Beaver Dam Officials Continue To Discuss Debt Cap Policy

(Beaver Dam) Officials continue to discuss changes to Beaver Dam’s voluntary debt cap policy, with the city finance director recently running the numbers on the costs to borrow money over the next five years. The city’s current, debt policy limits borrowing to around $1.8-million dollars annually, unless three-fourths of the council votes to exceed that limit. Discussion has been about getting rid of the fixed dollar amount and instead borrow based on a percentage of debt capacity allowed by the state; a 65-percent cap is being recommended. With next year’s projected borrowing of $6-million dollars, Beaver Dam will be at 45.7-percent of its available $70.1-million dollars in total debt capacity. Under a 65-percent cap that translates to $14.7-million dollars in available borrowing. If the city continues to borrow $6-million dollars each year, while debt is simultaneously retired each year, in 2025 Beaver Dam is projected to be at 49.8-pecent of $76-million dollars in total capacity, leaving around $11.5-million in available borrowing. City officials also asked about the portion of the budget that will have to be directed to annual debt service payments, a concept often compared to the percentage of income versus what is spent on a mortgage. The city has to shell out $2.6-million in principal and interest payments next year, which is roughly 18.1-percent of the city’s operating budget. By 2025, that number would increase to $4-million dollars paid annually which is 25.1-percent of the city’s budget. Administrative Committee Chair Ken Anderson expressed concerns saying he would be more comfortable with that number closer to 20-percent while Alderman Mick Fischer came out in support of the policy change as presented.  

City Director of Administration Zak Bloom is recommending the policy change saying that it covers Beaver Dam’s needs. In addition, he says the city’s bond rating for future borrowing is based on its debt policy and the fixed dollar amount in the current policy is not a metric used in establishing a bond rating.