Thursday, August 13, 2009
Indianapolis Bond Bank Rating Downgraded
Fitch Ratings has downgraded its rating for bonds issued by Indianapolis' Bond Bank from AA to AA-, and the City's outstanding unlimited tax general obligation bonds from AAA to AA+. The Bond Bank rating affects $164 million refunding bonds for tax increment finance districts and $3.2 million taxable bonds. The rating service cited the contraction of the City's property tax revenue base as a result of the property tax caps and a decline in the City's fiscal reserves. Today's action by Fitch could lead to higher borrowing costs for the City. The bonds for the Indianapolis Water Company have already been downgraded. Fitch projects the City will lose $32 million in property tax revenues in 2010 as a result of the property tax caps; however, that loss is offset by the state's assumption of the City's public safety pension obligations and retirees' health care benefits. The City has been forced to borrow money because of the delays in property tax collections caused by the implementation of new assessments and property tax caps.
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2 comments:
I see. So to recap the entire property tax revolt, what we got in exchange was higher sales taxes and increased interest rates on debt that we'll have to pay with future taxes? Great idea everybody! Sorry, but I can't shake this feeling that the only reason property taxes cause such a stir is that we all had to write checks in a big lump sum. At the end of the day, we'll still pay, I assure you.
I think we should be taking a hard look at how much debt is allowed to be floated in this County. When all the Schools and CIBs and the City slow down on the debt accumulation, it frees up more money in the budget for other things. I think the City is expecting to spend about $166M in 2010, just to make bond payments. And the schools are out of control completely. Look at the CIB - haven't paid off the Hoosier Dome yet - not a penny of it.
In addition, when the governmental units use property tax revenues to guarantee repayment of bonds, it is your house and mine that are being used as collateral.
No, the problem isn't that the City or the Schools can no longer tax us property owners into poverty. The problem is their rampant borrowing. Tamp that down and the bond rating will climb again. And, we'd get more bang for the bucks we pay in taxes to boot.
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