Warren council considers borrowing $24.3 million

By Ed Runyan

runyan@vindy.com

WARREN

City council probably will decide in September whether to borrow $24.3 million by selling bonds to make $14.7 million worth of capital improvements and refinance $9.6 million’ worth of debt.

Auditor David Griffing has given council estimates prepared by the underwriter of the proposed bond issue indicating the city will pay about $11.5 million in interest over the next 28 years on the $14.7 million.

Refinancing $9.6 million worth of debt will save the city about $2.3 million over the next 25 years, Griffing said.

In both cases, the interest rate will be around 5 percent, whereas the city’s current debt has an interest rate of about 6 percent. In financing of this type, rates are variable, Griffing said, not fixed like some mortgages.

Mayor Michael O’Brien has said this is the time to borrow money because of low interest rates — the lowest Griffing has seen in his 28 years with the city.

Griffing gave council members data to help them evaluate the bond proposal, put forth by O’Brien and Safety-Service Director Doug Franklin, who won the Democratic nomination for mayor in May and will likely become the city’s next mayor in January.

One thing Griffing says he can’t answer for sure is how much the capital improvements — such as a new one-stop city administration building, new police and fire vehicles and road improvements — will save the general fund in improved efficiency.

Construction of the one-stop would allow the city to close two existing buildings — the water billing office on Laird Avenue and the building that houses the health department on Main Avenue Southwest.

Griffing estimates the one-stop consolidation will save 25 to 50 percent on energy costs for those operations since the existing buildings are not energy efficient.

For example, the city would most likely move finance, human resources and the mayor’s office to the one-stop, leaving the existing City Hall on Mahoning Avenue Northwest, also called the Perkins Mansion, available for “ceremonial” purposes and less use.

That building, built in 1871, is not energy efficient, Griffing said.

An important point is the city can pay for the $14.7 million in capital improvements and refinanced debt through 2038 at around the same or lower yearly cost as it pays now for its debts.

The city uses its $1.5 million in annual property tax revenue to cover debt service, and last year debt-service costs were $1.27 million.

Data from the city’s underwriter, George K. Baum & Co. says the city’s debt service through 2038 would cost from $1.2 million to $938,000 each year.

That would leave room for additional borrowing if another priority emerged in coming years, Griffing said.

The city is likely to see a drop of 10 to 12 percent in assessed valuation of Warren property in the revaluation being completed by the Trumbull County Auditor’s Office this year, but that will only result in a loss of around $38,000 per year in revenue to the city, Griffing said.

The bonds would also pay for rehabilitation of the Central fire station on South Street, purchase of vehicles for the engineering department, improvements to the central maintenance and operations department on Main Avenue and acquisition of computer hardware and software.

The city is still negotiating with property owners on High and Franklin streets downtown to purchase the land on which the one-stop building would be built.