Understanding Cape Girardeau's $87.7M debt: Finance director Lisa Mills breaks down the numbers

Cape Girardeau’s finance director Lisa Mills explains how the city evaluates their debt payments and how that affects their current water system improvements.

The city’s current outstanding debt payments per their 2024 -2025 annual budget is at $87,749,000, The debt is made up of different types of bonds state revolving fund bonds, revenue bonds and annual appropriation debt.

State revolving fund bonds which 2012, 2013A and 2013B SRF sewer revenue direct loans amounting to $41,639,000, the revenue bonds include a 2019 water system refunding revenue bonds amounting to $6,220,000 and annual appropriation debt which includes 2016, 2018, 2020 and 2022 special obligation bonds amounting to 39,890,000.

In a May Study session, Mills said the State revolving funds had to do with sewer improvements around that time. Kinder and other council members noted in the same session much of the debt has to do with paying for the sewer system and wastewater treatment facility that opened in 2016.

In a recent city council meeting on Monday, June 17, the President of gettinggreatrates.com Carl Brown referred to the city as borrowing money as not an option.

Mills said there is a legal debt margin for the city which is considered 20% of the total assessed value of properties within the City of Cape Girardeau. The city’s total assessed value is $806,637,911 with the debt margin standing at $161,327,582.

“So we have not exceeded our legal debt margin, and we do not intend to, right, and we don't intend to get even close to that,” Mills said.

She said the city’s debt service payments per year stand at $9.9 million. Mills said taking out more debt would be irresponsible and wouldn’t match the cash flows of their organization.

“So financially, as Carl Brown indicated he didn't model any debt in his study. He didn't model the debt because we don't want any more debt. It would be financially irresponsible,” she said.

Mills also explained a scenario to show off the problem of having another long-term debt.

"If we borrow something large for 30 years, we go out there and we do debt for 30 years, but within that 30-year term, I have to do a substantial improvement or add additional capital, to the cost of that, then I've got a double constraint on my cash flow," she said. "(But I have to make sure) I have enough cash flow, i.e. revenue stream, to pay for any significant or major improvements that have to be done in the meantime."

Mills also said the debts have specific ways they have to be paid for, in the instance of the City of Cape Girardeau’s water system and the $6,220,000 2019 water system refunding revenue bond.

“The water fund, the water system in the City of Cape Girardeau, is an enterprise fund, and that means it's handled and treated like a business,” she said. “Enterprise funds are, like businesses, the revenues have to cover the needed cash flows and expenses.”

Mills said that’s partially what the current water rate study is for, to analyze the revenue streams needed to operate and do their capital improvements.

“From my perspective, what's important that we do is be certain that we have sufficient cash flows, i.e. sufficient revenue streams, either from tax initiatives or from our utility fees, our user fees, to pay whatever cost we incur, operating and debt,” Mills said.

Mills also specified that the bonds listed, pay out at different times. She said there are several of the debts that do pay out in 2034.

In the May study session, Mills said the $41 million in sewer improvements wouldn't be able to pay out till 2038. She added that there was an effort by a past finance director to try and pay down some of the debt, stating the financial markets have changed.

"So now is not a time to be thinking about paying down this debt, this debt is at very good interest rates," Mills said in a study session. "We need to just service this debt and stay the course."

She said in the session that in the year before their debt was standing right around $100 million.