Cities typically issue debt for all sorts of government needs, such as road repair, buy equipment, etc.
The City's debt offering totaled about 11 million dollars.
Moody's gave the City's debt issue both an MIG 1, equivalent Aa2 Rating. By definition, this means the City has good credit for short term borrowing. The interest on the debt issued is low saving the City money on its borrowing costs. However, Aa2 rating also means that the longer term risks for the lenders are somewhat higher.
Before you all snooze off, let me recap. For short term borrowing, Euclid's credit is quite good. Our debt to capacity level is low and manageable.
Now, about that longer term risk..................................................
As pointed out by Moody's the City faces some adverse longer term challenges, that can impact the City's credit.
Population Loss: 71,522 in 1970 to an estimated 47,415 in 2008 (38.6% decline)
Per Capita Income (income per person) compared to state average: 127.4% in 1969 vs.
93.6% as of 2008
Median Family Income: (average income level per family: 114.8 % in 1969 vs. 90.3% in 2008.
Unemployment: 11% (Feb 2010)
These dry numbers are telling the story of a community that is losing population and wealth,
Meaning that the burden of providing services is falling on fewer and fewer citizens. Those citizens have less and less ability to pay. That drives the rationale for tax increases, as we saw with the lighting and garbage taxes. That creates tremendous dissatisfaction and drives more folks out of Euclid.
Moody's also underlines our short and long term problem.
For our short term problem, they point out that of our approx 37 million dollars of general fund revenue, 56% comes from the income tax. The income tax grows and contracts with the economy. As Moody sees it, "rebuilding adequate operating reserves from presently narrow levels (1.6 million cash carryover from 2009) is crucial to maintaining overall credit quality." Income taxes are too volatile to depend on, so, develop other sources of revenue is what Moody's is saying.
Longer term, they point out that given the population and income declines, the "need for prudent redevelopment and retention efforts to protect and ultimately grow the City income
and property tax bases."
What Moody's can't know is that various Administrations have failed to address the long term issues of growth and development. Euclid is then left with the short term crisis' that we try and fix with tax increases.
During the past 20 years, such long term development issues have not been resolved.
Lakefront Development: The signature project of redevelopment: The Administration still
is tepid about the marina which is the key to the entire plan.
Shore: The current Mayor still threatens its closure.
Industrial Zone: No plans to create tax incentive districts to bring in business and
create jobs.
Euclid Ave Corridor: No viable redevelopment plan currently exists. No plans to build on
Euclid Historical Society and other community assets along the Avenue.
Downtown Plan: Failed to move on creating a downtown "special improvement district."
to help redevelop the area.
1996 Master Plan: Called for more "upscale housing" No real planning to attract those type of
developers
The failure over theses many years really means a failure to retain and attract wealth. Moving on any of these project over the past 20 years would have likely eliminated the needs for higher income taxes, trash taxes and lighting taxes.
On the budget side, we have also failed resolve long term issues.
City Jail: The loss on jail operations comes to about 1 million dollars a year
since it opened in 1989. If this issue had been addressed 10 years ago, would trash and lighting taxes been proposed?
Alternative Energy: The Administration has rejected using alternative energy (solar &
wind) along with new lighting technologies to save the tax payer money.
Government tends to be reactive, slow to innovate and hostile to new ideas. Euclid is no different. No matter if its 1994 (income tax increase), 2002 (Mayor Oyaski's proposed tax increase) 2004 (Mayor Cervenik's proposal for lighting/trash fees) the fix is generally the same. The result being that our citizens and businesses are burdened with higher fees/taxes, and, projects to grow our City get endlessly bogged down. For Euclid to survive, this must change. We can no longer wait.
That's the real mood Moody's captures!
City Budget Meetings begin on Monday Jan 24 @ 6:30pm, City Hall. They Continue on Jan 26 at City Hall, same time.
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