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When former Citrus Heights City Manager Henry Tingle retired two years ago, incoming City Manager Christopher Boyd assured him of one thing: “We’ll never go into debt.”
That quote and many others were included in an 18-minute video tribute to the outgoing city manager during his retirement ceremony in 2016. Known as “Tightwad Tingle” for his fiscally conservative policies and operating the city debt-free during his 17-year tenure as manager, the video showcases how the City of Citrus Heights operated with a “pay as you go” philosophy under his leadership, while building up millions of dollars in reserves and still making capital improvements like the new Community Center on Fountain Square Drive, completing the first phase of major roadway improvements on Auburn Boulevard from Sylvan Corners to Rusch Park, and most recently constructing the new $21 million city hall — a project that would have cost taxpayers millions more in interest payments if the money had been borrowed.
Now, the City Council is poised to vote at 6 p.m. tonight — for the first time in its 21-year history — for a $12 million revolving line of credit in order to finance “anticipated operating and capital funding needs for the next four fiscal years until property tax revenues become available,” according to a city staff report. For perspective, that’s about one-third of the city’s $36 million General Fund budget.
This isn’t the first time councilmembers have been tempted to go into debt. In the Tingle Tribute video, former Mayor James Shelby recalled times where taking on debt was discussed as an option, but in each case he said the city manager kept them focused on making Citrus Heights a “model city.” And indeed, not many cities can claim to be without debt.
Tingle told The Sentinel in his final interview before retirement that he resisted taking on public debt because, “It’s so easy to spend other people’s money and create debt and put the burden on taxpayers.” He’s also said he knows of no city that’s ever gone into debt and then gotten out of it.
Read the final interview: Henry Tingle reflects on 17 years as Citrus Heights city manager
In the tribute video, his policies about fiscal management are praised by city staff and council members alike. Sept. 30 has even been officially declared by the City Council as “Henry Tingle Day” to honor his impact on the city.
Vice Mayor Jeannie Bruins is quoted in the video saying the council knew the lack of receiving property tax revenue, part of a 25-year “Revenue Neutrality Agreement” with the county as a condition to incorporate as a city in 1997, meant planning ahead and meant “we couldn’t have everything we wanted, today.”
With just four years out from receiving an estimated $5-6 million annually in property taxes, the temptation to borrow in advance to fund projects today is understandable. While the projects are not specified in the staff report or resolution to be voted on, according to Mayor Steve Miller the funds are intended to go primarily towards two “big ticket” expenses: buying the old Sylvan Middle School property and helping pay for the second phase of improvements on Auburn Boulevard.
If the debt incurred is truly short-term and paid off when the city finally receives its property taxes from Sacramento County in four years, the proposal might not actually be a bad thing. However, the proposal being considered by the City Council allows for the line of credit to extend as long as 20 years and cover a broad range of both operating and capital expenditures — not just the two “big ticket” items.
There’s also the question of whether the debt will be able to be paid off early, by 2024, as the city intends, or whether it will wind up keeping the debt for the full 20-year term of the credit agreement and end up paying as much as $9 million in interest, according to figures listed in the loan agreement. In 2022, there are sure to be competing interests regarding how to spend the additional revenue from property taxes — repaving roads, infrastructure projects, and rising pension costs, to name a few that have been cited by current members of the City Council.
An economic slowdown, or another recession that Gov. Jerry Brown has consistently warned of, could also put increased strain on the city’s budget in the next four years and eat up the line of credit on operating expenditures rather than just “big-ticket” items.
With the sharp change in the city’s pay-as-you-go policy being proposed, it’s also unusual for the city to not bring the item up for public input several months in advance. In this case, the proposal was only made public three days after the Nov. 6 election.
For context, see story: Citrus Heights is considering a whopping $12 million line of credit. Here’s why.
By comparison, when the recent Rental Housing Inspection Program (RHIP) was proposed, which involved only a $505,000 budget, the idea was first brought up during a strategic planning meeting, then discussed at an open-to-the public study session, then a police representative presented the proposal to each neighborhood association and received community feedback, then a public hearing was held, and then finally a vote was taken by the City Council.
Why not follow that same transparent process when dealing with a $12 million proposal?
If the council still decides debt is needed as a last resort in order to stay afloat the next four years, a few considerations should be made:
Voters should have a say. A bond measure would allow voters to decide whether to approve additional major expenses, giving voters a direct say in whether they want to move on from the city’s pay-as-you-go policy. Bonds also typically provide citizen oversight to ensure funds are spent as intended. Likely there is not enough time to pursue this route now, but given that the city prides itself on a 10-year budget model that looks long into the future to foresee needs and plan in advance, this lack of funding before Revenue Neutrality ends should have been anticipated in time to put this on the ballot.
The city’s new council member should have a say. To help ensure the money is paid back as planned, the same council members who vote on the debt should be the same ones to vote on paying it back. However, tonight’s meeting will be Councilman Al Fox’s last meeting and he will be replaced by Middleton on Dec. 13th. Since voters have chosen Porsche Middleton to be their next council member and she will be tasked with approving the 2022 budget and allocating the first influx of property tax revenue in four years, it makes sense that she should be seated first before this vote. That would mean holding off for just one meeting.
Exact use of funds should be specified. The resolution council members are set to approve regarding the $12 million credit line is far too vague, saying only that the funding is intended for “certain capital improvements and operating expenditures,” which are not specified. Residents deserve to see where this money will be going in advance, before it is approved, and specific wording should be added to the resolution to bind the credit line’s usage to serve only short-term “big ticket” items.
This is critical for both transparency and also to prevent a future City Council from using the new funding source as a $12 million credit card to artificially boost the General Fund budget on any expense they choose. By the time the debt is expected to fully be repaid in six years, there will be at least two new members on the City Council, as both Councilman Jeff Slowey and Mayor Steve Miller have said they will not seek another term. This simple step would help ensure funds are only used as originally intended.
Alternatively, the City Council may be better off following the original plan laid out by the current city manager in following Tingle’s legacy. As City Manager Boyd said two years ago:
“There’s no greater honor for me than to take over as city manager and carry on your tremendous legacy. And one final thing I just want to make sure you know: We’ll never go into debt, I can assure you of that.”
The City Council is slated to vote on this matter at 6 p.m. on Thursday, Nov. 15, at City Hall. To read the staff report and full proposal, click here. The Tingle Tribute video can also be viewed by clicking here.
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