Have you noticed that when polticians get into big debates, they tend to push themselves to hard-to-defend extremes? Democratic Mayor Tom Henry and Republican challenger Paula Hughes are arguing about how much debt the city is obligated for, and they're both saying things open to challenge. Hughes decries the latest debt load, which she says is $516.4 million and includes a $21 million increase last year. But Henry says no, the city actually reduced the debt it owed by $13.2 million. Why the discrepancy?
The candidates and their campaign staffs spar over many issues, but the key difference is this: Hughes counts the mounting bond debt incurred by City Utilities as long-term city debt. If she's wrong on that point, perhaps she was confused because the city itself includes that City Utilities debt in the financial report. It's in a table titled “City of Fort Wayne
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Leo - Reading about the birth of Fort Wayne City Light & Power back in 1907, we find that William Hosey when he was a City Councilman in 1898, introduced and passed a $.025 per $100 of taxable property levy to accumulate a fund to construct an electrical power plant for Fort Wayne. The tax revenues were gathered in a fund for nine years - in 1907, after voters approval, City Light & Power was established (and Mr. Hosey was our mayor in his first year in that office). The special tax levy was collected until 1912 at which time the operating costs of the facillity were to come from rate-payers. The tax levy generated a total of $336,039.73
So, the City Light Lease income and the amount that Indiana & Michigan Power is going to pay the city, would not exist if not for the foward-thinking of Hosey, John Trier, Harvey Crane, C.A. Ramsey and David Irvin (the Board of Works members in 1907).
Doesn't it make good sense that this so-called windfall should be used to pay for the needs of our present City Utilities, rather than spending it for some other use?
John, excellent post! I agree 100%. The problems with debt are many, but two stand out. When you build something based on borrowing, you create two problems. The first is the debt itself which needs to be paid off. Generally, you do not want the term of the debt to exceed the useful life of the constructed item. The second is maintenance and operating costs. Maintenance costs may be nearly zero up front, but over ten to twenty years they increase to a substantial level. The toll road lease did not take into account that constructing all those new roads would require a much larger maintenance budget.
I was annexed into the city. I have city water and sewer which means I am on the hook for the $200 million separation of storm and sewage sewers. FWCS district taxpayers made out when the property tax overall, the state took their $500 million police, fire and teacher unfunded pre 1977 pensions. The problem is I live in the state and now I am liable for others unfunded liabilities. We could take this further, but the point I want to make is, debt is debt. It makes little difference how many sub entities you create to divide total debt into small chunks, it still has to be paid by the people.
It would not be easy to determine what debt a city should have. The problem is that debt incurred now generally benefits those who are enjoying the constructed item the debt built, but future generations may not enjoy the "newness" in the future, only the burden of paying for it. I am a firm believer that if you want something now, you should be wiling to pay for it now. Just because a city could afford debt, there is no reason it needs to have debt. Debt correlates to higher taxes, lower standard of living and less disposable income.