Updated: 9:59 a.m.
Wednesday, March 18, 2015 | Posted: 6:00 a.m. Wednesday, March 18, 2015
Varying levels of debt in Butler County’s
By Denise G. Callahan
BUTLER COUNTY —
The largest jurisdictions in Butler County
have varying levels of debt, and those numbers are driven by a number of
variables, including growth, services offered, policies and bank balances, to
name a few.
Debt levels run the gamut in the county
from a high of $267 million in Hamilton where
they run all their own utilities to a low of $7.5 million in Oxford,
home of the county’s largest employer, Miami University.
The total debt carried by a governmental entity doesn’t necessarily tell the
whole story, Hamilton’s numbers look huge but only $45.9 million is paid for
with taxpayer money, the rest is paid by the city’s water, sewer, gas and
electric customers and other means. Hamilton is
the only city in Ohio
that operates all four major utilities.
The county is on an aggressive path toward
eliminating a heavy general fund debt load that reached $91 million in 2009,
and now sits at $45 million. The commissioners recently approved an accelerated
schedule for paying off $17.5 million worth of bonds issued in 2006, to pay for
repairs and upgrades on several county buildings, like the jail and the
Government Services Center.
The principal on the 10 bonds currently
stands at $10 million and by refinancing at a lower interest rate and shaving
five years off the length of the loan, the county will save $1.2 million. Andy
Brossart, the county’s financial consultant, said the commissioners back then
had two choices, either raise the sales tax which is tied with three other
counties for the lowest in the state at 6.5 percent, or issue debt.
“Back in the mid-2000s the county was the
second or third fastest growing county in the state. When you’ve got a county
that’s developing that fast and has infrastructure needs and you’ve got a very
low sales tax, one of two things is going to happen,” Brossart said. “Either
you raise the sales tax and use a mixture of debt and cash or you don’t, which
they didn’t. You’re forced into either ignoring what you have to do for
development or issue debt… It’s like pick your poison.”
Brossart said when the county issued the
2006 bond series they probably should have paid cash for some things that had
price tags under $1 million. Administrator Charlie Young said there are times
when issuing debt is appropriate but now they are in pay down mode.
is clear that we have an opportunity to greatly reduce if not completely
eliminate the general obligation debt for the county, in a fairly short period
of time,” he said. “That will then free up a significant amount of funds to
meet the challenges that lay ahead.”
Finance Director Tawana Keels said annual
debt payments that were over $10 million in 2009 will drop to $800,000 by 2023.
The general fund debt service payment for this year is just over $8 million.
While the county is attacking its debt,
officials in Hamilton
are issuing more in the name economic development, according to Finance
Director Tom Vanderhorst.
“We’re going in the opposite direction,
we’re borrowing more money,” Vanderhorst said. “I think the reason being is
that our primary revenue source from the general fund perspective is income
tax. Those declined in 2008, so we’ve been borrowing more money and using a lot
of it for economic development and trying to attract businesses.”
Tyler Roark, the city’s budget analyst,
said the largest recent debt increase was a $9.5 million loan in 2013 to pay
for a variety of capital improvements, including the Artspace building and
contributions to the CORE Fund. The city’s 2013 Comprehensive Annual Financial
Report indicated economic development activity brought in 608 new jobs,
retained 408 existing jobs and added $30.2 million in new payroll.
Roark said the city will also significantly
reduce its total debt later this year.
“The Greenup Hydroelectric Plant debt will
be retired using the proceeds from the 48.6 percent interest sale of the
Greenup Hydroelectric Plant to AMP Ohio,” Roark said. “Approximately $106
million in outstanding debt for Greenup will be retired and another $4 million
in electric bond anticipation notes will also be retired in 2015.”
In 2009, West Chester Twp.’s outstanding
debt was almost $75 million; it is now under $52 million. But 91 percent of
that number is backed by tax increment financing, not general fund dollars.
Finance Director Ken Keim said the township
has five TIFs that have debt issued and half of the debt was issued for Union Centre Boulevard
and related projects along that corridor. That TIF expires in 2021, so
“theoretically” if no new debt is issued, the township’s debt will be cut
almost in half.
to pay cash or issue debt obviously depends on how much money is in the
checkbook, but Middletown’s
Finance Director Michelle Greis said other factors also filter into the
equation when you are issuing new debt or refinancing old obligations. The
city’s debt stands at $36.5 million, and she said its costs an estimated 3
percent of the amount borrowed to issue or refinance debt. It would cost about
$150,000 to issue or refinance a $5 million bond.
“Any time you issue debt there are fees. You pay a bond counsel, you pay
an underwriter, you have to do a cost benefit analysis of the fees associated
with doing a debt issuance, versus our savings over the term,” she said. “Is it
going to be worth it?”
Governmental bodies are limited to
borrowing up to 10 mills without voter approval. And in Oxford, City Manager Doug Elliott said you
also have to be mindful of how much you can afford in debt payments, because
once set they don’t budge unless you refinance. Considering who should foot the
bill is also part of debt issuance decision-making process.
“The disadvantage of paying as you go is
that if you have an asset that you pay for now, that has a life span of 20
years, you’re hitting the taxpayers now with that cost, rather than paying for
it each year as you use that asset,” he said.
He said a new $4 million municipal pool the
city is considering building in a few years is an example of an asset you would
want to pay for with bonds, because residents for many years to come will use
it and should pay for it, not just people living there now.
Fairfield is one community that
is almost completely built out, so the days of issuing debt to accommodate
development is on the downturn. Finance Director Mary Hopton said she has
refinanced every bit of the $28.3 million worth of debt she could, to get a
lower interest rate. There are restrictions on when government bonds can be
“We have some areas that are adjacent to
Fairfield Twp. and West Chester Twp. that are more commercial that still could
be developed, that might require some additional infrastructure but nothing
major,” she said. “As far as residential housing, we’re pretty much built out.
There are some spots, but it’s not like you are going to have a 500-unit
development like in Liberty or West Chester. We’re past that point, our boom
was in the ’70s and ’80s primarily.”
Hopton said, Liberty Twp. is really at the doorstep of big development as its
$9.7 million outstanding debt demonstrates. Up until recently, Trustee Christine Matacic used to describe her home
as a bedroom community, but now with cranes and bulldozers crawling all over
the $350 million Liberty Center project at Ohio 129 and Interstate 75, it seems
The township partnered with the county, and
the Liberty Community Authority was formed to handle the mega deal. The port
authority sold $37 million worth of revenue bonds in November on behalf of the
partners to pay for infrastructure. The project, which includes major retailers
like Dillards and Dick’s Sporting Goods, restaurants and a movie theater, is in
a TIF so the bonds will be repaid through that vehicle.
“As with anything else, when you are in a
growth mode there are certain projects you need to get done,” Matacic said.
“We’ve been very fortunate that we partner with other people and partner with
our developers and others, to make sure that we minimize that debt when we do
have to go out.”
said revenue bonds are different from the general obligation bonds the
jurisdictions have reported for this story, and thus are not included in the
“General obligation bonds issued by a
community pledge the full faith and credit of the issuing municipality. This
financing method allows the community to access the lowest possible borrowing
rates,” Brossart said. “General obligation bonds can be repaid by revenue
sources other than the general fund of that community, for example, tax
increment revenues, water revenues or sewer revenues. Revenue bonds legally
obligate and are repaid only by the specific revenue sources identified in the