Rainy days and taxes
Imagine you desperately need a roof — a necessity, not a luxury, particularly these rainy days.
You’re not looking to trade up to some fancy tile or metal variety. All you want is something that won’t leak and is sound enough that a home improvement guru won’t have a heart attack looking at it on some TV show.
You find a company that’ll help you locate a roofer and spread your payments over 20 years. The company ball-parks a cost, insists it probably will be less, but doesn’t provide specifics of what your monthly payment will be.
Do you sign on the dotted line? It is, after all, a necessity. Or do you worry whether you’ll be able to afford monthly payments for a period of time so lengthy it could see a child mature from birth to college?
That’s roughly the situation Marion is in regarding an electric upgrade that city council members approved Monday.
Without asking taxpayers or closely looking at how it might pay for it, the city committed to a project that could leave it as much as $4.2 million deeper in debt.
Understandably, interest rates won’t be set until later, but it might be useful to ponder what they might be.
If the city’s borrowing agent, Kansas Power Pool, is able to get a rate as low as 2%, the loan could end up costing $900,000 in interest, with yearly payments averaging more than $250,000.
That’s $50,000 more than what the city has been setting aside each year to get started on the project.
We won’t for a minute suggest that the $50,000 isn’t worth it or a totally necessary expense. What we question is where the $50,000 will come from.
As with the imaginary roof we mentioned, the sad truth is that once the debt finally is paid off, we’ll probably need to do it all over again — the equivalent of re-roofing to update what by then will be as antiquated as what we have now.
And it might not be just $50,000 extra. If the rate comes in at 3%, we’re talking $1.6 million in interest and annual payments of $282,000.
It’s not an unfamiliar story. Marion is doing pretty much the same — borrowing without issuing bonds — to repair its water system. It probably should do the same with its streets.
Countywide, we know all too well how the burden of maintaining roads has created financial strains that ultimately lead to flattened tires and wrecked vehicles, even when workers don’t make silly mistakes like using wire-infested concrete chunks as if they were finishing gravel.
The cost of projects like these is considerable. Coming up with an extra $50,000 a year, as the city’s electric rebuild might, translates to eliminating a full-time job, adding five mills to the city’s tax rate, increasing its total tax levy by nearly 7%, or boosting already too-high electric rates, which hurt the poor and strangle business, by another half-cent or more per kilowatt-hour.
Much as we would eagerly campaign to approve the project, we lament that city fathers didn’t have sufficient faith in voters that they could be persuaded the improvements merited such expense.
Then again, maybe officials didn’t want taxpayers getting any ideas that they might like to be involved in determining exactly how to pay for the upgrades.
— ERIC MEYER