This spring a report by the city pointed out the dire straits in which the city finds
itself in this election year. It highlighted what it claimed were $1.5 billion
in needed improvements, but naturally not all of these items are of genuine
high priority and necessary. For example, an intelligent traffic system
certainly would ease congestion, but it’s not a life or death matter,
especially when it could cost as much as $60 million.
But clean water with a federal
mandate is another matter. The most pressing concern on the list was the
estimated $342 million needed to be spent over the next dozen years to
rehabilitate a city water system that has been crumbling for years as it spent
precious dollars on things like a convention center, hotel, and sludge pits, the
effects of this disrepair drawing the ire of the Environmental Protection
Agency. A consent
decree between it and the city that was hammered out late last year means
the city must start spending about $34 million a year on this beginning in 2015.
That’s especially bad news, for
while about half of city capital expenses get funded through government grants,
the remainder the city picks up and not all of that can be debt. Municipalities
in Louisiana may issue debt to the maximum of 10 percent of the assessed
valuation for any purpose. The maximum may be exceeded if the aggregate issued
for all purposes does not exceed 35 percent of the total assessed valuation. At
present, after teetering near the maximum capacity some years ago, as of 2012
the city was $347 million below in total, but only $146 million could be used
to fund this project because of the 10 percent limitation.
Traditionally, the city has used
revenue bonds to fund water and sewerage projects, but because of the vast size
of this one, this could lead to catastrophic rate increases as these kinds of
bonds are backed not by general funds tax revenues as general obligation bonds
are, but by specific revenue streams tied to the funded project. A severe
rate hike is hitting Shreveporters already in anticipation of the project,
and any additional increase could make for some short political careers among
currently-elected officeholders, even as it seems this present hike, putting Shreveport among the
highest of Louisiana and other peer cities in rates, will not be enough to close
the gap. And any use of general obligation bonds would disallow use of that
capacity for other city projects.
One way to deal with this that
any aspiring mayor should consider, as previously
noted, is privatization of operations and perhaps assets. With so much work
needed to be done on it buyers of the entire setup might be scarce, but at
least its operation could be contracted out and the savings plowed back into
infrastructure (currently the city finances about a tenth of its capital needs
through cash, chiefly from its Riverfront Fund that collects largesse from gaming).
The same could be done with the related
area of waste disposal.
And if cash for capital needs is
scarce, then extend this idea to underperforming assets that the city doesn’t
need. Unneeded legacies of the former Mayor Keith Hightower years, the
convention center lost roughly $4.5 million in 2012 and while its associated hotel
made about $1.6 million then, that did not even cover its interest expenses of
$1.8 million. It still had $38 million in debt attached to it, while the
convention center was paid off. Even if the hotel was sold at less than its
mortgage, sale of the convention center could make up that and then some.
These moves would roll tens of
millions of dollars of debt off the books, provide some working cash, and allow
shunting of additional tax revenues to handle these capital needs, in a funding
environment dire enough that current Mayor Cedric Glover felt
he had to play
high stakes poker with the Red
River Waterway Commission and dog park supporters in order to get capital
projects of his choosing funded before he met
with humiliating defeat in accepting a dog park on city land. Mayoral and City Council candidates alike would be wise to make these strategies a part of their campaigns.
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