Council debates merits of accelerating projects while financing is a bargain
By Jennifer Eisenbart
Staff writer
With interest rates at an all-time low, the City of Burlington is considering accelerating its road repair program and other capital improvements over the next two years.
However, with the city needing to sell $1.5 million in bonds for the two years of improvements, policy as to borrowing to make the improvements vs. paying cash out of pocket came into sharp focus Tuesday night at the City of Burlington City Council Committee of the Whole meeting.
City Administrator Kevin Lahner made about a half-hour presentation that showed the potential savings on the bond sales – about $200,000 to $465,000 in payments – and an accelerated repair schedule that would compress four years of work into two years.
The reason? If the bond sales are made, state law basically requires that the improvements be made in two years, or else the city will need to go through a complex process to avoid having to return the money, said Lahner.
Lahner said that the accelerated schedule makes sense in light of the potential savings on interest rates. Unless interest rates stay as low as they are – which Lahner said is unlikely if the economy continues to improve – the city will save money.
Also, he added, the bidding environment for projects is highly competitive, with “contractors leaving their typical home areas to compete with each other.”
The accelerated repair schedule would see the following:
• In 2012, parts or all of Milwaukee Avenue, Kendall Street, Robins Run, Dale Drive, Dunford Drive, Echo Drive, Foxtrail Circle, South Perkins Boulevard and Kane Street would all be repaired.
• In 2013, the city would tackle Beloit Street, West and East Chandler Boulevard, Highridge Road, James Street, Teutonia Drive and Johnson Street.
The current plan calls for a $1.5 million bond issue in 2013 and approximately $500,000 in road repair expenditures in 2013, 2014 and 2015. Instead, with the change, the city would issue $3 million in bonds for the two years worth of work.
Alderman Katie Simenson offered the most argument to the idea, saying the city is taking a risk to put itself in debt vs. only paying for what the city could afford.
“I think you should pay as you go,” Simenson said. Lahner said it was a matter of policy, and Simenson conceded that, but still thought she had a point based on principle.
“You only pay for what you can afford,” she said. She also brought up that the issue would come up for a vote before new council – with two new members – on the April 4 meeting.
“I think it’s wrong for a new council, too,” Simenson added.
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