David Michael Miller
One issue that has gotten less attention than it deserves in the Madison mayoral campaign or in the city council races is debt.
Madison is in much deeper debt today than it was eight years ago when I left the mayor’s office. Back in 2011, Paul Soglin campaigned hard on that issue, promising to dramatically reduce city debt and he continued to raise the issue until the last year or so when he started, stopped and started again to run for a third consecutive term.
But the facts are just the facts. When I left office the city debt burden was under the target that the city has adopted and now it’s way over it. That rule of thumb is that the percentage of the city operating budget that goes to pay back borrowing should not exceed 12.5 percent. During my eight years in office it never did. Now, after eight Soglin budgets, it stands at 17.4 percent.
Let me stop here and make a clarification. State law does not allow the city to run a deficit in the operating budget as the federal government does. But the city does borrow money, a debt, to pay for long-term capital expenditures, like rebuilding streets, constructing or refurbishing buildings like fire and police stations, buying buses and other vehicles, as well as other long-term investments in tangible items.
Curiously, Soglin still blames me and the council, but that just doesn’t hold water. Overall borrowing would have increased by about the same amount if the council had adopted budgets that Soglin proposed. Yes, they have amended his capital budgets and added some spending, but not enough to appreciably change the numbers.
In Soglin’s eight budgets from 2012 through 2019 he has proposed a total of $1.058 billion in general obligation borrowing (the kind of borrowing that gets paid back by city taxpayers). Over those eight years the council has adopted budgets that set borrowing a bit higher at a total of $1.096 billion. So, the council has added only about 3.5 percent in borrowing authorizations over eight years.
Simply put, Paul Soglin owns the current city debt burden.
But here’s my twist on the argument: Rather than blaming others, he should embrace it. In this case, debt is good.
Soglin’s right about one thing. I started the trend that he continued. When I got into office in 2003 I looked around and saw a bunch of investment needs. We hadn’t built a new fire station in a long time while the city had been expanding rapidly. Our library buildings were tired. Our streets were in poor condition. I felt it was time to make more investments in bricks and mortar, asphalt and cement. And neighborhood centers. Up until that time the city had not invested in the capital costs of these centers, but I figured that their programming was often being held back by inadequate space and leaky roofs.
Then the Great Recession hit in 2008 and there was even more reason to make capital expenditures. Now interest rates were at historic lows, contractors were desperate for business and giving us great bids, and construction workers needed the jobs. If you need to rebuild a street a couple times in a century, why not do it when interest rates and construction costs are likely to be at one of their lowest points during that century?
Truth is, if I had stayed in office beyond 2011 the current debt burden would probably be about what it is today. My guess back then was that once we had spent the better part of a couple of decades catching up on capital needs, debt would approach something like 17 percent to 19 percent of the city operating budget before it started to trend downward again.
So, I asked the candidates if the city should just make a conscious decision to accept the fact of higher debt burdens for the near term.
My question and the candidates’ answers are below.
Question: Since 2011 the share of the city operating budget going to pay back debt has increased to 17.4 percent. Before 2011 it had never exceeded the 12.5 percent rule of thumb that the city uses to measure what is too much. Is this a problem or is it simply the result of aging infrastructure that needs to be replaced? Should the city decide as a policy that for some period it’s going to spend more on capital projects then it has in the past — in other words change the 12.5 percent rule of thumb to some higher percentage?
Soglin: There are five reasons for the excessive debt service. The first was the failure to address infrastructure needs in the period from 2001-2008, creating greater costs in the past decade. Secondly, there was enormous, excessive borrowing in the years 2010-2011. Thirdly, significant city growth following the end of World War II resulted in aging infrastructure in need of replacement. Fourthly, in 2009 the city started using "premium" — borrowed money — for its operating budget rather than applying it to capital budget projects. Lastly, the refusal of the city council to distinguish “needs” from “wants” significantly added to the problem. We have to learn we cannot do everything at once and some important projects may have to be delayed a few years or even longer.
Rhodes-Conway: Current debt service levels are concerning for a number of reasons. First, high debt service costs limits our ability to provide adequate public services through our general fund budget because debt service is eating up a larger and larger share of the available money. Every dollar that goes to debt service is a dollar that does not go to directly serving the people of Madison. The debt load we carry affects our ability to fund pre-school and after-school programs, bus drivers, snow plowing and recycling pick up and all those core services people expect from their city day to day. That said, those services are undermined if our infrastructure is failing. The capital and operating budgets need to go hand in hand, both achieving the right balance.
Second, already high debt will hamstring our city’s [ability] to take on big bold initiatives, like investing in affordable housing or building a Bus Rapid Transit System. We need to make sure we have the borrowing capacity we need to complete critical projects.
Rules of thumb are important as they set a target. We shouldn't change the target just because we're currently missing the mark, we should assess why we're missing the mark. As Mayor, I will refocus our borrowing and spending priorities to investing in the things that most immediately affect the lives of our residents and allow them to thrive in our community.
