better. I could support that bond issue. But.......what if we don't spend $250,000 per year renting a facility? That certainly changes the arithmetic. If we can rent the facility to others, that would also change the arithmetic.
I simply don't have enough info. If Rowlett "officialdom" wants me to support the Safety training facility, I need more information. In conversations with city leaders, I have said that they do not do a good job at communication with the citizens. They already know how I feel about that.
Each of the budgets, or allocations, of the proposed Bond program has it's own similar story. Essentially, its what we get for the money.
We all have to make our individual decisions on the details above. However, the concept of using bond funding rather than cash flowing out of our tax revenue is quite another analysis.
Just for purposes of discussion, lets say we need $20 million for "stuff." We don't have $20 million. We can get a loan. That's what a bond issue is. We are borrowing money from people who buy our bonds.
It's the same as buying a car and getting a loan from a bank. If you don't have $25K in the bank to buy the car, you get a loan to pay for the car. Then you pay off the loan in accordance with the terms you can afford.
Notwithstanding the details mentioned above, the bond issue is much the same as trading in our old car. We have about $25 million of old bond debt that is retiring. We have been making payments on that bond debt for many years. That debt will be gone in a few months. However, we now need some repairs.......about $25 million in repairs. We can take the money that we now will have because we have retired the old bonds, and start making improvements. Under this scenario, we will not incur any more bond debt.........but it will take us many, many years to make the repairs, because the absence of bond debt does not create the immediate cash to make all repairs at the same time. So......there are two alternates: 1) raise the tax rate to get more cash sooner, or 2) float new bond debt for $25 million.
Let's say we're selfish. Let's say we don't want the tax rate to go up and we want all the repairs done NOW.
That only leaves one option. A new bond issue. A good thing about a new bond issue is that the interest rate on bonds issued now have a substantially lower interest rate than earlier bonds. I have mentioned this before. I feel that Brian, the City Manager, should issue a public notice telling the public what the weighted average of the old bonds carry vs. the interest rate of the new bond issue. You should see a noticeable difference. Our interest cost of $25 million of bond debt should go down considerably from the earlier bond debt. That good for us and takes some upward pressure off the tax rate. HOWEVER, other pressures may exert upward pressure on the tax rate. That is a different discussion.
The sale of cheaper bonds will provide the immediate $25 million to make all the proposed repairs as we could get to them. And, our cost should still go down a little.
It's just like buying a new car, except we're buying new streets, alleys and parks at a lower interest rate.
You do not save money by rejecting the bond issue. You only change to a pocket that never has enough money in it.
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