Gathering Places
Gathering Places
Oahu taxpayers just went $579 million dollars in debt. At least that is the amount the Honolulu City Council authorized the city to borrow for various construction projects, equipment and certain salaries. City saddles taxpayers
with too much debtAt a 5.5 percent interest rate over 25 years, it seems like a pretty good deal. But wait...during the next two and a half decades, interest payments alone will total $549 million. Principal and interest together will cost the taxpayers $1.12 billion dollars over 25 years. Keep in mind that this is only for debt incurred for this fiscal year.
Last year the Council authorized $380 million in borrowing. The year before, $268 million and before that $353 million. Every year the city borrows money and adds a new debt payment atop those we are already paying. As of March 20, the city's total indebtedness in bonds, notes and loans was $1,961,286,410. And that's just principal. Imagine the interest that must be paid on that amount.
While it is essential that we have a capital improvement program to provide for a clean, healthy and citizen-friendly city, I am increasingly troubled by the direction we are heading in our borrowing. At a time when our economy has not pulled out of its long-term slump and when there are dark economic clouds over the mainland and Japan, we continue to pile up debt with nary a thought as to the long-term consequences of paying for it.
We who now serve on the City Council and in the administration will have moved on by the time the effects of our spending spree are fully felt, but that is all the more reason that we act responsibly now to ensure the soundness of our fiscal house. We are maxing out our credit cards and the taxpayers are going to have to foot the bill.
For this fiscal year, the Council approved deferring payment of $53 million of next fiscal year's debt. The increased debt resulting from the refinancing will result in increased payments in the future. In fact, the current annual total general obligation bond debt payment is $107 million. Four years from now, the yearly payment will be $207 million -- almost double today's payment.
In addition to the higher general obligation bond debt service, the city will be burdened by higher debt service for sewer bonds. The debt service for sewer bonds will increase from $4.3 million in fiscal year 2002 to an anticipated $12.1 million in fiscal year 2006, nearly a threefold increase.
These payments will continue to rise. In order to pay for our borrowing, the city must increase its revenues. That means real property tax revenues will have to rise significantly. Responsible fiscal policy dictates a rational schedule of increases in the real property taxes for, make no mistake, borrowed money is not "free money;" it is real debt that must be paid now or later.
Unless future capital budgets are more fiscally responsible and unless the City Council and administration take a long-term approach to borrowing policy, we will do a grave disservice to future administrations, future Councils, and ultimately, the taxpayers of the City and County of Honolulu.
John Henry Felix is a
Honolulu City Councilman.