by SEAN KIMMONS

Facing more than $73 million in debt, Kyle city officials are hashing out a long-term debt policy that would set a limit on the percentage of debt it can carry each year.

Kyle Finance Director Charles Cunningham addressed the city council last week with analysis of capping debt service payments funded by the city’s general fund at 30 percent of current general fund revenues.

Currently, the city stands at 33 percent in debt service payments and would climb up to 43 percent by 2013, according to city estimates.

“If it were up to me, I would put it at 30 percent and not incur debt for another five years,” Cunningham said.

The 10 percent increase in debt service payments stems mainly from the council’s top three desired projects: Kyle Library (slated for construction this year), Kyle Police Station and Burleson Road improvements.

All three projects, if approved, could add another $14 million to the city’s debt. In response, the city tax rate would gradually climb from 42 cents to 50 cents per $100 property valuation by 2013.

Besides avoiding a spending free for all, a long-term debt policy could benefit Kyle’s bond rating, which now stands at an A+ rating, Cunningham said.

Kyle City Manager Tom Mattis recognized the challenge of adopting this type of policy at this time.

“We’re trying to retrofit a policy where we already have incurred debt,” Mattis said. “The day we adopt this policy, we’d be in violation of it.”

Mayor Mike Gonzalez said that Kyle is the fifth fastest growing city in Texas and infrastructure is still required to accommodate its future population.

“We need to recognize that we’re a fast growing city … but we also need to balance what we think is a healthy level for this city,” he said.

Cunningham told the council that 30 percent is ideal for mature cities, not cities that are still growing. He added that Kyle’s debt level would peak in 2013 and then stabilize.

“If we don’t do any more [projects], the debt should level off,” he said.

Gonzalez then asked: “At what level does it really hamper us?”

Councilmember Lucy Johnson, who has recently been elected as the next mayor, quipped: “I think it’s beginning to hamper us at the current level.”

“I feel that this is tremendously important because we need to set a goal,” she said of the policy.

Mattis said that a policy like this is “really unique” and not a lot of other cities are doing it.

“It’s new ground for everybody,” he said. “We’re a long way from a scenario we’re going to implement.”

The debt policy would also prevent Kyle’s total gross bonded debt from exceeding six percent of the assessed valuation of the city for the same year.

City staff plans to run the policy through the city’s finance committee and then present it again to the council at a later date.

Projected long-term debt policy:
The analysis will ensure that debt service payments funded by the general fund shall be not greater than 30 percent of current general fund revenues.

Fiscal Year    2010    2011*    2012**    2013***
Debt Service Payments    $2,944,602    $3,256,071    $3,895,667    $4,430,537
General Fund Revenue    $8,966,653    $9,414,986    $9,885,735    $10,380,022
% of Total Revenue    33 percent    35 percent    39 percent    43 percent

(Additionally, 20 percent of debt capacity is reserved for emergency purposes.)
The total gross bonded debt of the City of Kyle will not exceed six percent of the assessed valuation of the city for the same year.

Fiscal Year    2010    2011*    2012**    2013***
Total Bonded Debt    $70,872,951    $75,572,951    $81,182,951    $83,578,237
Assessed Value    $1,330,740,045    $1,411,750,871    $1,483,062,106    $1,558,011,272
Percent    5.33 percent    5.35 percent    5.47 percent    5.36 percent

* Includes public works building (already committed) and library
** Add Dacy Lane project (already committed) and police station
*** Add Burleson Road improvements
(Information provided by the City of Kyle.)