This week we were reminded of the price tag on the latest round of proposed borrowing to be voted on by Arlingtonians this fall — $245 million.
As part of the latest briefing on the bonds, County Manager Schwartz reminded Board Members that the latest iteration of the 10-year capital spending plan would bump us up close to the 10 percent cap in annual debt service that is recommended to retain the highest bond ratings. It is projected to hit 9.9 percent to be exact.
There’s an old saying about playing with fire that comes to mind here. As interest rates begin to rise and county leaders speak of meeting long term needs, particularly when it comes to seats in schools, it is time to start asking whether we should adopt more of a “pay-as-you-go” mentality?
In April, I suggested dedicating 50 percent of closeout funds each year to pay cash instead of borrowing for infrastructure needs, split evenly between schools and other county needs. Here is a suggestion for today: see how it feels to pay for something specific up front.
The proposed neighborhood conservation bond is slated to be $5.2 million, or a little more than 2 percent of the total bonding authority. The County Board should put a plan in place to have the entire amount set aside in cash by the end of 2019. This is just one year after the bond would have otherwise been approved by the voters this November.
Detractors may say that the interest rate on $5.2 million is inconsequential compared to our budget as a whole, and they would be right. But there is something to be said for starting to change the mentality of taking on debt, even if it is a relatively small amount. And, it would start to add up over time if you could reduce every round of future borrowing by 2 percent.
At the same time, you also have to be committed not to replace the items you pay for by borrowing for something else. There would be a huge temptation to add new projects, which would of course defeat the purpose of paying for things up front.
Fiscal discipline should not be defined as how close we can get to the annual 10 percent debt service cap without going over. We should seek out how far we can be below 10 percent while still meeting the needs of our community.
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