By Keene Winters

As the community eagerly awaits announcements from city hall about new plans to move the downtown mall and the east-side riverfront projects forward, it is important to remember that our resources are not infinite.

Keene Winters served two terms on the Wausau City Council from April 2012 to April 2016. Mr. Winters is a financial planner and owns the local office of Great Lakes Financial Management Group in Schofield. (Photo credit: Life Touch)

In the eight years prior to 2016, the city carried an average of approximately $51 million in outstanding debt in any given year.  That was slightly below the average level of  indebtedness for a Wisconsin city of its size. Over 70% of the debt was in short-term, 10-year general obligation notes, minimizing the costs to taxpayers.

Beginning in 2016, the issuance of debt accelerated. By one estimate, city debt could grow to around $105 million by the end of 2018, placing Wausau among the most indebted municipalities in the state. To add that much borrowing in such a short time, the structure of the debt has had to change. The city has used more longer-term general obligation bonds, spreading payments over 15- and 20-year time horizons. It also refinanced water utility debt as revenue bonds, and it issued $18.4 million in five-year, interest-only bond anticipation notes, leaving the payment of principal to be refinanced in the next mayoral term. All of these changes will have an adverse effect on the city’s cost of borrowing.

Debt Policy in Wausau 2009 – 2015

  • From the beginning of 2009 to the end of 2015, the city’s debt load averaged about $51 million per year. Outstanding general obligation debt varied between 36% and 38% of the state statutory limit.
  • According to the Wisconsin Policy Forum (formerly the Wisconsin Taxpayers’ Alliance), the 24 municipalities with populations between 30,000 and 150,000 carried average debt loads of 40% – 42% of the statutory limit at the end of this period. The most indebted cities in the group came in at 78% – 79%.
  • In this era, the city used almost exclusively general obligation bonds and notes as its primary source of financing. It also issued general obligation debt on behalf of the city’s water utility to take advantage of the lower interest rates on debt backed by the full taxing authority of the city rather than just a revenue stream.
  • With the goal of reducing interest costs, the city made a concerted effort over this period to shift its borrowing to the shorter-term, general obligation notes. At the peak of this policy in 2013, nearly $44 million (93%) of the city’s $47 million in outstanding debt was in the lower-interest,10-year notes.

City Debt Policy 2016 to 2018

  • The policy focus changed in 2016, and debt expanded rapidly. The city budget for that year anticipated debt would grow to $65,158,575.  Instead, the newly-elected city council and mayor amended the budget, and the city ended 2016 with debt of $75,079,604, an increase of roughly $19 million over year-start levels.
  • Similarly, the city budget for 2018 projected debt to be $92.4 million at years end, but that number may not be firm. Early on, it was revised to $96.5 million.  Then, on May 9th, 2018, the Wausau Pilot and Review reported on a presentation by City Finance Director Maryanne Groat stating that city debt could reach $105.3 million with amendments by year’s end.
  • On November 10, 2017, Moody’s downgraded Wausau’s credit rating from AA2 to AA3.
  • In February of 2018, the city found itself unable to make a promised payment of $750,000 on a loan from the Judd S. Alexander Foundation and an extension was negotiated.
  • In three years, the city’s will have restructured its debt to higher-interest, longer-term debt instruments:
  • Of the $75.2 million in new debt issued or budgeted to be issued from 2016 to 2018, 63.5% will be for Tax Incremental Financing Districts. The key projects are east-side riverfront development (36.2%), Thomas Street (15.3%), business campus expansions (11.0%) and west-side downtown development (1.0%).
  • The remaining approximately one-third of the borrowing was for city capital improvements (10.5%), refinancing of sewer and water debt from general obligation bonds to revenue bonds (10.2%), improvement of water and sewer infrastructure (9.8%), swimming pool reconstruction (4.3%) and other refinancing (1.7%).
  • In the end, only about one-quarter of the $75.2 million borrowed from 2016 to 2018 will be used for infrastructure replacement and maintenance outside of the Tax Incremental Financing Districts.

Unfortunately, much of this borrowing was done without a master plan or forecast of future needs.  Commitments have been made, and the future seems to be filled with more borrowing.  The numbers here do not yet include money for projects like moving Great Lakes Cheese to the industrial park, phases 2 through 5 of the east-side riverfront development, any substantial money for re-development of the mall or any capital projects like upgrading the wastewater treatment plant, the water plant or the central fire station.  It is hard to see how this works out well.

My guess is that future mayors and council members—hamstrung by having to make the payments on this debt—will not look kindly on this period of excess nor the policy-makers who created it.

Editor’s note: The views of our readers and guest columnists are independent of this newspaper and do not necessarily reflect the views of Wausau Pilot and Review. To submit a letter, email editor@wausaupilotreview-newspack.newspackstaging.com or mail to P.O. Box 532, Wausau, Wis., 54402-0532.

12 replies on “Guest Column: Wausau’s debt, from a historical perspective”

  1. Hey, Wausau city hall is great at making deals.

    It’s not like we just paid $4.7 million for a chess set and some picnic tables….oh wait.

    But at least Riverlife is in full swing and going goo….oh, yeah.

    OK, for sure we can go get a sandwich at the old Westside Batt…no, that’s not done yet over 18 months later either?

    Sure, alright but that new movie theater in the old Sear…no way, that’s dead too?

    The new mall owners are movin…nothing there as well?

    Well schucks, maybe Wausau city hall needs to get out of the real estate business afterall.

  2. 36.2% that’s $27.2 million for what? What do we have? WOW and ????????? A park under a busy bride?

  3. Do any people remember that Act 10 limited the shared revenue for cities, counties, school districts and that has a negative effect on budgets, plus the limits put on property taxes, things got a whole lot tighter in 2010!

    Getting the shared revenue from the state would ease a lot of the burdens and the problems with the mall are really quite unique…

    Meanwhile the Federal Government has gone over $21.3 trillion in debt during an economic high tide but the common wages are still flat.

    So ask the mayor and council persons at the meeting!

    1. NO NO NO. Act 10 was a state measure the control spending in lean times. God forbid State employees pay something for their health insurance like the real world!

      Lets deal with reality communities like Wausau are fiscally irresponsible (think Thomas St). With that said why should state taxes support such massively bad projects with shared revenue.

  4. What in God’s name does the federal budget have to do with the article in question? Oh, by the way John, how much of that 21.3 trillion was added during the 8 years your buddy Obama was in charge?

    1. Nothing, it’s just his attempt to misdirect from the deplorable track record of Wausau city hall attempting to manipulate and dictate the local commercial real estate market and over-borrowing for pet projects.

  5. Time to reign in the city of Wausau and it’s spending in unnecessary areas that don’t contribute to the tax base. The city debt isn’t and shouldn’t be the responsibility of the Federal government to fund. If this city administration can’t do this then maybe the next one will.

  6. Fed’s have nothing to do with this, out of control spending such as no bid contracts, not follow rules for project
    procedure, which happened on Thomas street. Don’t be surprised if the city council dreams up some more user fees to help bail the debt out.

  7. UPDATE ON CITY BORROWING

    Subsequent to the writing of my opinion editorial, the Wausau City Council had a Committee of the Whole meeting on August 14th regarding the city capital finance plan. Here is the update:

    More Borrowing: The updated city plan now includes $4,595,000 in additional borrowing for the central fire station and $8,065,000 additional borrowing for sewer and water projects that were not present in the city documents that I used to write the original piece.

    More Higher-Cost Borrowing: The stated goal of city policy is to keep general obligation borrowing at 50% or less of city’s statutory limit, which may sound prudent. However, in order to do that, the city is expanding its borrowing into debt categories that do not count toward the statutory limit. For example, it will be using more revenue bonds, which typically have higher interest costs than general obligation bonds.

    Even more troubling is the use of bond anticipation notes. These are five-year, interest-only debt obligations that will require the principal to be refinanced in the next mayoral term. Not only are the interest rates on these debt intruments usually higher than general obligation bonds, the need to refinance the balloon payments in five years consumes future borrowing capacity. Consequently, the “50% limit policy” appears to be nothing more than a misleading talking point that neither limits debt nor debt service costs.

  8. Seems that I posted an answer about how our tax dollars paid into the Federal coffers and State coffers are supposed to be passed down to the cities, counties, and schools… when that doesn’t happen the local government agencies suffer from lack of revenue… is it right that a shared revenue plan started in 1911was curtailed by Act 10 and limits on property taxes were also put in place.

    Doesn’t the lack of fiscal responsibility on the Federal level, state level mean the local government bodies are being hard pressed to fund our needs in Wausau and throughout Wisconsin and the nation.

  9. Well it sounds like a awesome town. Why wouldn’t people want to live here. Full of drugs and crime, highest county debt in state, that wheel tax to fix the roads haaaaaas

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