Carmen Arrieta-Candelaria is the city's chief financial oficer

As El Paso taxpayers look ahead to the Nov. 6 quality of life bond election, some are asking how the city can pay for all those projects and everything else without imposing huge tax increases.

The city’s chief financial officer, Carmen Arrieta-Candelaria, confidently says it can.

The two quality of life propositions that will appear on the November ballot total $473 million. That makes it the biggest bond election in the city’s history – by far.

Not on the ballot are $210 million in certificate of obligation bonds, or COs, that the city intends to sell over the next decade to fund street improvements.

Also not on the ballot are $29.2 million in COs the city will sell to pay expenses related to moving City Hall to make way for a new baseball stadium.

That $29 million will go to the purchase of the El Paso Times building and the building at 801 Texas, along with remodeling and move-in costs.

Altogether, that comes to $712 million.

The city is currently carrying $878 million in bonded indebtedness.

Do a little quick math and that adds up to $1.6 billion in debt – an 81 percent increase. But the quick math would be wrong, Arrieta-Candelaria said.

The quality of life bonds will be sold not all at once, but over seven to 10 years, starting with $33 million in 2014 with the first payments the following year.

Meanwhile, the city’s older debt will be dropping rapidly.

Over that time, the city’s tax rate, now at 66 cents per $100 valuation, will rise by only 5 cents, she says, peaking for two years before starting to decline.

That nickel on the tax rate will cost the owner of a home valued at $150,000, after exemptions, about $75 a year.

“Some cities sell all their debt and then just let it sit in the bank until they need it,” she said. “But we don’t. We don’t want to pay 3-percent interest on money that is earning less than 1 percent.

“We only sell debt when we need it. The second thing is we don’t work on all the projects at once. There’s no way we can fix all those streets at once.”

In the case of the city’s $141 million in quality of life bonds that voters approved in 2004, she said, “We’re just finishing up some of those projects.”

The last of those bonds were sold in 2008, she said.

Reduced debt service

The money to make debt payments comes from a separate portion of the overall tax rate, or 22 cents of the current 66-cent tax rate.

At that 66-cent rate, the owner of a $150,000 home will pay the city $990 in taxes a year. A third of that, or $330, goes to pay off debt.

Arrieta-Candelaria said the city reduced the debt service portion of the tax rate by 1 cent to 22 cents last month for the year starting Sept. 1. They did that be taking $3 million from the city’s reserves and paying down the city’s debt.

“Every penny of the tax rate raises $3 million,” she said. “That reduced the rate, and it left the city with $6 million in reserves.”

Another tool the city uses to lower annual bond payments and hold the tax rate down is refinancing older bonds to take advantage of current low interest rates.

“We’re refunding $23 million in October and that is projected to save $2.4 million in interest over 10 years,” she said. That money will still be collected through the tax rate but it will go toward reducing other debt.

“So, there’s a lot of thought behind the debt model,” she said. “We don’t just issue debt and say we’re done. We’re constantly looking for opportunities to manage the debt and avoid a tax increase.

“The tax rate will go up because we will have more debt, but it won’t go up in large spikes,” she said.

While the city plays down the impact of higher bond debt, the Texas Comptroller’s office issued a report last week warning about the fast-growing debt carried by the state’s cities.

From 2001 until last year, local debt went from $87 billion to $193 billion, a 122-percent increase, according to the report.


 

E-mail El Paso Inc. reporter David Crowder at dcrowder@elpasoinc.com or call (915) 534-4422, ext. 122 and (915) 630-6622.

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(5) comments

Dante2810

"Over that time, the city’s tax rate, now at 66 cents per $100 valuation, will rise by only 5 cents, she says, peaking for two years before starting to decline."

The problem I have with statements like that, used to make it appear that this is only a temporary increase, is that in the 12 years that I have owned my home, my property taxes have never gone down.
Either some taxing entity raises their rate or CAD decides that I can suddenly sell my house for $10,000 more this year than the year before.

As for the $75.00 per year.... if you take that number and multiply it by the number of households in this city, you are taking $10,000,000.00 out of the hands of El Pasoans that could have been spent on other things around town.....say like at a baseball game or shopping downtown?

babymaker

Quick math...would be wrong !! I will be one of the first customers at the ball-park. But, i will pass any tax increase to my customers, and then some. Some of US, have been blessed, anytime some thing goes up in price, it's like getting a raise.E-JO-LA....What can i say

Only in El Paso

Only the government can simultaneously have a large debt AND reserve cash. Wouldn't you like to have that deal? Yeah, me too. And what's this business about having to raise taxes? Weren't we just told that by playing this high-stakes game of 'musical chairs' (with buildings), that we are instantly going to raise zillions of dollars in extra wealth and therefore extra revenue? I seem to remember that these stadium-nuts (the triple A-holes is what I call them) told us that the entire world would be clamoring to see our almost-pro team, along with the other expensive goodies that we're building. Finally (and to much of everyone's chagrin) will someone ask the chief money guru, in what millennium is this new debt going to be paid-off in? With progress like this, who needs enemies?

Rick Talamantes

The "Quality of Life" debt payment (AAA stadium/demolition and relocation of city hall) by the city experts, is only opinion. Every comment about financing this debt is opinion. My greatest concern is the why we are going into this debt when we can't even arrive at a final cost. I have lived my life according to what I can pay and not what I can finance. The debt the special interests are demanding we incur for the sake of a better "Quality of Life" belie fiscal common sense. If the bond issues were for infrastructure to build this city then it would make sense. Jobs and development based on the special interest recreational dreams are nothing more than that, a dream. If this debt was for wind generation of electricity to supplement the high electrical energy use for our beloved desalinasation plant then I would support the debt. Desalinasation plants are shutting down production in California, one basically abandoned, since the cost for energy is too high to make a profit. People ask why our plant is only operating at 10-20% of its potential and that is the reason why. The city of El Paso/PSB can't afford the electric bill. If this debt was for the creation of a rubber tire crumbing operation to create tire amended asphalt which last six times longer and create an end use for scrap tires then I would support the debt. Just these two items would cost a mere fraction of current controversial debt. El Paso need leaders who will lead us into a decent future which will not be handicapped by irresponsible fiscal debt. I cannot in good faith support any of the
debt these special interest groups are demanding we support.

R2den2

sounds like the "Quality of Debt" to me...
how we are in 800+ "MILLION" & double that, and it wont take long to pay of the older debt. And the new debt will only cost an extra 66 cents...

Add in no clear answer as to where this is all going, just a bunch of hyped up, we might do this and that and another thing.

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