After two debt limit increases, the City’s general obligation debt broke the $200 million mark earlier this month in selling another $14.5 million bonds to finance the Robert Crown Ice and Library Center, and $12 million for other capital projects. The $200 million is secured for repayment through property taxes over the next 25 to 30 years. The City’s bond statement also discloses it failed to properly file bond rating changes, annual financial reports and other financial information.
The City’s total debt has tracked steeply upwards in recent years, shooting from 6 to nearly 17 percent of residents’ average income, according to it’s most recently published Comprehensive Annual Financial Report. And the City’s fiscal cushion fallen to nearly half its 2014 levels, according to Fitch’s Ratings.
Financial Impact and Outlook
Because Evanston in a home-rule unit, it can raise revenues through increases on property tax and certain fees “without limitation as to rate or amount.” This flexibility has allowed the City to retain its current bond rating, though both Fitch and Moody’s warned in 2018 that the City’s bond rating faced a downgrade if it sustained or increased the high carrying costs for its debt service and underfunded pensions. The rating agencies also noted that the City’s debt service accounted for 17% of spending in 2017, and that City’s “reserves remain below its peers in the state” despite “broad legal ability to raise revenues.”
The result is that, while the City is permitted to set its own general obligation debt limit, continued increases are likely to strain the City’s rating, making it more expensive to borrow money for other needed projects and maintenance. And given Evanston’s reducing fiscal cushion, it will need to look to revenue from property tax and fee increases, as well as cuts to public services and community programs, further jeopardizing the City’s affordability and liveability.
The City’s 2019 Bond Issuance statement also reveals it failed to make proper financial disclosures to the Securities and Exchange Commission including:
- Failure to properly file notices of prior rating changes by Moody
- Failure to properly file its annual financial information for 2017
- Failure to file its Annual Report for fiscal year 2015
- Failure to properly file its annual financial information for 2013
- Failure to include certain financial information in its 2013 Annual Report
The 2019 Bond Statement states that the “Bond Counsel expresses no opinion as to whether the Undertaking complies with the requirements of Securities and Exchange Commission Section (b)(5) Rule.”