After postponing the issuance of general obligation bonds for two years, Evanston’s City Council Monday is scheduled to tackle two key issues.

First — how to fund the 2022 and 2023 capital improvement projects already underway.

Second — what to spend on capital projects next year to start fixing the city’s crumbling infrastructure.

Interest rates on new municipal debt are now running around 4.2%, according to the city’s CFO, Hitesh Desai.

That’s more than double the rate when the city last issued bonds, in mid-2021.

Credit: WM Financial Strategies

And only about half of that increase had occurred by mid-2022, so the Council’s decision not to borrow then looks in retrospect like a gamble that has not paid off.

Desai is now recommending that the city wait until March 2024 to issue bonds to cover the 2022 and 2023 projects, in hopes interest rates will have declined by then.

A chart from the city’s 2023 budget showing annual payments required on existing general obligation debt and when those bonds will be paid off. Credit: City of Evanston 2023 budget

Since the city traditionally issues new bonds with 20-year maturities each year, one positive element for the budget is that old debts gradually are paid off.

Desai notes that the city paid off $10.69 million in bonds at the end of 2021, $11.44 million at the end of 2022, and is scheduled to pay off $11.96 million in bonds at the end of this year.

But since the city has been falling progressively further behind on facility maintenance over the years, carrying out a plan to catch up is likely impossible without either issuing substantially more bonds, selling off some city assets or paying cash for the projects — which would almost certainly mean substantially higher current taxes.

Some budget hawks on the Council have been pressing to reduce bond issuance to avoid having to make the future interest payments they require — but they have yet to propose how to square that idea with the goals of limiting any tax increases and better maintaining city facilities.

There also has been a theory that the city could use so-called “excess reserves” in the general fund to pay for the capital projects already underway.

The city ended 2022 with $57 million in the general fund.

But Desai notes that the Council used $10 million of that to balance the 2023 budget and so far this year has used $8.2 million more to fund capital improvement project cost overruns and employee wage increases in new union contracts.

“Given the wage increases that have been approved by the City Council as well as the new pension policy that will redirect $5 million previously available to the general fund,” Desai says, “staff cautions against using excess general fund reserves, as they will be needed to balance the 2024 general fund budget.”

Meanwhile, city staff have come up with a list of nearly $112 million of potential capital improvement projects for next year, including more than $32 million for which there is no funding source other than general obligation bonds.

They include needs to;

  • Increase the pace of water main replacement to reduce the chance of catastrophic failures of aging lines.
  • Meet state-required deadlines for replacing all the city’s lead service lines.
  • Tackle major deferred maintenance issues in both neighborhood parks and ones that see community-wide usage.
  • Address an estimated $145 million to $275 million in needed upgrades to or replacement of several key city facilities.

Staff is seeking to have Council set priorities for tackling specific projects.

Bill Smith is the editor and publisher of Evanston Now.

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  1. It will be very interesting as to how the council tries to solve this. As usual, they look short term, not the long game.

      1. C’est vrai Guillaume… But when spending frivolously on civic projects sponsored by staff like the Animal Shelter (~$1000 per sq/ft), ridiculously costly “studies” by consultants, a costly school project (despite dramatic reductions in enrollment) and sponsoring homeless shelter projects that clearly do not just benefit Evanston homelessness… the civic debt problems are compounded greatly.

        Respectfully, Brian G. Becharas

  2. Maybe use the $3 million from the ‘participatory budgeting’ charade to find some of the deferred park maintenance?

  3. The city’s incompetence in financial matters is difficult to overstate. The interest rates that prevailed through 2021 were universally recognized to be historically low and an invitation to issue long term debt. How could the city miss this?

  4. Similar to what Pascalo said, I am really struggling to understand why the $3M Participatory Budgeting program was implemented given we knew these infrastructure costs, pension funding and staff pay raises were imminent. Meanwhile we have people deciding whether to fund a new roller rink for $530,000. Too late to cancel that program?

  5. Well… this is what happens when you leave socialists in charge. And they are not 100% wrong for their audience – majority voters are equally clueless, but they all got their “feels”!

  6. As a community that votes over 80% one way for decades and is also incredibly enlightened, keep doing what we are already doing!
    Isn’t madness doing the same thing over and over and expecting a different result?

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