Report: Refinancings have helped reduce city of Wichita’s debt
04/06/2014 11:53 AM
04/06/2014 11:53 AM
The city of Wichita has reduced its debt by roughly 16 percent since 2010.
The debt from general obligation and revenue bonds has dipped to $915 million, down $148.4 million.
Lower interest rates, payoffs and strategically timed refinancings from 2010 to 2012 helped the city slice the debt, said Shawn Henning, the city’s finance director. Specifically, the refinancings have saved the city $25 million.
The city’s debt will increase somewhat when it issues permanent bonds for the airport terminal and the city’s aquifer recharge project. And the city faces costly future repairs for its streets and water and sewer systems.
Vice Mayor Pete Meitzner applauded the debt cut. He repeated warnings that more debt will be needed to pay for deferred maintenance on streets, water and sewer lines.
“The city prudently manages debt,” he said. “We refinance to lower interest costs, we pay cash when possible to avoid issuing debt, we are well positioned to retire all of our debt obligations as scheduled, we adjust project timing to manage debt levels, we constantly re-evaluate the importance and necessity of projects … and we take the necessary actions to maintain debt levels within established benchmarks.”
Meitzner said the current council has moved aggressively to control and lower the city’s debt, but acknowledged that some don’t think those efforts are enough.
“Some road projects, including some road expansions, have been delayed, postponed or resized, thus not funded as projected,” he said. “There has been … the library, estimated at $40 million at one time then reduced to $30 million and not approved for funding. Thus, there’s now a $30 million CIP (capital improvements) project not hitting the debt.
“And over the last three years, our finance department took great advantage of lower rates and refinanced some of the debt.”
Council member Jeff Blubaugh said the debt figure isn’t something he’s concerned about.
“And with paying it down $50 million last year, I’m absolutely confident that the manager (City Manager Robert Layton) is on the right track reducing debt.”
Henning’s debt report is based on city debt service payments and new issues through Feb. 11.
The debt numbers will rise again, Henning said. The city plans, in the next couple of years, two significant bond issues – one for the city’s share of the airport terminal and parking debt, about half of a project costing $101.5 million, and one for the Equus Beds groundwater recharge project, at $160 million today.
Those bonds will be repaid from revenues generated at the airport and from water sales, not from property tax revenues, Henning said.
Future water and airport revenues, state and federal grants and future council policies could reduce the amount of bonds needed for the airport terminal and the ASR, Henning said.
Wichita’s credit remains good, though one step below the spotless AAA rating of some cities.
“We expect that Wichita will continue to enjoy favorable capital market access for its short-term debt offerings,” Moody’s officials wrote city officials in a Jan. 6 evaluation obtained by The Eagle.
Moody’s cites several of Wichita’s strengths for its relatively strong debt ratings:• Wichita’s status as a regional economic center with a diversifying economy in health care and telecommunications.
• The long-term stable presence of Wichita State University and McConnell Air Force Base.
• Unlimited levy authority for general operations.
The down side of Wichita’s debt picture, according to Moody’s:• A high debt burden with additional borrowing planned for “significant capital needs.”
• Economic concentration in the unstable aircraft manufacturing industry.
• The departure of Boeing and the emergence of Beechcraft from bankruptcy – and its pending sale to Textron.
• Weaker reserve levels – “though improving” – than many similar cities. Wichita keeps about $20 million in reserve each year.