Debt Service Levies
Fiscal Year 2023
In order to issue debt, the City needs to be mindful of the State’s requirements for issuing debt. There are specific guidelines related to various types of projects. To issue improvement bonds under state statute Chapter 429, the projects included in the bond issue must be at least 20% assessable. Most of our street improvement projects meet this requirement. Although this is becoming more of a challenge. Beginning in 2018, the City adopted a street reconstruction plan with a plan to issue street reconstruction bonds under state statute Chapter 475.58, subdivision 3b. This statute was again used in 2020 and 2021. Our debt is generally repaid over 10-year periods to coincide with the terms of the assessments related to each debt issue.
Equipment certificates may be issued for the purchase of equipment. They are repaid over a shorter period of time. Equipment certificates may not be issued for longer than the useful life of the equipment being purchased. With the establishment of the vehicle replacement fund, the utilization of equipment certificates has decreased.
If the city consistently issues debt each year, as the oldest debt issue is retired in full, the new debt issue will take its place. In this manner, the city can maintain a stable debt service levy. As the debt service levy changes, the city adjusts their capital projects levy by the same amount to maintain a consistent total levy devoted to capital projects.
For projects with longer useful lives, it is more equitable to finance these projects by issuing long-term debt to be repaid with a debt service levy. In this manner, the taxpayers paying for the improvement are also benefitting from the improvement over the same period of time.