By Shereen Siewert
City officials on Tuesday are set to discuss several budget modifications that would add about $12.5 million in debt, resulting in a total debt projection of $107,484,779 by Dec. 31, 2019 — a more than 112 percent jump in five years.
The increase in spending places Wausau among the most indebted municipalities in the state and more than double the state’s average. The city’s borrowing in recent years has also shifted to higher interest, longer-term debt issuance, according to city documents.
The most recent budget modifications, which are subject to final council approval in August, are as follows:
According to Wausau Finance Director MaryAnne Groat, the city’s General Obligation (GO) debt will be $69,259,779 at the end of the year, with $14,610,000 in bond anticipation notes and $23,615,000 in water and sewer revenue bonds. Bond anticipation notes require the payment of interest for five years, after which a balloon payment of the principal is due.
By comparison, the city’s debt in 2014 was $50,473,575. The bulk of that number, $43,848,575, represented general obligation notes of 10 years or less.
Wausau’s projected 2019 debt levels do fall within the amount allowed under state statutes, which specify that a municipality’s debt cannot exceed 5 percent of its equalized property value. But the city’s debt has risen steadily since 2014, according to the Wisconsin Department of Revenue. In 2016, when the city’s debt was at $77 million, the Department of Revenue ranked the city 33 percent higher than similar municipalities.
Prior debt issues prompted Moody’s in November 2017 to downgrade Wausau’s credit rating from AA2 to AA3. Moody’s cited increases to the city’s debt, declines in tax base, deteriorating demographics, narrowed reserves or growth in the city’s outstanding general fund advances as factors that led to the downgrade. The purpose of Moody’s ratings is to provide investors with a simple system of gradation by which future relative creditworthiness of securities may be gauged.
Groat said she does not anticipate that the additional debt will have an impact on Wausau’s rating with Moody’s, which is expected to be released in September.
Debt service is a necessary expenditure that reflects a government’s commitment to maintaining vital infrastructure; nevertheless, high levels of debt service can signal fiscal distress, as they may crowd out needed expenditures on essential services, according to the Wisconsin Policy Forum.