Jeff Kunz: Bond a good deal for taxpayers

READER'S VIEW: EAGLE CITY HALL

May 12, 2013 

  • WHAT ARE THE BOND ELECTIONS FACTS?

    In early April 2013, the City mailed a fact sheet to all voters concerning the bond election.

    Here is a summary:

    - The negotiated price for the building is $1,899,999, over a half-million dollars less than the asking price.

    - The city has $825,925 in cash to apply towards the building's purchase.

    - The maximum bond duration is 15 years.

    - The total proposed bond principal amount is $1.2 million.

    - The total bond interest, based on the anticipated annual interest rate of 2.0 percent, is $194,932.

    - The total amount (bond principal and interest) to be repaid is $1,394,932.

    Acquisition of the building will have potential cost savings.

    - If the city doesn't buy the building, annual costs starting Oct. 1, 2013, will be as follows:

    Full lease payment: $240,592

    Property taxes: $ 16,604

    Insurance premiums: $3,034

    Total costs: $260,230

    - With a maximum 15-year bond, the estimated annual payment would be $ 93,000

    - The net annual savings from ownership are: $167,230

If you could own your home in 15 years or less and reduce your payments by 62.0 percent, would you do it? Of course! And that's the same easy choice facing Eagle voters on May 21, when the city of Eagle will hold a special $1.2 million general obligation bond election to purchase Eagle City Hall.

If two-thirds of voters approve the measure, the city will use the net bond proceeds and cash reserves to purchase the building.

Cast your votes based on logic, not emotions. We could own Eagle City Hall for significantly less than what we are spending to lease it. However, some residents are unhappy the building was constructed and leased despite three failed bond elections.

They feel that their voices were taken out of the equation and their votes were circumvented.

I understand these emotions, because I too was unhappy (at the time) that the building was constructed and leased against the people's will. However, through my involvement with the Eagle City Hall Location Task Force and its careful analysis of the situation, I have come to understand that purchasing and owning the building is the most logical and cost-effective solution that satisfies all of the city's requirements. Ultimately, the task force recommended purchasing the building at fair market value without increasing our property taxes.

Ownership means significantly reduced city costs. Today, the city incurs three costs - full lease payments (of $240,592 per year), property taxes (of $16,604 per year) and insurance premiums (of $3,034 per year) - that could be eliminated through ownership. These costs are paid out of the annual budget and are fully covered by our current level of property taxes.

The estimated annual bond payments to purchase the building would be $93,000.

Thus, the city could realize net annual savings of $167,230 (62.0 percent), or more than $2.5 million over the next 15 years, by owning rather than leasing the building. The city's bond election information confirms these numbers as factual.

Ownership means less potential for a property tax increase. The ballot proposition authorizes city officials to levy a property tax increase, if necessary, to repay the bonds; otherwise, investors would not buy the bonds.

However, this does not mean that city officials must raise property taxes to purchase the building, because the annual budget monies currently being spent on expensive lease payments could instead be used to make the lower bond payments to purchase the building.

Annually, the City Council can opt to pay the bond payments from the city budget and avoid a separate levy. If city officials opt to pay the bond payments out of the annual budget, building-related expenses reduce by $167,230 per year (as described above) and, if all other budget line items remain constant, the net effect potentially justifies a property tax decrease.

All City Council members have stated that they favor using budget monies, not higher property taxes, to make the annual bond payments to purchase the building.

Ownership means greater benefits for our future. Ultimately, city officials will decide what could be done with the net annual savings of $167,230 from purchasing Eagle City Hall. For example, city officials could decide to:

- Reduce our property taxes. Each of the approximately 8,500 households in Eagle could enjoy a property tax reduction of over $20 per year by acquiring the building.

- Pay off the bonds early. Doing so would minimize the interest we pay on the bonds.

- Fund high-priority projects such as infrastructure development and maintenance.

- Some combination thereof.

Once the bonds have been fully repaid, we will own the building outright and the annual bond payments will cease - this represents an additional savings of $93,000 per year that city officials could use to further reduce our property taxes, to fund high-priority projects or some combination thereof.

In summary, it is important that voters remember the facts about the May 21 Eagle City Hall bond election and that they cast their votes based on logic, not emotions.

Ownership of Eagle City Hall means significantly reduced city costs, less potential for a property tax increase and greater benefits for our future.

For more information, please visit the Eagle's website at www.cityofeagle.org or the Committee in Favor of Eagle City Hall Ownership's website at www.owneaglecityhall.co.nf

Jeff Kunz is former co-chairman of Eagle City Hall Location Task Force and chairman and treasurer of Committee in Favor of Eagle City Hall Ownership.

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