The city of Tupelo relies on Chief Financial Officer Lynn Norris to guide its budget and spending decisions – including whether it can afford several big-ticket projects. Norris recently told municipal leaders they could pay for a new aquatics center, a city revitalization program and an anticipated annexation without raising taxes. Norris explained to the Daily Journal’s Emily Le Coz the reasoning behind his view.
Q: The city has several large-scale projects under consideration that you said it can afford with general obligation bonds. That seems like a lot of additional debt. Are you sure that won’t strain us?
A: It won’t strain us, no. Through our tax levies, we have set aside for capital improvements and other projects. As we roll off of our existing debt, we can make those improvements and do those projects and not increase taxes. It will increase blended debt of the city, but not the debt service. We’ve already had two bonds that have rolled off in the past one year. We had a roughly annual $820,000 payment on those two bonds combined. Now they are both gone.
Q: But the economy is pretty bad right now. Is this the best time to be taking on more debt?
A: The interest rates are at very low levels, so it is a good time because of the rate. The city of Tupelo could issue a general obligation debt in the 3 percent range. Anytime you issue debt, regardless of the economy, you have to assess your ability to repay it on the impact it will have on your operations. When you have the ability to issue debt, it is a good time to issue debt. The city is financially strong. We’re a AA rating. We wouldn’t consider issuing any debt that we couldn’t pay for.
Q: Some of these projects have pretty hefty price tags – an $11 million aquatics facility, a $14 million city revitalization program, for example. And if annexation passes, that’s an additional $25 million Tupelo will spend to extend services and facilities to the new areas. How much more can the city borrow?
A: Cities can borrow 15 percent max, or 20 percent max, of our assessed valuation. But we are at 3 percent now, so that’s good. Of course as you issue new bonds, you rely on assessed values to pay them back, and our assessed values might not stay or go up. It’s always a risk. Our goal is to keep stable rates and stable tax levies, so in our planning process we plan around the needs of the city and how we best can issue the debt at the lowest possible cost.
NEMS Daily Journal