City Needs to Set Priorities and Make Tough Choices
Thursday, December 4th, 2014 @ 8:59PM
December 4, 2014 ~ article by Karen Bowerman, City Councilor, City of Lake Oswego
View article in The Portland Tribune
Lake Oswego has more projects than it can afford without taking on additional debt. Some tough decisions need to be made.
There is the $27 million Boones Ferry Road project, which I personally supported in 2012 on a “pay-as-you-go” basis. This would require $17 million from cash reserves and certain SDC funds, along with the voter-approved $5 million bond and a $4 million grant.
Then there is the replacement of the city’s antiquated operations or maintenance center, once envisioned as a new building on new land, then reduced to a cost of $18 million at its current site, and now reduced in scope to an estimated $13 million price tag. However, it has yet to be value-engineered. In addition, the Police/LOCOM Center is another priority that would cost several million dollars. (Addressing ongoing street maintenance, although not a capital project per se, is yet another critical issue, and is the one that gets absolute top billing on my priority list.)
If just $30 million in cash is needed just for Boones Ferry ($17) plus the operations/maintenance center ($13), we find ourselves unable to pay as we go if both are tacked simultaneously. We have to make some tough choices. Some say, “No problem — just borrow!”
I favor Lake Oswego not assuming additional debt. Our city already has $215 million in outstanding debt, largely for water and infrastructure. Debt service now costs $17 million annually! Debt service costs wind up in our tax bills, whether directly or indirectly. I do not favor additional taxes and fees.
I favor moving forward with the Boones Ferry construction, because the people passed a $5 million bond, indicating their support for the project. We can manage frugally over a short amount of time for the cash reserves to pay for Boones Ferry Road improvements by continuing to break the project into phases as we are now doing. But we must make the decision now not to “just borrow!” so as to amass the cash funds for this important priority.
Some argue that we should complete the operations/maintenance center by using the city’s cash reserves and then take out a full-faith-and-credit bond for Boones Ferry, hopefully paying it off with future urban renewal taxes. (Don’t accept at face value the claim that this would be building a maintenance center without “a nickel” of taxpayer money — it’s taxpayer money just shifted around.) I see it differently. We should no longer add to our debt anytime it is possible to avoid it. Shifting debt from one project to another is not being as fiscally responsible as we can be.
Therefore, a maintenance center should not be our top priority for exhausting existing reserves. We need to rethink the entire effort, including conducting an economic evaluation of what maintenance services can be contracted out, to determine whether a smaller and more cost-effective maintenance center is possible. That is why I voted against leasing space now for Parks Maintenance to move from the existing operations center to new space in Foothills. I felt it was premature to spend that $323,000.
We need to make some decisions about our real priorities. We have more projects than money, so without new debt we do not have the capacity for doing the maintenance center and Boones Ferry at the same time. In addition, Lake Oswego’s budgets for current operations keep rising each year.
Taking on debt would cost our citizens more for these projects. Even at current low interest rates, over the life of the debt, the cost can be about 60 percent more than “pay-as-you-go.” For every $1 we spend now using debt, it costs roughly $1.60 over the next 30 years.
So we need to make some tough choices. Which project do we take on immediately? My position is clear: No new debt and taxes for Lake Oswego residents. We should set a priority order among these projects and plan so that no additional debt has to be issued.