City takes on $97 million in new debt, refinances $110 million in debt

The City of El Paso is considering a change in how it issues debt, a bold and risky move that could give city councils more control over the City budget.

The conversation stemmed from City Council’s unanimous decision Tuesday to issue more than $97 million in new debt and $110 million for refinancing existing debt.

The City’s current debt issuance method allows the City Council to approve projects that will be paid without actually borrowing the money until years later.

The City’s Chief Financial Officer, Dr. Mark Sutter, said the City generally sells 25 year bonds and the bonds pay interest for 25 years whether they’re sold the day they’re authorized, or when the project starts, or after it’s done and the City’s finally reimbursing itself.

Often the City will use money it has on hand to pay for those projects. But then it has to pay itself back and that’s when it actually takes on the debt it had previously approved.

For example, Tuesday’s $97 million in debt was so the City could pay itself back for projects approved by prior city councils, such as drainage, street and park improvements and even some quality of life bond projects.

Mayor Oscar Leeser said the current system makes it hard for city representatives to hold the line on taxes because they’re forced to borrow money that has already been spent by prior councils.

“I just find it hard to do business and be a responsible government when we don’t know what’s coming forward. What was spend and all of a sudden trying to create a tax rate,” Leeser said.

Leeser is proposing the City Council issue debt as soon as it authorizes it, a change also recommended by Sutter and the City Manager, Tommy Gonzalez.

City Rep. Michiel Noe said the move could prove risky.

“It is politically correct to let that council take the heat for it,” Noe said. “They decided to spend it so start spending it then but then do we burn the taxpayer with the interest that day and not allow debt to roll off?”

Sutter said the City could not immediately change to the new method, but could transition to it at a responsible pace.

“I couldn’t run my business. I couldn’t run my home and I can’t see how we fun a city with moving debt to the future and hope for the best,” said Leeser.

Noe compared the issue to his car. He said his car is paid off and he plans to be payment-free for three years before he buys a new car.

“I’m not going to borrow the money for the car three years ahead of time and pay interest on it just because I made the decision today. That’s not a financially sound thing to do,” Noe said.

The City of El Paso has just over a billion dollars of taxpayer-backed debt. That’s about a third of what the state allows.