Join Club

Peter’s Take: Does Arlington Have Too Much Debt?

Peter Rousselot

Peter’s Take is a weekly opinion column. The views and opinions expressed in this column are those of the author and do not necessarily reflect the views of ARLnow.com.

At its May 23 meeting, the County Board authorized the issuance of $185.3 million in new bonds for various spending, added to $552.4 million in outstanding bonds issued since 2008. There are an additional $281.8 million in bonds already authorized, but not yet issued. Plus, there are $49 million in bonds that have been issued, but not yet spent.

Discussion

Does the County Board’s latest action leave Arlington with too much total debt?

For many years, the standard answer from county government has been and continues to be “no.” The reason given has been and continues to be that Arlington is one of the relatively few municipalities in America that has maintained the highest possible credit rating (AAA/AAA).

Whereas this is certainly one legitimate way to evaluate Arlington’s status, there are other legitimate ways — some of which raise cause for concern. A more extensive county government explanation of our current and projected future debt levels, followed by a full public discussion, is in order.

Arlington can maintain its current credit rating — despite having roughly $1 billion in total debt (including revenue bonds and other debts) compared to roughly $1.2 billion in total annual revenue (83 percent leverage) — because the bond/credit rating agencies have confidence in Arlington’s ability to continue raising property taxes to generate sufficient revenue to service (repay) its mounting debt load.

An authoritative municipal finance source  lists 10 financial ratios (e.g., per capita debt, total debt to fair market value, and total debt to average individual personal income) that should be analyzed and discussed publicly in determining the relative risks of a municipality’s debt load.

In a 2014 opinion column, the Sun-Gazette examined Arlington’s debt level in terms of these ratios, concluding:

Think the Arlington government’s debt has gone up significantly over the past decade? You have a 75-percent chance of being right. There are (at least) four ways to measure the county government’s bonded debt. Three of them show a significant increase, while the fourth shows almost no jump at all.

A 2014 study in The Connection Newspapers concluded that “Arlington County has one of the highest per capita debt loads in Northern Virginia”:

The Government Finance Officers Association recommends that government “issuers undertake an analysis of their debt capacity prior to issuing bonds” because a “comprehensive and routine analysis of debt capacity provides assurance that the amount of debt issued by a government is affordable and cost-effective.” In so doing, government officials can keep debt at affordable levels.

Further, assessing debt capacity on an ongoing basis is essential for effective debt management and ensuring that debt-planning activities are integrated into the capital improvement process. This assessment, in short, ensures that “an appropriate balance is struck between a jurisdiction’s capital needs and its ability to pay for them.”

Conclusion

By continuing to focus on maintaining our AAA/AAA credit rating as the determinant for deciding whether to incur more debt, we are making a mistake. Attaching too much weight to this factor ignores other county debt. It also assumes that borrowing the maximum amount allowed by the ratings agencies is wise, and that Arlington’s tax base has a virtually unlimited capacity to absorb ongoing tax-rate and assessment increases without suffering ill effects.

Recent Stories

Good Wednesday evening, Arlington. Let’s take a look back at today’s stories and a look forward to tomorrow’s event calendar. 🕗 News recap The following articles were published earlier today…

Arlington is receiving nearly $300,000 in federal funds to help clean up the Chesapeake Bay. The money is part of a much larger $206 million federal grant given to the National…

Schedule your tour today to see The Grace and Reva residences in National Landing. Located in the heart of the neighborhood’s vibrant food scene on Crystal Drive, these two residential…

James Beard semifinalist Peter Chang’s second restaurant in Arlington is expected to open next month in Crystal City. Located at 1550 Crystal Drive, the Chinese restaurant NiHao initially planned to…

Award-winning drag queen Tara Hoot is bringing her Family Fun Story Time Brunch to Arlington at Freddie’s Beach Bar! Saturday April 6 at noon! Join Tara for songs, stories, puppets, bubbles and joy! It’s not just stories, it’s a SHOW that’s perfect for kids and kids at heart–fun for everyone! Plus a tasty brunch at Freddie’s! Click the link and make your reservations now! ❤️ 🫧 🌈

Submit your own Announcement here.

The Summer 2024 STEAM (Science/Technology/Engineering/Arts/Math) Fellowship application is now open! Apply by April 15 to be considered!

The STEAM Workforce Development Teacher Fellowship provides Arlington Public Schools (APS) high school, middle school, and elementary school teachers with opportunities to learn about workplace needs in STEAM-related fields and for them to use the experience to enhance student learning to match workplace expectations in a selected industry. STEAM Fellows participate in a three-week summer fellowship, receiving a $4,000 stipend upon completion.

Applicants planning to pursue a fellowship in the arts must demonstrate how they will build connections between the arts and science, technology, engineering, or mathematics.

Click the button to learn more, share, apply, and see the variety of fellowships completed in previous years.

Read More

Submit your own Announcement here.

ACFCU’s Homebuying 101: Steps to Getting Pre-Approved

Are you ready to jump into homeownership, or have you started considering it but don’t know where to start?

Financial preparation is key when thinking about purchasing your first home and the first step to getting pre-approved. Join ACFCU for

Free Right-Sizing Workshop – How to Get Rid of Your…

Cody Chance and Dick Nathan of Long & Foster are hosting a free workshop at our office on Cherry Hill Rd. (formerly Lee Highway) on the topic of “down-sizing” Thursday, March 28 from 5:30-7:30. We have created a workbook with

×

Subscribe to our mailing list