November 2018

UPDATE III: Should new Sewer Plant bonds be paid for through user fees?

l3wis November 16, 2018 6Comments

Before I give you my answer to that question, first, I want to say I don’t think it is fiscally feasible. The bond payments combined with current debt service will easily exceed $25 million a year. A question councilor Stehly has been asking but not getting an answer on.

Don’t you think it is kind of bizarre we planned out $260 million in water reclamation upgrades over 7 years, a rate increase model and a 1st reading on Tuesday, yet NO ONE has an estimate of what those bond payments will be.

Yeah . . . right . . .

UPDATE II: Here are the projections;

UPDATE III: Here is the full report and answers to Stehly’s questions from Tuesday’s informational: Council Stehly Response – 11-16-18

Reminds of the SFSD and how they ran from the $300 million dollar bond repayment number.

So what is the justification of paying the bonds down through user fees besides the enterprise fund model that former mayor Bucktooth and Bowlcut concocted with Turdbak? They feel that bonds for infrastructure should be paid for through user fees. (I partially agree, but we will get to that in a moment).

Let’s be clear, like the Pavilion, the Denty has never made one dollar’s worth of payments towards the bonds and debt service which is around $9 million a year for the facility. That payment comes directly out of a fund we pay into when we purchase anything in Sioux Falls, groceries, clothing, etc. The 2nd penny is supposed to be for things like infrastructure (sewer plants) and roads, but we use it now to pay down the bonds on entertainment facilities. Does the Denty make money? Well kind of. They have tons of sponsorships* which offset the operational costs and any money left over above and beyond doesn’t even go back to the city. It goes into a revolving fund that the city maintains financially but that SMG uses to promote the EC. While it doesn’t cost us anything to operate the facility, we get ZERO from it to pay down the bonds. It’s like paying a mortgage on a house you can’t live in and the renters keep their rent payment, but do invite you over for an occasional BBQ – BYOB of course.

Something that was suggested long ago was a ticket fee attached to each ticket that would go directly to the bond payment. It was nixed by SMG because they said promoters don’t like it. But if it is written into city ordinance promoters and artists would have to obey. The 7th penny, which is the entertainment tax was used to pay down the Pavilion bonds, it was supposed to sunshine after that but never did and now is used for the maintenance of the Pavilion and EC and CC.

It is hypocritical to say we need to raise sewer rates to pay these bonds since the EC, the Pavilion, The Midco Aquatic Center and many other play palaces in SF have never paid down their bonds through user fees.

The user fees for sewer should go towards operating and maintaining current sewer lines. We should pay the bond for new sewer infrastructure out of the fund that was created for that, the 2nd penny.

When I have suggested this, many have said, “Then where will the debt service come from for the entertainment facilities?” My response is the same as Public Works Director Cotter’s, FROM USER FEES!

It’s time we change city ordinance so that the play palaces can start paying their own way. Clean water is essential to the health and well being of a growing city, seeing Garth Brooks 20 times in a row isn’t. We need to look at our fiscal responsibilities more closely.

*UPDATE: I wonder how the sponsorship negotiations are going with most of the sponsors at the Denty? Most of those agreements expire in 2019 (except the main naming rights). Makes you wonder if SMG’s latest termination has anything to do with this?