In “A Look at City of DeKalb Debt,” we calculated whether the debt carried by the City of DeKalb currently exceeds the legal debt limit imposed upon non-Home Rule communities. It does not. Also, in 2010 DeKalb passed a debt management policy that actually sets a stricter limit on gross bonded debt than the state would.
When issuing new debt, the City should strive not to exceed credit industry benchmarks where applicable. Therefore, the following factors should be considered in developing debt issuance plans:
1. Ratio of Gross Bonded Debt to Full Market Value of Taxable Property
The formula for this computation is Gross Bonded Debt, which is the total outstanding debt, divided by the current Full Market Value of Taxable Property as determined by the Township Assessors. The City shall not exceed 2% of Gross Bonded Debt per Full Market Value of Taxable Property.
Yes, it is too bad that the city will merely “strive” and considers the limits as “factors to be considered” instead of actual, you know, limits. Still, let’s look it over.
In tax year 2010, the City of DeKalb’s total EAV was $643,916,597. To get the full market value, you divide this number by .3333, which gives us $1,931,942,985. Gross bonded debt for the fiscal year 2010 was $25,920,000, so doing the above computation yields 1.3%. So far it looks pretty good. In fact, the 2% limit would be $38.6 million.
However — you knew there was one, didn’t you? — the City of DeKalb’s EAV dropped by $35.5 million since then, and we’re getting ready to spend $12 million on a police station. I do not know how the debt restructuring fits into this picture yet, but it seems possible we’ll be butting up against the to-be-strived-for limit pretty soon.