Debt-Free Govt? What a CONCEPT! - Granite Grok

Debt-Free Govt? What a CONCEPT!

The problem is that the vast majority of politicians and those in Govt are often SO quick to start the groupthink of “hey, paid this off – that’s the signal to turn around and buy more debt!”.  It always seems to be the mindset that Govt should always be funding itself more INSTEAD of thinking “Hey, let’s give the taxpayers’ wallets a break by lowering taxes for a while”.  Saw it all the time when I was on my hamlet’s Budget Committee.  Thus, when I saw this, I kept marveling “wouldn’t this be nice if ALL levels of Government adopted this“?

Mishawaka is officially a debt-free city

Mishawaka now joins a seemingly small club of debt-free American cities, according to a release from the mayor’s office. This means some minor savings for homeowners come property tax time, and everyone is invited to a “Debt Retirement Party” on Friday.

Here is the full release:

Mayor Dave Wood announced today that The City of Mishawaka is debt free!  For the first time in over 100 years, Mishawaka begins 2015 with no general obligation bond debt after making final bond payments in late December. The City’s latest bonds, originally issued between 2005-2007 for $12.3 million to finance various projects such as the City’s radio communication system and major park improvements were paid off several years early.

And WHY would they do that?  Well, suffice it to say, a GREAT reason:

Back in 2012, Mayor Wood announced one of the major initiatives of his administration was the ambitious goal of paying off debt early to becoming debt free as a means of helping to insulate the city against unforeseen circumstances such as economic downturns, emergencies, and state funding source changes.  Mayor Wood stated: “The City’s debt free status is not only rare, but it’s an obvious indicator of our ongoing, strong commitment to fiscal responsibility. This was only possible based on our ability to work together as a team.  Clearly, this wouldn’t have been possible without the work of our Department Heads and the Common Council.”

What they accomplished was to become financially independent.  Too often, the lure of free or cheap money is such a siren call that bad decisions are made.  Yet, this Mayor made the TOUGH decision to say the hardest word in government to say when it comes to money: NO!.  No to the debt, no to the obligations, and NO to the special interests that always seem to have more and more GREAT ideas of how to spend other peoples’ money, usually under the rubics of “it will save money in the long term” (hardly ever attained) or “quality of life issues” (but only if one engages in their special activity).

A city not having debt paid back with tax revenue is highly unusual. In Indiana alone, the latest State report shows that there are 191 Indiana communities carrying debt that is paid back with property tax revenue. Many cities and states have enormous debt problems and unfunded liabilities that have lead to drastic service cuts or even bankruptcy.

Being debt free is good news on many fronts.   Mayor Wood stated: “I believe that being debt-free is itself a calculated investment that will place the City in a favorable position not only to support our existing families and businesses, but will be an obvious indicator of our fiscal health for prospective investors. As the economy continues to improve, Mishawaka continues to be well-positioned to take advantage of our financial position and build our future on our past successes.”

General obligation bond debt is particularly important because it is paid back with property tax revenue.  Mishawaka property owners will also benefit from a modest property tax cut.  Their tax bill will no longer have a line item for Municipal Bond debt.  Although tax bills vary based on the circuit breaker, deductions, and the debt of other taxing units, at the rate of .0466/$100 of assessed value, a typical Mishawaka home assessed at $100,000 could see a tax reduction of $46.60 per year.

$46 / year is not much – and trust me, there are those that would sneer and say “why make such a big deal of that – we should be INVESTING that!” instead of humbly saying “thank you – we are trying harder for you to keep your own money; it IS yours, after all”.

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