City is debt free for first time this year
The City of Goose Creek paid off all its debts in 2012.
This is a rare, almost unheard of feat for any governing body or municipal government.
City Administrator Dennis Harmon attributes this to the fiscal responsibility of city council and city staff.
“We look at the total debt of our city on a regular, reoccurring basis,” Harmon said. “When you have debt you incur interest. We try to keep the debt of the city to a minimum.”
Because of the city’s revenue streams its staff was able to pay off the debt on its interest over a period of time. “We thought it would be prudent to do that,” Harmon said.
By paying off many debts early the city saved an estimated $750,000 to $1 million, Harmon said.
“In every one of these cases we paid it off early,” he said. “There’s no real magic there. It’s a combination of being fiscally conservative, having fiscal discipline, and realizing what you can afford and pay back.
“It’s easy to borrow, hard to pay back. When you pay it back early we’ve got good caretakers of the public’s money. Defer to what you need as opposed to what you’d like to have. It comes down to the ability to say ‘no.’”
Paying off debt affects the city’s cash flow.
Harmon compared city debt to that of a homeowner. Most homeowners do not have $150,000 cash to pay for a home so they take a loan and pay it over time.
The $2.5 million bond payment on the Crowfield Golf and Country Club was one of the city’s major debts. It was paid off on Oct. 5. The golf course debt was $235,000 annually from 2003 to 2012.
“It affects cash flow,” Harmon said. “Having that paid off allows the city to look at future property. It eliminates the need for the general fund to support that operation.”
Other major debts paid off include fire trucks and Santee Cooper water line extensions.
Two water line extensions were paid off on July 31 (for $763,384) and Nov. 30 (for $398,162). The water tower off U.S. 176 ($865,000) was paid off July 1, 2011.
Harmon said the city has two types of debt. The first is general obligation, which is superior debt. The city is pledging full faith to repay this debt. “You will do whatever is necessary to pay that,” he said.
The second type is revenue debt, which takes proceeds from a particular fund.
“Over the years we’ve rebuilt the city water system,” Harmon said. “We didn’t put tax or general fund revenues into that fund.”
According to Harmon this is a standalone system – fees incurred pay off fees within that system. The golf course also worked that way.
As of October the golf course became self-sufficient, meaning it now pays for itself.
“Very few cities I have any knowledge of are debt free,” Harmon said. “It speaks well to the financial models we have in place.
“Most cities have so many demands placed on them they can’t make those things happen without borrowing. The tendency for political entities is to not overburden your population with debt.”
The city uses good fiscal discipline to forgo or only incur debt for things it absolutely has to have, especially in the long term, according to Harmon.
A $239,500 fire rescue truck was paid off on Sept. 30, 2006, according to city records. A 2006 Quint fire truck, priced at $493,971 was paid off June 30, 2010. A 2007 Quint fire truck, valued at $496,201, was paid off July 12, 2011.
Fire trucks are a long-term investment. The life of a fire truck is usually 20 to 25 years – but some have lasted up to 30, Harmon said. “A fire truck is half a million dollars rolling down the road,” Harmon said.
The vehicle replacement strategy is to lease-to-own. The condition of each piece of equipment is assessed on an annual basis, Harmon said.
A 1997 bond for the Marguerite H. Brown Municipal Center, which cost the city $6.58 million, was paid off June 1, 2009. A 2002 bond for the Recreation Center, which cost $5 million, was paid off Aug. 17, 2011.