This week the Gazette asked the candidates for mayor about the town finances. What is your view of the town’s finances and its debt? Do you think the town should continue to finance large projects — near future projects include an east side fire station, new and larger operations center, southside park, police station — through voter-approved bond issues? Are there any other big-ticket items you think should be added to this list?
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Vivian Jones: The Town of Wake Forest has worked very hard over the past years to achieve and maintain a stable financial position. When I first became mayor, we were coming out of a time when the town had struggled a bit as we were beginning to grow. We put together the financial plan and began discussions with rating agencies prior to issuing GO (general obligation) bonds in 2006.
They were impressed with our conservative projections and our attention to keeping our debt service at a manageable level. They were also impressed with the continuity of staff and stated this was a benefit to the financial picture. After these discussions, we received increases in our credit ratings.
Just after the recession, in 2009, we met with the rating agencies again, and came away from those meetings with AAA rating from Standard & Poor and Aa1 rating from Moody’s. At that time, we were the smallest town in North Carolina to have AAA rating. The fact that we sustained a strong financial position during the recession allowed us to attain this achievement. These ratings save the taxpayers’ money by allowing us to manage our long-term financing with much lower rates through general obligation bonds (voter approved) and installment purchase financing.
Because we have maintained our excellent financial position, we plan to go back to the rating agencies this coming year and we expect that we will receive AAA rating from Moody’s also.
Although the Local Government Act allows us to have up to 8 percent of assessed value of property in outstanding net debt, the town policy adopted in 2013 only allows 2 percent. We are actually below 1 percent at present.
For large projects, often the best thing is to have voter-approved bond issues. This is an approved method of financing which works well for long-term large ticket projects and it allows the community to be involved in setting priorities and understanding the cost. However, installment purchase financings have served us well and they can be a less expensive option in some cases. It would depend on the economic climate, the interest rate and the cost of issuing this debt. Sometimes, installment purchase is a better option for public facilities like the operations center.
I believe the Town of Wake Forest has managed its debt position extremely well and that our overall financial position is excellent.
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Jim Thompson: The current state of the town of Wake Forest, financially, is very strong. We did extremely well in 2016 and that’s very obvious when you look at our tax base, which has grown from $2 B in 2007 to $4.5 B. The one challenge, as I have mentioned earlier, is that most of that revenue (77 percent) comes from residential. This past year, our net position increased $7 M compared to last year.
As far as our debt goes, the town’s total debt decreased in 15-16 by 12 percent to $28 M. Now, while this may seem like a lot of money, you have to consider that we have a debt issuance policy that states we can’t issue more than 2 percent of our assessed property value on debt. We are currently just over 1 percent. One thing that sets NC municipalities apart from other areas of the country is that the NC legislature dictates most of what local government does, including debt issuance. According to general statute, we could actually issue up to 8 percent of our assessed property, however, that isn’t the case. And that’s one reason why the town is in such a good financial position.
Most of the credit for the state of the town’s finance must go to the incredible staff we have from administration to finance. Our town manager and finance team are constantly looking at ways to save the town money. For example, just this year we refinanced bonds, which saved us over $360,000. In addition, even though voters approved a $25 M bond referendum in November 2014, we don’t issue those bonds until needed. This saves the town money which, of course, saves money for taxpayers.
So, the town is in a good financial shape and because of that we are in a position to continue to seek “big-ticket” items that will improve the overall town. If you look at our current CIP (Capital Improvement Plan), you will see there are over $188 M in projects that have been deemed to be important for the town over the next five years. Does that mean we will issue all that debt over that period of time? No. That’s why we have to prioritize.
One key measure I look at when it comes to prioritizing spending is to look at the business case for the spending. If we spend X, what is the return on that investment. I am a big believer that you have to spend money to make money. So, I tend to favor projects that could benefit the town with potential revenue. Some of those items include: development of a business park, street/sidewalk improvements that promote connectivity, downtown improvements and fiber.
Another measure I look at is “matching funds.” There have been numerous examples where we get funding for a project, but perhaps we have to kick in 50 percent or in some cases 20 percent of the funding. Many of our transportation projects have come as a result of this type of funding.
One last measure that is extremely important, however not be as glamorous, is government efficiency. It is important that the town operate as lean as possible. As someone who has managed non-profit organizations for nearly 20 years, I understand what it means to operate an organization with other people’s money. Because we want to be good stewards of the tax dollars generated by citizens, it’s our obligation to run the organization as efficiently as possible. Sometimes this does require an investment that may never really be seen on the outside – software improvements, equipment purchases, etc. One big item we are going to be exploring over the next few years is that of a new operations center for the town. It’s something that is sorely needed and it is something that impacts our citizens daily.
In summary, the town of Wake Forest is in a good position financially, however, we are at a crossroads and the decision you make in the next few weeks will determine our future. We’ve had economic development as a goal for years and yet here we are with nearly 80 percent of our tax revenue coming from residential development. It’s time to Bring the Future to Wake Forest TODAY and elect Jim Thompson your next Mayor on Nov. 7. Check out www.ElectJimThompson.com for more information.
