McClure Administration Makes Case to Borrow $60 Million For New Garage and Office Building at NorCo Courthouse Campus

At yesterday's Finance Committee meeting of NorCo Council, Executive Lamont McClure made the case for borrowing the money needed for a new garage and office building at the courthouse campus. (Preliminary plans were discussed here). His basic argument is that the county is in a very good financial position to assume more debt.

McClure stated that there have been no tax increases in any of the past six budgets presented, including a tax cut in 2022. During that time, the size of county government has actually decreased 31% ($121 million). Moreover, during these six years, outside auditors have annually given the county a clean bill of financial health. 

He also addresses the claim that he is only able to do these things by cutting into the county's fund balance and reducing it until a massive tax hike is necessary. That's just untrue, he observed. He told Council that the average fund balance over the past six years has been $48 million.  He predicts it will be $50 million this year. 

Fiscal Affairs Director Steve Barron followed McClure. He explained that municipal debt is financed through Non-Taxable Bonds sold on the secondary market. "Acquiring debt to construct buildings and infrastructure for government services effectively reduces the burden on today's taxpayers, distributing payments over the useful life of the facility so that those benefiting from it contribute to debt service payments."

According to Barron. most municipalities consider $1,600 to $2,000 per person as a reasonable debt load. If the county assumes new debt to finance the garage and office building, the burden per taxpayer would be $440.73, which is significantly below the average. 

Barron also told County Council that the total assessed value of taxable county property is over $10 billion. The debt burden of financing a garage and office building would be 1.4% of the county’s assessed value. 

He also discussed the $100 million in annual revenue generated by the county. While many municipalities allocate between 40% and 50% of their revenue to debt service, Northampton County's allocation is notably lower at 16.6%. "In summary, with over a billion dollars of borrowing capacity, we currently utilize only 8.2% of that capacity. The new proposal would bring us to 12%. These factors contribute to Northampton County's Aa1 rating from Moody's and its status as an excellent credit risk, attributed to our timely payments, robust revenue, prudent debt management, and conservative approach." 

Barron then introduced Scott Shearer from PFM, who discussed the options for borrowing $60 million in new debt. He said current rates on bond debt are about 2.6%, below historical averages. Moreover, the county can invest this borrowed money with a 4% return rate until the money is needed. He added that demand is high for tax exempt bonds from highly rated entities like the county. 

There are two ways to re-pay a $60 million bond. The first is through level payments over 20 years, similar to a typical mortgage. The second is through wrap around payments in which the amounts increase over time. 

Shearer told Council that borrowing $60 million should have no adverse impact on the county's bond rating.