After the City of Bozeman’s all-time-high annual budget of $108M was approved by elected officials in June, the leading topic at city commission meetings has been the proposal for a new “cops and courts” building at the corner of North Rouse and Oak Street. Tentatively named the Rouse Justice Center, the project hopes to provide much needed space for our growing city’s equally growing needs of municipal law enforcement, criminal justice, and court services. If the $23.8M general obligation bond is approved by Bozeman voters in November, this facility is expected to meet Bozeman’s needs for the next 50 years, though the public should understand that Gallatin County’s criminal justice resources would still be at the Law & Justice Center.
There has been some muddied waters, it seems, around the values associated with the new Rouse Justice Center (hereinafter “RJC”), and I hope to offer Magpie readers clarification. Though widely reported as such, $23.8M is NOT the total building cost for the RJC; it’s only the value of the bond. The actual cost of the RJC, according to a report from the general contractor and verified by Bozeman Director of Finance Anna Rosenberry, is expected to be $25.6M. Rosenberry confirmed via email on Thursday that the difference of “$1.8M was approved in previous year budgets… (for) land purchase and preliminary building design, with cost estimates.”
It is also likely that many of Bozeman’s voters may not fully appreciate the terms of a general obligation bond—notably, the interest owed. A bond is ultimately a loan, and as such, a rate of interest is applied to the debt. While neither Rosenberry nor the City of Bozeman can be expected to perfectly predict the interest rate at a forthcoming time when the bond is issued, they can and have made an educated guess. In this case, the Director of Finance has predicted an interest rate of 4.25%. From that assumption, the actual cost to the taxpayers for the RJC, including principal and interest, is approximately $35,371,000. Rosenberry stated via email that the City of Bozeman would make semi-annual payments over 20 years to pay off the bond, with “annual debt service of $1,778,000.”
$35.4M is a hefty sum, for sure; it amounts to one-third of the City of Bozeman’s record annual budget for FY2014-15. And, if you’re anything like me, you may have already begun wondering about the other bonds and civic buildings going up or recently completed.
I’m not going to include the Bozeman School District’s expenditures, because their fiscal management is fodder for a whole ‘nuther article, but here’s a quick list of the big civic projects of late: the water treatment plant, the sewer treatment plant, the Trails Open Space bond, the parking garage, and the public library.
Tackling those one-by-one, readers should first note that the water treatment plant and sewer treatment plant are, in the words of Rosenberry, “…not general obligation bonds (paid with full faith of taxing authority) – instead they are revenue bonds paid only with the revenues derived from the utility customers.” In other words, we the ratepayers of Bozeman’s water and sewer bills pay for those every month on our utility bill, as opposed to the general obligation bond values that are calculated as part of our semi-annual property tax bill.
But I digress. The Trail Open Space and Parks bond has only been issued for $9.9M so far, but the remaining $5.1M, Rosenberry expects, will be sold this fall. Assuming the same interest rate as the City is using for the RJC, the total cost to the taxpayers for that 20-year bond will be $22,292,000. The interest paid on this bond alone will be approximately $7.3M.
The downtown parking garage is similar to several ongoing “Special District” bonds that include projects like South 8th, the Valley Center/North 19th intersection, or the forthcoming work on Story Street. Rosenberry explains, “The Downtown Tax Increment Financing District issued $4.7M in bonds to help pay for (downtown parking garage) construction. This isn’t a general obligation of the city taxpayers. It is a special obligation of that district.”
In contrast, the public library funding was supported by a general obligation bond, and is fully issued at $4M. For this year’s budget, the Director of Finance reports that $240,000 will be paid toward the principal, with $33,000 paid toward interest.
A lawyer from Missoula and a financing advisor to the City Commission, Mr. Dan Semmens suggested on Monday night that the Bozeman officials consider “hiding the ball” from voters, presumably meaning that we shouldn’t be advised as to actual costs of the RJC bond. Commissioner Chris Mehl responded that that’s not how the Bozeman City Commission does business.
I appreciate Mehl’s response, but the actions of the City and the commission regarding these bonds have not been transparent, and I point to the above as proof. Voters will decide this fall if we need a new justice center—I think we do—but what voters may not fully appreciate is that we’re bonding this community to a future altogether different than what we’ve known. For municipal government, that future’s looking bright, but for those in Bozeman who work for a living, the gap between income and expenditures is getting worse. -TBM
Correction: (9:16 a.m. on Monday, August 4th): The original post attributed to Commissioner Chris Mehl in the second-to-last paragraph that "that's how the Bozeman City Commission does business." It has now been corrected to reflect that he said that's not how the Bozeman City Commission does business. My apology for any confusion.