The city of Pierz could be debt free in as few as 10 years, provided the city sticks with its capital improvement plan.
The Pierz City Council voted to bring the city one step closer to that goal, when it unanimously approved using the $95,000 settlement for its tax financing increment (TIF) district 1-1, for the Schoenes Haus in Pierz, to pay off the remaining $68,000 Meadow Ponds bond.
City Administrator Anna Gruber asked for the Council’s direction on where to put the funds, noting the Meadow Ponds bond interest rate was 4.5 percent. The other option would have been to invest the money, however, the city’s investments are averaging a return of .8 percent.
“Pay it off,” was the unanimous will of the Council.
The city has two remaining bonds to be paid off, both self-sustaining.
The city’s Cassie Street bond has a balance of $139,000 at an interest rate of 2.9 percent, to be paid off in 2019. This bond is funded by assessments each year.
The largest bond, the storm water bond, has a balance of $317,000. The Council was able to refinance that bond to lower the interest rate to 2.5 percent with the last payment slated for 2022. That bond is paid for through storm water fees paid by residents.
The city’s next capital improvement project is slated for this summer, when portions of Park Avenue and Robert Street will be redone. For that project, estimated at $597,000, the city has $200,000 in a dedicated fund, plans to use a 1 percent public loan to pay $225,000 over 10 years and will pay the remaining $172,000 out of its general fund investments.
“It will be paid off at the same time the storm water bond is paid off,” said Gruber.
She said the City Council and staff have planned out projects for the next 10 years, with the idea the city will not bond to pay for them.
“We have been figuring out how much money needs to be put away in a capital fund to pay off not only the Park Avenue/Robert Street project, but to build up a capital fund, so that after paying for this project, the city will be debt free,” said Gruber. She said it was “pretty remarkable.”
Mayor Toby Egan said the city may be debt free sooner, if the Council chooses to pay off some of the debt before the bonds are due.
But the focus, he said, has been not to raise taxes and to pay off city debt “which we had a lot of,” he said.
“We didn’t try to work any specific schedules, but put it in our minds that as we could afford to, we would pay off bonds,” he said. “That’s kind of been our focus for the past six years.”
The Council not only wanted to keep taxes in line, said Egan, “But to get rid of city debt, too — those are two killers of the local economy,” he said.
Projects the city has planned for over the next 10 years include: A mill and overlay of Edward Street South and Third Avenue Southeast in the summer of 2016, at a cost of $75,000, and a mill/overlay on Peter Avenue in the summer of 2018, at a cost of $50,000. Both projects will be paid for with the dedicated fund and assessments.
In 2020, the plan is to replace storm sewer, curb, gutter and do surface work on Summer Street and First Avenue, at a cost of $250,000, to be paid for out of the dedicated fund and electric fund, as well as assessments.
First Avenue Northeast will be reconstructed in 2023 at a cost of $150,000, using dedicated funds and assessments.
It’s 2023 that could be the magic “debt-free” year. In 2023, provided the city doesn’t throw another project into the mix, the 1 percent loan used to finance the Park Avenue/Robert Street project will be paid off, as will the storm water bond.
Egan said the city wanted to stay on schedule with the plan, but that it’s possible some of the projects could be pushed back, or pushed ahead, depending upon the city’s financial situation.
“Replacing the streets is not the hard part,” said Egan. “We could replace streets and put the vast majority of the burden on property owners.”
“What’s hard,” he said, “is to try to find enough money to do projects and keep assessments low. There’s definitely a balance there.”