City’s debt drops by $1.8 million

The city of Mitchell’s long-term debt decreased by about $1.8 million in 2009, according to a report provided to the City Council earlier this month.

Finance Officer Marilyn Wilson presented the city’s annual financial report to the council March 1. Included in the report is a single-page summary of each of the city’s long-term debts.

Excluding interest, the city’s total long-term debt stood at $21.208 million at the beginning of 2009, the report says. By the end of the year, that figure decreased to $19.407 million.

Wilson said in an interview this week that the most significant debt-related action taken by the city last year was the refinancing of its B-Y water pipeline debt, which is expected to save the city $271,000 over the life of the obligation. Other than that, the city simply continued to make payments.

Wilson said she is comfortable with the city’s debt level but is advising caution for the near future.

“I’m just beginning to work on final sales-tax numbers for 2009, and we need to find out where that ended up,” Wilson said. “We need to be cautious and consider where that’s going to be heading in 2010 before we take on any additional debt.”

Wilson said she can think of only two major, potential increases to the city’s debt level in the near future: The long-proposed construction of a bigger arena, and the possible construction of a new City Hall or other building on the site of the former Methodist hospital structures that Davison County plans to demolish soon. Both projects are in the discussion stages.

The next payoff of a debt is likely to occur next year, when Wilson hopes to finish paying the debt incurred for reconstruction projects on Second and Fourth avenues.

Wilson said the state constitution prohibits cities from growing their debt level beyond 5 percent of their assessed valuation, unless local voters agree to move the limit to 10 percent for a water or sewer project. Mitchell voters approved such a move years ago to extend the B-Y Missouri River pipeline to the city.

The most recently available calculation of the city’s debt limit is from the end of 2008. At that time, the city could have taken on an additional $15.1 million in debt. But, as Wilson pointed out, “that doesn’t mean we have the cash to finance all of that. That’s the other consideration.”

The city’s total long-term debt of about $20 million is comparable to the debt reported on other, similarly sized cities’ annual financial reports. Many of the 2009 reports are not yet available, but reports for 2008 show total long-term debts at the end of that year totaled $17.791 million in Brookings, $10.763 million in Huron, $21.641 million in Pierre, $15.366 million in Spearfish, $11.947 million in Vermillion, $17.059 million in Watertown and $3.891 million in Yankton.

Following is a summary of the city of Mitchell’s long-term debt, excluding interest, as of the end of last year:

• Cabela’s (as part of the incentive package offered to lure the outdoors retailer to Mitchell, the city incurred the debt for the giant display of stuffed game at the back of the store), $2.846 million.

• B-Y water pipeline, $6.145 million.

• Recreation Center and streetscape (this debt stems from the city’s conversion of the old YMCA to a Recreation Center and the installation of Corn Palace-themed street lighting downtown), $610,000.

• Second Avenue and Fourth Avenue reconstructions, $720,409.93

• Corn Palace (remodeling, including the lobby), $830,000.

• Various obligations related to tax increment financing districts (the city incurs debt in these districts to pay for infrastructure improvements, and the new and increased property-tax revenue resulting from private development activity is then captured to pay off the city’s debt), $5.551 million.

• Outdoor Aquatic Center, $2.705 million.

Tags: city council, mitchell city council, news, local