Some cities have mountains of debt. Palm Coast doesn’t. But it faces mountains of needs, from stormwater infrastructure to roads to a public works facility, plus some wants like parks and a future sports complex on the west side. The city’s ability to finance those needs is limited. Its revenue sources are few and spoken for. Its charter places severe restrictions on borrowing.
Now, coinciding with the city’s 25th anniversary, the Palm Coast City Council wants to explore ways to ease the charter’s restrictions on borrowing. The council agreed today to devote a workshop to that discussion.
Any changes to the charter’s restrictions would have to be approved by referendum. The council’s sudden urgency suggests that some of its members may want to see a referendum amendment proposal on this November’s ballot. Otherwise, any possibility of change would be pushed at least to 2026.
Today’s discussion was in the context of Finance Director Helena Alves’s presentation on the city’s tax structure, its revenue sources, restrictions and financing options. The segment on restrictions was a first. But clearly, Alves was presenting it at the request of council members. “We have not included this section in the past, but we do feel it’s relevant to the budget process as council will have several presentations on the five year CIP [capital improvement plan] and respective funding needs,” Alves said.
Joel Tindal, a managing director with Hilltop Securities, the firm that’s advised city finances for years, summarized the different ways local governments can finance projects: bonds, notes, loans or lease purchase agreements, backed by revenue sources and explained the city’s limitations.
By state law, bonding for general obligations using money from the general fund–say, if the city wanted to build a City Hall on borrowed money–requires a referendum.
In Palm Coast, the charter is stricter. It requires a referendum if the city were to enter into a lease-purchase agreement or any other project requiring borrowing of over $15 million, or whose repayment would extend beyond 36 months. The charter does not make exceptions for emergencies. The restrictions apply to numerous types of borrowing, including in public private partnership projects, and exceed state law requirements. Loans for the utility system are a notable exception to the referendum requirement.
Tindal said that can change by referendum. “Subject ultimately to a referendum and any change to the charter I think you have flexibility,” Tindal said.
“I think there’s upside but there’s also a lot of risk,” Council member Theresa Pontieri said. “Our charter is the way it is now to keep us from incurring that risk.”
Mayor David Alfin was interested in having the flexibility as long as it ensures that the city maintains its bond rating. “It’s a little creative, but what it does is it protects the overall idea that the bond rating is incredibly important to the city,” Alfin said. “You could sort of consider it on a project by project basis, keeping in mind that you want to protect your bond rating.”
But as Tindal noted, the city does not and cannot control its bond rating. That’s controlled by independent rating agencies. They base their rating on the financial soundness of the city, with debt load the main factor. A city cannot simply increase its debt load willy nilly and expect its debt rating to remain high.
“I’m curious as to what kind of what limitations we can put on ourselves because I don’t want this to be the wild west of borrowing,” Pontieri said. She agrees with the limitations in place in the general fund. But at the same time, she is interested in exploring some borrowing possibilities to make it easier for the city to develop public-private partnerships outside of debt that out be secured with property tax revenue.
“We are handcuffed by not being able to enter into private public partnerships, big time,” she said. “The pay as you go just for the [public works] operations complex alone, I feel like we’re never going to get there realistically.” The council first started planning for the complex in 2017.
If a loan is not secured by property taxes, it could only be financed by a limited number of revenue sources, causing Pontieri to ask: “Is the juice worth the squeeze here?”
To Alfin though, the restriction “that’s in the charter now was probably put in there arbitrarily just because they put a number and it’s not been addressed in 25 years.” (In inflation-adjusted dollars, the $15 million limit in the charter now would have been $28 million in today’s dollars.)
When the council discusses this in a dedicated workshop later this month or next month, it will hear a presentation on the various capital projects that are unfunded at the moment and the different financial tools to help fund those projects, including different debt options. That means an exploration of the city’s charter restrictions, and how to overcome them.
“This is something that should be explored. But this is a very, very important decision with a lot of implications,” Pontieri said.
The city has no general fund debt. Its utility accounts for 84 percent of debts outstanding, with the stormwater fund accounting for 10 percent and the Old Kings Road special assessment district–the portion of Old Kings Road that was four-laned in 2010, originally with a loan from the utility fund–accounts for 3 percent of the debt.
Bingo says
Bingo Alfin wants to change charger to allow for borrowing money. Now we know how he’s going to pay for the rest of that road west.
HayRide says
Can’t afford to pay for needed city services, but you voted yourself a hansom raise, well that’s good leadership, we should vote you right back in next term, we’ll never learn a good lesson!
Tim says
I wish they couldn’t do this , but they will find a way to . They just need to stick to what they need to fix and give up on their wants . We don’t need a sports complex on the east side or anyplace other. The city must remember that they are here for life and don’t need to think in two or three years. The need to think in 10 to 15 years
Deborah Coffey says
Let’s just take the walking bridge of Rte. 100 that started at $7 million and ended at $12 million and it’s a bridge to nowhere at the moment. That was important when we can’t afford to repave roads and fix swales? On the other hand, lots of Palm Coast voters are getting exactly what they voted for. I hope they’re happy.
Hammock Joe says
You do know that the bridge was built with a state grant not any local money. You may not like the bridge but if it wasn’t built here it would be somewhere else and still cost you exactly the same thing…nothing. The money could not have been used for anything else.
Bill says
Put down the hammers and chainsaws! Stop expanding and destroying the woodlands in favor of apartments and houses. The town is big enough!
The Sour Kraut says
The mayor and council don’t seem to know the difference between wants and needs. Giving them the ability to borrow against our future is a guaranteed disaster.
NJ says
BEWARE!!! Palm Coast’s years of Low Impact Fees are coming back to BITE every Taxpayer!!! Do NOT make any Charter Changes!! The Park System and “New Sports Complex” must be put on STAND DOWN-NOW! Roads, Water and Sewage Systems, and Storm Water Must be Always be FIRST!!! Palm Coast has Very Little Industry Base which means Continuing Increases in Property Taxes!! Where is our Missing Congress, Mike Waltz, ( always the Green Beret Hero on Fox News but NEVER has any Town Hall Meetings) who Promised to bring the Military Contractor Industry to Flagler County??? Does he have a home in Flagler County??? Time to Vote for a New Congressman who will have Town Hall Meeting ( like every other Congressman and Senator does) to listen to the needs of the people of his district!!! I tried to ask him a question at Palm Coast City Council Meeting once but all he did was have someone take our picture (which later he posted in his Press Release as a “Meeting” with people of district) , than he RAN to his Vehicle while everyone at the City Hall where wondering WHY he even came to his district!!! DO YOUR JOB!!!!!
Nephew Of Uncle Sam says
James Stockton for Waltz’ replacement, 6th Congressional District.
John Stove says
Go ahead, place it on the vote for November and you will see how it will fail to pass. Alfin and our Council are completely clueless on how to get staff to run a city on a fixed budget (like the rest of us). Don’t have money for a sports complex? DONT BUILD IT…don’t have money for a new park? DONT BUILD IT…..
These mental giants need to figure out how to effectively run the core services of this city (water, sewer, roads, drainage) first before they talk any more of expansion or parks etc etc
Ben Dover...... says
I don’t know but maybe I’m just stupid.
If I make 250 million yearly like the City does and my credit rate is 840 but I need to buy a house and car that can afford to buy and pay for monthly. My credit score drops to 800 but, I got an excellent interest rate and will successfully pay it off in 10 years, do I do it?
YES, because I finally used my credit score to it’s best potential.
How do you make this decision at your home, because you are the real manager of your home.
My suggestion is get a City Manager before you make yet another mistake.
Vote no to Danko!
James says
“… in the charter now was probably put in there arbitrarily… ”
-Alfin
Just a number thrown in there… like all the other numbers… like the capacity utilization limit of the water system set forth years ago by ITT? Right?
I think I actually once wrote a comment on here regarding the use of municipal bonds, as opposed to the “pay as you go” situation that seems to be the way Palm Coast “goes.” But that was quite awhile back now… before the absurd talk of future sports complexes “out west,” among other things. Not to mention learning of what I’d consider to be
a number of actual long term fiscal missteps on the part of the city regarding infrastructure and maintenance planning.
Furthermore, does Palm Coast even have a bond rating? Yes, the county has a pretty good rating, but then they have tax revenue from the individual cities that make up the county. The largest of which being Palm Coast. As it seems to me, most new lending via muni bonds would need to have the “blessing” of the county, since, as things seem to stand, the revenue for the backing of such bonds would obviously cut into the county tax revenue in my opinion. Hence, perhaps causing friction between the county and city. Probably not going to happen… unless “Town Center” becomes the “county seat.”
Is the city council that clueless?… or that ambitious? Alfin did get his raise so who knows.
Risky business if the money from the bonds aren’t used for the right purposes… and Palm Coast government doesn’t have that good a track record in planning/using funds appropriately.
Just my opinion.
Atwp says
Are these Republicans?
Land of no turn signals says says
Sky’s the limit keep borrowing and maybe Big Joe will pay off the city’s debt just like the billions of taxpayer money he used on student debt.HA!