Muncie's debt: Too much — or not enough?
- Muncie's bond debt is %2464%2C279%2C971%2C according to the state
- Muncie's per capita debt is %24917
- 287 of 426 Indiana cities and towns have more per capita debt than Muncie
MUNCIE – The city's been on a spending spree. A million dollars for park improvements here, $14 million for a downtown parking garage and quiet zone there.
Anyone who's even casually following the number and pace of city projects since Dennis Tyler became mayor more than three years ago might wonder about how much debt the city is taking on through bond issues to finance infrastructure improvements and economic development.
Even Muncie City Council member Linda Gregory expressed concern.
"I haven't voted for some of the financial proposals, bond issues," Gregory said in an interview with The Star Press. "While development is a good thing, I think we're over-bonded."
So how much debt does Muncie have? Is Muncie likely to be known as the "City of Debt" the way government critics dubbed the community the "City of Taxes" more than two decades ago?
The Star Press checked on the amount of Muncie's debt using the Gateway online tool from the Indiana Department of Local Government Finance.
What did we find?
Muncie has less debt and less debt per capita — per person — than Anderson, Lafayette or Bloomington. Muncie has much less debt and debt per capita than the fastest-growing cities in Indiana, like Carmel, Noblesville and Fishers.
That might not be the case for long, however. In interviews with The Star Press, Muncie officials drew a line between those Indianapolis-area communities, their debt and their progress.
"Look at the payroll and jobs created in those cities," said Todd Donati, executive director of the Muncie Redevelopment Commission, where much of the city's debt since 2011 has originated. "If they're growing, it's because they're spending money and drawing attention to their growth."
Maybe Muncie should be spending more and accumulating more debt, Donati suggested.
Tyler said he had no qualms about the financing for projects he's initiated since taking office.
"The programs in my time as mayor are a very aggressive effort to bring jobs," Tyler said.
Asked if some of that spending kept him awake at night, Tyler replied, "No."
"Nobody can foresee the future, but I'm very comfortable where we're at and where we are strategically placed."
Gregory was not reassured.
"We're banking on there being an awful lot of development in these various TIF districts to pay off all this," Gregory said. "I'm fearful of another 2008 national recession.
"I realize you have to spend money to make money, but you have to have a good foundation too," Gregory added. "It scares me."
How much debt?
Muncie and Delaware County's debt is a complicated picture involving a variety of bonds issued to finance projects and set to be repaid through payments made up of property tax revenue, tax increment financing (TIF) revenue and other sources, sometimes over decades. Much of it is borrowed through banks, local and otherwise, who loan government money to pay for or leverage projects. Some of the debt is backed by property tax repayment and some of it shifts to other sources at later dates.
Using the state's Gateway website, The Star Press researched the city and county's debt, combining all types of repayment sources.
Delaware County has just over $44 million in outstanding debt with a per capita (per person) debt of $375. Among Indiana's 92 counties, 15 counties had more debt and 29 had more debt per capita.
The city of Muncie's debt is just over $64 million. If the city took on no more debt from here on, the last of its existing debt would be paid off in 2039 with a single million-dollar payment.
The city's per capita debt is $917. Of 426 cities and towns included on the Gateway website by the state, 287 had more debt per capita than Muncie's per capita debt.
Among other Central Indiana cities, Richmond had a debt of about $4.2 million and a per capita debt of $114. But nearly every city of a size comparable to Muncie had higher amounts of debt and higher per capita debt (see figures included with this article). The per capita debts range from just over $2,700 for Anderson to more than $11,000 for Carmel, where officials have been criticized for their free-spending ways.
What is Muncie's debt for?
Projects add up
Some of the city's outstanding debt, according to information released by Donati, dates back to 2012 and is being repaid through sources including property tax and TIF revenue and the food and beverage tax.
The largest amounts of debt are relatively recent, including three bonds issued in 2014: $7 million for the new Walnut Street streetscape project downtown and $2 million and $14 million bond issues for the city's downtown parking garage and quiet zone, a project aimed at lessening the noise of train whistles at downtown railroad crossings. Both were aimed at encouraging the development of the Courtyard hotel downtown, which is still under construction.
Those latter two bonds are currently covered by TIF revenue but in five years will be covered by a local food and beverage tax when that tax's revenue is no longer committed to the Horizon Convention Center.
Although the Muncie Redevelopment Commission has drawn attention for issuing bonds to cover the cost of projects, Donati maintained that the actual MRC debt is $12 million.
The Gateway database that shows $64 million in debt for Muncie notes that the debt reported for all Indiana cities listed is as of Dec. 31, 2014. That thought also failed to make Gregory feel better about the city's level of debt.
"We've done $20 million since then," Gregory said. "The quiet zone, another million last week for Tuhey (park and pool) ... we've done a lot since the first of the year."
Donati's figures, however, list the quiet zone and related debt as being incurred before the end of the year, so it's hard to determine where some of the debt falls. And for comparison purposes, if Muncie's debt has grown since the end of 2014, the debt of some other Indiana cities also might have grown.
'The only way'
Are Muncie and other cities incurring more debt and borrowing more now than in past years, and why are they increasingly tying repayment of debt to TIF and other special revenue?
Because of "circuit breaker" property tax caps that went into effect statewide in 2009, said Indianapolis financial consultant Otto "Buzz" Krohn.
"As a rule, Indiana is pretty conservative," said Krohn, who has consulted with the city of Muncie on past bond issues. "Because of tax caps and the handcuffs the Legislature has put on cities and towns, they're having to use debt financing more and more to make up the difference in what they used to fund out of the budget. They're not able to capture all that out of the tax levee anymore.
"It's the only way to get capital projects done. There's not much leeway within normal budget funds anymore."
The level of bond debt in Indiana might surprise some. According to the Gateway site, Indiana's 426 cities and towns have borrowed nearly $5.8 billion. Counting interest and other costs, the state's cities and towns owe $9.5 billion. In addition to that, Indiana's 92 counties owe $2 billion.
'Who will pay?'
Donati only half-jokingly suggested that Muncie should emulate higher-bonding cities like Fishers and Carmel in Hamilton County.
"If you're putting bonds together, you've got development happening," Donati said. "It's all good stuff as long as you have the capacity to do it. We're not Detroit. We're not going to borrow to pay our bills."
Tyler agreed and maintained that critics of the city's financial moves are wrong or taking a political stance.
"Some people misunderstand the bonding system and others intentionally misunderstand and want to make accusations," Tyler said.
Gregory — a Democrat like Tyler and Donati, but not affiliated with the mainstream party — said she is concerned not only about the uses of the debt but the life of the debt.
"When we bond for things that create minimum wage service jobs, retail jobs, they're going to be dependent on people with wages to spend," Gregory said. "That didn't happen in 2008. We have to be cautious.
"We've done bonds that are paid off in 2040," she added. "If I vote for those, I'm saddling people with debt for another 25 years. That's pretty far out there. If we're not getting meaningful jobs that will keep our children here, who will pay that debt?"
Contact Keith Roysdon at 765-213-5828 and follow him on Facebook and Twitter.
How does Muncie's debt stack up?
Critics – some of them elected officials – say that Muncie has taken on too much debt for big projects.
How much debt does Muncie have? And how does it compare to other Indiana cities?
Of 426 Indiana cities and towns, 287 have more per capita (per person) debt than Muncie.
Muncie debt $64,279,917; per capita $917
Richmond debt $4,232,989; per capita $114
Lafayette debt $215,566,416; per capita $3,210
Anderson debt $153,797,224; per capita $2,740
Bloomington debt $184,470,615; per capita $2,294
Fishers debt $261,714,368; per capita $3,408
Noblesville debt $321,775,832; per capita $6,191
Carmel debt $908,795,295; per capita $11,475
Source: Indiana Department of Local Government Finance Gateway site
Among Muncie's bond debt from 2014:
$14 million in economic development bonds for downtown parking garage and quiet zone (to be covered by food and beverage tax revenue in five years)
$7 million in tax increment financing bonds (TIF) for a new streetscape for Walnut Street downtown, new road in the northside Airpark industrial park and southside sidewalks