Bond Issue Is Too Risky



I am opposed to the three proposed Payson bond issues.

First, the needed improvements can be accomplished within the proposed time frame -- without spending $4 to $6 million in interest. Secondly, a commitment of $13 to $15 million for the life of the bond issue is simply too risky.

In the event of a future crisis, a large bond obligation could prevent Payson from raising funds to meet the emergency. There is a substantial chance that a crisis could arise due to the water supply, fire damage, traffic congestion, air quality, flooding or even a large legal judgment placed against the town.

Such a crisis could spell a major change in spending priorities and capital needs.

Judging from the size of recent Payson budgets, it is likely that $2 or $3 million per year could be added to capital outlays, which have recently ranged from $10 to $13 million per year. The sum of $2 million is less than 7.5 percent of recent budgets, which have ranged from $30 to $34 million annually.

When the last bond issue was voted down, Payson was able to fund the proposed capital improvements out of current operating funds within a short period of time.

If the strategy that was previously successful won't work again, then there is another alternative. Payson can find enough money by doing what successful businesses do in a depression: reduce expenses by prioritizing projects, improving performance evaluations of employees, supervision of employees, job training programs, revising work procedures and dismissing employees who fail to meet job standards.

My estimate of the probable interest is based on an interest rate in the range of 5 to 7.8 percent. This is the range of interest rates on Arizona long-term bond issues of municipal bonds held by the Franklin Arizona Tax Fee Income Fund, according to their annual report dated Feb. 28, 2003.

When Payson has so much deferred maintenance, so many substantial risks with potential future crises and so many necessary capital improvements -- in addition to those currently proposed -- the town needs to make the most efficient use of its financial resources.

Therefore, Payson needs to avoid unnecessary interest expenses. It should pay for needed capital improvements from ordinary income. And, it should protect both its capital and borrowing capacity to deal with future crises.

Jim Winter, Payson

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