CONSERVATIVE PLANNING HELPS CITY FINANCES

Cape Girardeau doesn't plan to take any great financial risks, and that's exactly what the debt statement should reflect, says the city's finance director.

"We try to use conservative forecasts," said John Richbourg, who handles the city budget and finances.

Even if sales tax revenues would decline and the city lost much of its financial base, Cape Girardeau wouldn't crumble financially.

"We try to monitor where we are exposed," said John Richbourg, city finance director. "Most of the time we assume a 2 percent growth," which should cover even the basic inflation rate increases were revenue sources to decline for any reason.

Cape Girardeau doesn't want to default on any loans or bonds nor does the city wants its bond rating to drop. The city has an A rating, which is "good for a city our size," Richbourg said.

A triple-A bond rating is the best, but there are varying degrees of minus and pluses associated with each letter, he said. Bond ratings are similar to a person's credit rating.

Much like a good credit rating can help a person get a bank loan, good bond ratings help the city.

The city has to publish its debt statement prior to any bond election, according to city charter. Voters will decide an $8.5 million sewer revenue bond issue Feb. 8.

The debt statement, which outlines what sort of outstanding obligations the city has, was first published Monday. Another copy will appear in Monday's Southeast Missourian classified section.

The debt statement doesn't offer much of an explanation for the average person, Richbourg said. But it shows what type of debt the city has to repay.

The city's debt, listed as outstanding obligations, are nearly $77 million. That figure doesn't include the proposed $8.5 million bond election.

But the bond election won't greatly affect the city's legal debt limits if it passes.

"The only debt limited is our general obligation," Richbourg said.

The city has an outstanding general obligation debt of $2.395 million. Those funds were used to help repay the balance on the Show Me Center.

According to the city's debt statement, Cape Girardeau could increase its debt by as much as $67 million. But that increase would, of course, be subject to voter approval.

However, it's unlikely the city would ever let its general obligation debt rise to such a high level, Richbourg said. Having such a high debt ratio could affect bond ratings.

Only general obligation bonds affect bond ratings for a municipality. The sewer bonds, because they are issued for a specific project and are limited in scope by that project, don't have the same affect on ratings as general obligation bonds.

Because Cape Girardeau has funded several of its major improvement and building projects with bonds funded by the state, those bonds have the lowest risk. They also have the lowest interest payments.

The city expects to save $5.1 million on the proposed sewer projects because it will use State Revolving Loan Fund bonds.

"It's cheaper than a pay-as-you-go method," said City Manager Michael Miller. The state program offers bonds at a 2 to 3 percent interest rate.

General obligation bonds, like those that funded the construction of the Show Me Center, are secured by the credit rating of the city. Revenue bonds must be secured by revenue, usually generated by a sales tax.

The city hopes to use an existing quarter-cent sales tax to generate the money needed to complete five sewer improvement projects. The tax was first approved in 1995 to fund $25 million worth of work. Nine of the original 12 projects listed in that bond issue have been finished.

But the city needs the authority to issue more bonds now to continue the work. Issuing the bonds now, based on voter approval Feb. 8, will allow the city to get most of the work done in the next four years.

If the tax fails then the city will have to find other funding methods for the projects, which could take longer to get the work done and could involve sewer or water rate increases, city officials said.

With the bonds, "in three or four years it will all be done," Miller said. "That's the beauty of bonding."