Sparta to consider new approach to debt

SPARTA — Debt, along with taxes, is never a popular subject. Although some may complain, balk or opt out for a time, eventually the creditors and Uncle Sam come calling and it’s time to pay the piper.
As with all municipalities, Sparta issues bonds to pay for large capital projects and expenses and must pay these off over time, creating yearly debt service. The repayment of these, along with the interest they accrue, is factored into taxpayers’ bills.
This week Sparta’s Chief Financial Officer, Grant (Sam) Rome and auditor Tom Ferry presented a proposal to the Township Council that would be a new approach to dealing with debt service and capital funding. They said if the town converts short-term debt into long-term debt it could decrease interest payments and free up more cash for current budgets, thus be able to pay cash for capital expenses instead of further bonding.
Township Manager David Troast said this is a way to control spending and minimize future debt. It could make as much as $1.2 million available in cash each year, instead of $500,000, which was what was available this year.
Ferry said that since interest rates are so low, this is a very feasible plan. The town could then consolidate bonds and hold a bond sale. If the economy should change again and if rates go up, they could simply back out of the bond sale, Ferry said, so there is no risk to the town.
Councilman John Schon said he thinks this looks like a win-win solution for Sparta but wants to see the structure for this proposal in writing. The council will look into this idea further and will have the town’s bond counsel present at the next meeting to answer questions from the council and the public on this approach to controlling debt.
Schon said, “Let’s make time for good decisions.”

Council will consider utility bill grace period

The first hearing of Ordinance 12-15 was on the agenda for the council this week. The ordinance would provide a 10-day grace period for the payment of utility bills, similar to the grace period for paying property taxes. However, the current ordinance calls for a 10 percent penalty on late payments, unlike the 8 percent penalty for late property taxes. Mayor Jerry Murphy said the council should table the ordinance to re-word it and make the penalty 8 percent to keep it in line with the property tax late penalty. The council agreed and the ordinance was tabled until the next meeting.
Tax bills are out: citizens wonder what happened to the 2 percent state tax cap?
Sparta citizens received estimated tax bills in June and this week the final bills for the last two quarters of 2012 and the preliminary billing for 2013 are being sent. Taxpayers wonder why their municipal taxes appear to have gone up by 3.7 percent when there is a state cap of 2 percent on tax increases.
Rome explained to the Independent that only the town’s operating expenses are subject to the 2 percent cap. He said operating expense increases for the current budget are actually slightly under 2 percent.
However, capital expenses and debt service, which are part of every budget, are not subject to the state cap. Rome said this year these came in at slightly above a 2 percent increase.
Another factor keeping taxes up is the loss of town ratables and loss of valuation due to tax appeals. Rome said that even if the operating budget is exactly the same or even lower than the previous year, but there are numerous tax appeals, the overall assessment goes down and taxes go up for everyone. When citizens have their homes reassessed they may get a reduction in their own property taxes, but the rest of the town ends up paying the difference, Rome said. He added that the entire town is due for a reassessment and that the tax assessor is now preparing to begin this process within the next two years.

The elephant in the room

With all the discussion of taxes, debt payments, and utility bill payments at the council meeting this week, no mention was made of recent reports that some of Sparta’s public officials have been delinquent in paying property taxes as well as utility bills over several years, despite having their own properties reassessed. Although some have made recent payments toward some of these debts, citizens have raised concerns about this since these individuals are responsible for the town’s finances and are considered leaders in the community.