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City Council debates plan to manage debt

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Fredericksburg City Councilman Fred Howe’s recent proposal for paying the debt on the new $35 million courthouse reveals clear differences in fiscal approaches among city leaders.

Howe calls his plan a “fundamental change” in how to address major projects such as the courthouse, which commits the city to a $2.1 million annual payment for 25 years.

He equated it to a home mortgage, suggesting that once the debt is paid, taxpayers should no longer have that financial burden.

Specifically, if the annual $2.1 million payment requires 6 cents in real estate taxes to cover it, taxpayers should see a 6 cent drop in the tax rate after 25 years.

The council discussed the proposal during its last work session, but the issue remains unresolved.

Mayor Mary Katherine Greenlaw and council members Kerry Devine and George Solley—the only current council members who supported the courthouse project—dislike Howe’s concept.

All three said the city will be faced with other projects once that one is finished.

“You’d be raising the tax and lowering the tax and raising the tax,” Devine said. “I wouldn’t play that game with the taxpayers.”

“But I would,” Howe said. “My overall point is, government never gives it back.”

Howe said his goal was to stop the trajectory of ever-increasing taxes, each of which becomes the next baseline for fiscal planning.

Greenlaw saw it differently.

“Every budget is a responsible attempt to spend the revenues,” she said. “It is always going to be ongoing. You borrow and you pay off. You borrow and you pay off.”

“As a practical matter to what it does to taxpayers, it is not going to amount to a hill of beans,” she added.

Because the city has a variety of revenue sources, Greenlaw faulted Howe’s idea of placing the burden on one group—in this case, city real estate owners.

“It’s not accurate or fair to equate it all to property taxes,” she said.

Making his proposal solely in terms of the real estate tax also created problems for Solley and City Attorney Kathleen Dooley.

But Howe said he used the real estate tax in sharing his proposal to make it readily understood, not to target that revenue source.

He noted that City Manager Beverly Cameron did the same thing in making his fiscal 2014 budget proposal.

Cameron suggested a 3 cent increase in the real estate tax rate to cover a shortfall of roughly $1 million. Each penny in the real estate tax generates about $345,000 in revenue.

Council members Brad Ellis, Matt Kelly and Bea Paolucci expressed general support for Howe’s idea.

At the March 26 council meeting at which Howe offered the idea, he and Ellis asked Dooley to look for ways to incorporate it into an ordinance.

Assistant City Manager Mark Whitley said he can begin adding line items to the budget that will show the debt paid and debt outstanding on the courthouse project and others.

Dooley began laying out a proposal to meet Howe’s request to funnel funds to one account dedicated to the project that would end when debt retired. However, she stopped short when she realized Howe didn’t necessarily want real estate taxes to cover the cost.

Had that been the goal, she said the city could have petitioned state legislators for approval to establish a special assessment on real estate for a particular bond.

Paolucci said she saw Howe’s plan as trying to keep the public informed about the city’s indebtedness for various projects, which she supports.

“I think that’s all he’s trying to do is create an awareness,” she said.

Pamela Gould: 540/735-1972