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The Truth About Crystal’s Debt

Crystal’s current mayor believes the city is in debt and he plans to make us debt free.  Just because he says the city is in debt, doesn’t make it so.  Just because they act like the sky is falling doesn’t mean it is so.  The truth is that Crystal is not in debt.  Bonds have been used as part of a healthy financial strategy.

To be sure, let me explain there are lots of things that can be considered when looking at city debt, these include:

1.Certificates of indebtedness.  These are usually used to purchase vehicles.  They are like bonds but are for smaller dollar amounts and are usually negotiated with a bank rather than sold on the bond market.

Crystal did one of these in 2002 or 2003 to pay for a fire truck.  It was paid off over about five   years and we haven’t done another one since then.

2. The tax increment financing districtscan do pay-as-you-go (PAYG) notes with developers as a way to encourage development. With these dollars the developer pays for site clearance or other improvements and then is repaid over time by the PAYG note from the city.  Crystal made the final payments on an older PAYG notes earlier this year.

There is one new PAYG note for the Cavanagh apartments.  The Cavanagh note has a face value of $1,087,20.  Principal and interest payments totaling $69,784.33 will be made each February 1st and August 1st until February 1, 2026.

Annual city taxes on this property are $8,222.  The investment for this community is that we now have 130 units of low-income, senior (55+) rental units that will continue to rise in value.
In 2014 the sale price was $1,094,314 and today the property is valued at $2,115,000.
Resident income limits are as follows for 1+ and 2 bedroom units.

  • 1 Occupant: $36,420
  • 2 Occupants: $41,580
  • 3 Occupants: $46,800
  • 4 Occupants: $51,960

3.  Bonds can also be issued by the utility fundsand they would then show up in the utilities section of the budget & annual financial report.  Crystal doesn’t currently have any outstanding utility bonds.

4  Street Reconstruction Bonds. Sold by the city to cover the 60 percent of a total reconstruction project paid for by the citizens who live on that street.   The property owns the debt for the road rebuilds and other property improvements approved prior to construction.

Since the property holds the debt, there is little risk of a “bum pay” as this debt must be negotiated and satisfied before the property can change ownership.   Also, consistently 25 percent of the homeowners within the street reconstruction area pay their assessment with cash.  When the street reconstruction project went through my area I never had that kind of cash at that time in my life so I chose to finance through the city.

5  Leases for equipment or buildings can be considered to be debt.  Crystal had been leasing copy machines.  All the copy machines needed replacement in the last twelve months as they had reached the end of their useful lives.  The new copy machines were all purchased.  No other leases are in place now.  Leases are a pain to administer so the city does everything it can to avoid them.

Crystal does not show leases as a loan or debt in the budget or annual financial report since leases are more like an operating expense.  People argue about whether leases are or are not debt.  The structured payments over the life of the lease are somewhat like principal and interest payments on bonds.  But you usually take ownership of something you buy with bonds.  You don’t own the thing you are leasing, so I think it is like an operating expense.

Summary:    Crystal has three debts meaning we are not debt laden.   In fact we have three debt funds, listed below.

  1.  Street Reconstruction Bonds: Payments are made by the property owner through property assessments. Property owners are in debt for rebuilding the roads in front of their own homes and for other property improvements they approved prior to construction.   Since the property holds the debt, there is little risk of a “bum pay” as this debt must be negotiated and satisfied before the property can change ownership.  The debt of the street stays with the house till it is satisfied.
  2. Pool Bond:  This debt was approved by voters in 2004 and is still active, I did not check on a maturity date.
  3. PAYG Note: The Cavanaugh project was worked on and approved while I was mayor.  The city made an investment into low income housing for seniors.  Many of the people, who live there now, were tax paying property owners from right here in Crystal.  I am proud they remain in our community in safe and affordable housing located next to a park and lake.  It is a wonderful statement to all that we cared about our community residents.

The city is not in debt as the current mayor had tried to make you believe.  The current mayor needlessly spends hard earned reserves and calls it a savings.  Losing reserves through spending means we lose interest income.  Why worry about interest money paid if the interest money lost is not calculated into the discussion.  Just because interest was not paid does not mean money was saved.

Let me know what you think.  I will continue to educate citizens about Crystal, if you have ideas you would like me to cover or questions, would love to know what you are thinking.

Please help us all move forward toward a brighter future by supporting me with your vote for Mayor.