Editorial

SEWER BONDS NEEDED TO COMPLETE PROJECTS

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When voters in Cape Girardeau go to the polls next Tuesday, they will have to decide if they want the city to issue $8.5 million of sewer bonds to pay for some major projects. The bonds would be funded by the existing quarter-cent sales tax approved by voters in 1995 when the city embarked on a major upgrade of storm and sanitary sewers.

As the city grows and becomes more of a regional hub, it is important that essential services keep up with demand. The proposed bond issue doesn't require a tax increase. The money from sales-tax revenue is already in place. But the city can't issue the bonds without voter approval. We encourage voters to grant this approval by voting yes.

There are several advantages to the city's funding program for the sewer work. One is the fact that the revenue stream is already in place. If the bonds aren't approved, the city would use the money to do the sewer work on a pay-as-you-go basis. But that would cost millions of dollars in additional expense, thanks to inflation and other factors. Moreover, the bonds to be issued are low-interest bonds from the state. Being able to use these low-cost bonds saves an additional $5.1 million, the city estimates.

Some voters, however, may be puzzled. Their confusion arises from a legal notice required by the city charter whenever the city asks for additional bonding approval. The notice was intended to be informative and help voters understand the city's indebtedness. But, in fact, the notice has probably created more concern than it has alleviated.

The notice shows that the city debt, if Tuesday's bonds are approved, would total $89.7 million. This would be offset by $4.6 million of debt reserves, leaving a net outstanding debt of $85.1 million.

Moreover, according to the required public notice, the city's legal debt limit is 20 percent of assessed valuation, or $69.2 million. At first blush, it would appear the city is already far above that limit. However -- and this is the confusing part -- the legal debt limit only applies to the city's general-obligation bonds. Currently, the city has $2.4 million of G.O. bonds and $535,000 in reserves to pay off those bonds, leaving a net G.O bond debt of only $1.9 million that applies to the $69.2 million debt limit.

Not so many years ago, most city and county debt was in the form of G.O. bonds. That was in an era when property taxes were almost exclusively used to pay off any indebtedness. At that time, a G.O. debt limited to 20 percent of assessed valuation was an important safeguard.

But, as Cape Girardeau's situation clearly shows, G.O. bonds are seldom used anymore. Instead, other sources of revenue -- sales taxes in particular -- are most often used. Local taxpayers have seen street programs and other major expenses in addition to sewer work funded by special sales taxes. These programs do not endanger city property taxes and are generally regarded as a preferred method of paying for big-ticket items. For one thing, sales taxes generate revenue from users of city streets and services but who aren't property owners or taxpayers in the city.