Debt ceiling D-day again? Stay in Carson
In real estate, folks say, trifecta talk is of location, location, location.
If so, in government the tri-headed mistress or monster is bonds, bonds, bonds.
Just as where your property is situated is a trump card, where your time horizon reaches trumps a heap of things. Good property location, sound investment; bad place, egg on face. Sound time horizon and low interest on government bonds, sensible fiscal approach; ugly time horizon and higher interest, hold onto your hat. But all government bonding isn’t the same. Take federal debt versus local bonding. Feds first, Carson City below.
“The debt ceiling vote isn’t about what will be done in the future,” said John Sununu, former chief of staff to President George H.W. Bush and CNN Crossfire television show host. “It’s about the integrity of America’s commitment to support the bonds we issue. Elected officials have an obligation to maintain that integrity, regardless of whether they voted for the programs that required the borrowing in the first place.”
Sununu, a mechanical engineer and businessman who became New Hampshire’s Republican governor in the 1980s before becoming Bush I’s brains, was correct. The difference between federal and local indebtedness, however, turns on a crucial point. The feds can print funny money dollars whenever, so the debt ceiling issue comes around more and more quickly as borrowing swells at that national level. It’s coming again later this year.
Meanwhile, places like Carson City issue debt for bedrock things: wastewater treatment plant improvements or capital projects, like the multi-prupose athletic center now under way, the animal shelter about to begin or next year’s downtown business corridor makeover. The difference with the feds’ fiscal madness is Carson City must remain a good steward of it’s bond rating or — see above — hold onto its hat.
Recent and current boards of supervisors have done so, bumping near but not exceeding indebtedness limits to protect the rating despite problems in the recession with cash flow (the tax revenue stream backing bonds). In part, that’s why last year’s small boost in the city sales tax, upping it one-eighth of one cent, was necessary and even smart coming out of the recession for the capital projects.
Those who screamed bloody murder had every right to do so; it’s called free speech. But 2014 and now are good times for a municipality to issue bonds if it can. Interest rates are low but are going to start up soon. The time horizons make sense on both the city’s old and new bonds. The board and city finance office have repeatedly retired older bonds and replaced them with lower-interest bonds over recent years.
Last week, another sign of the good timing came. July taxable sales for the city came in at a 10.2 percent increase and topped the Nevada boost of 8 percent. It’s just another small sign the revenue stream — read cash flow — is going to be there to service city government’s debt as the economy gains steam. Debt is a two-edged sword cutting both ways depending how you use it.
Carson City is using it wisely, whether you like what it’s buying or don’t. The restrictive reason is a good thing and rather simple: City officials can’t just print money to pay their debts. Are you listening, Feds?
Sununu undoubtedly was right about the debt ceiling, and the quote will apply again soon, but it would be better if the need didn’t keep cropping up because federal officials can’t curb profligate spending.
So if location, location, location is important, Carson City is a better place than Washington, D.C. every day of the year and twice on debt ceiling D-day.