Officials: Issuing debt, low taxes a 'balancing act'

Rather than approve spending the entire $29.5 million at one time, which could increase taxes by a wider margin, the council opted to break up the bond into pieces and issue the money as needed, she said.

Voter approval equals 'carte blanche?'

Although the council is moving forward with issuing the 2011 bonds, voters also approved road and park bond projects in 2008 that have only been partially issued.

Out of the $81.5 million 2008 bonds, the city has issued $2.5 million for parks projects and $12 million for roadway projects. Voters were told the bond projects could affect the tax rate.

Just because voters give the thumbs-up to issuing bonds does not mean council has to issue them anytime soon or that they have to raise taxes to pay for the projects, Rundell said.

Councilman Tommy Gonzalez said he believes council should look for alternate means of financing projects if at all possible so as not to raise the tax rate, even though voters give their approval in a bond election.

"It's not necessarily, in my opinion, a carte blanche that says, 'just raise taxes and don't worry about it,'" Gonzalez said. "When they show that issue, it's telling voters worse-case scenario. And a lot of voters sometimes knew with the growth of the economy, because of growth and new tax revenues, you won't have to issue all the bonds."

Council voted in October 2010 to issue $400,000 for the design of an amphitheater in San Gabriel Park. However, the funds were redirected to other projects approved by voters in the same bond proposition after council members decided in November 2011 to wait at least a year before moving forward on the project.

Gonzalez said he views the amphitheater as a luxury that the city should wait to pursue because there are other priority projects to complete.

"While we still want to do it, before we have the eventuality of increasing somebody's taxes for an amphitheater, let's wait to see if the economy is better to where it won't be as impactful," he said.

Councilwoman Rachael Jonrowe voted against the motion, saying more research needed to be done to see if the amphitheater could bring more economic activity to Georgetown.

"Particularly when you're talking about bond issues, I think most people understand the potential for their taxes to go up is there," she said. "But they think that it's worth it. And we don't seem to question that much when it comes to road projects or the public safety facility, but projects like the amphitheater are seen as sort of frivolous sometimes. But it's all part of quality-of-life issues, which improve people's lives and make this a more attractive place for people to move and for businesses to start up here."

While the council votes on when to issue the money, Rundell said city staff is conscientious of planning when to ask for it.

"Part of the issue with the amphitheater is timing. It's not just building it. It's staffing it, managing it and those operational costs that we currently can't manage on top of everything else, just because revenues are so much less than in 2008. We've grown, but our revenues haven't grown as much as our needs have," she said. "I think that was—from the staff's perspective—the reason we looked at it and said we would love to have it, but operational costs are going to be more than what we can generate from the facility itself."

Bond 101

Municipal bonds are loans with set interest rates that agencies such as counties, cities and school districts use to raise funds for capital projects that can include roads, facilities and park improvements.

There are three types of bonds that municipalities can use to issue debt—general obligation, which are voter approved; certificates of obligation, which can be issued without an election; and revenue bonds, which are guaranteed to be repaid through revenue generated from the project and not increased taxes.

Although CO bonds can be issued without voter approval, cities and counties are required to host public hearings before they can be issued.

Rundell said the city typically will only issue CO bonds for things governments are required to do.

"You wouldn't necessarily want to go to the voters every time you have to build a fire station because elections are expensive. Some cities finance things different ways, but if you were going to build a waterline, you wouldn't want to have to go to the voters to do that," she said. "Anything that we think is controversial or will have a significant impact to the tax rate, it's the city's policy to take it before the voters."

Quality-of-life issues typically go before the voters to gauge public support, she said.

How much a bond will increase taxes depends on several factors, including the city's appraised values and the bond's interest rate, Rundell said. Those factors influence when to use voter-approved bonds and how much of the approved amount to use at one time.

"We try to mitigate [the tax impact] as much as we possibly can, but that is a council concern. They want to be very conscious of that because from an economic development perspective, having a low tax rate is very important," Rundell said. "It's very desirable. It's very much of a selling point to industries and residents who may want to live here, but at the same time, we have to be able to fund all of those priorities, improvements and quality-of-life things that make this a desirable community. It truly is a balancing act."