I’ve been doing a lot of thinking lately about local government debt. It all started when I was preparing for a presentation and took a look at the Wake County budget for this year.
I nearly fell out of my chair.
This year alone, Wake County’s budget includes just more than $273 million in debt service. To break that down a little bit, it’s $178 million in principal, $93 million in interest, and $2 million in other fees and expenses. Of that, $208 million is for Wake County public schools. And it’s almost 22 percent of the county’s total budget.
Before you think I’m picking on Wake County specifically, let me go ahead and say it has about the same amount of debt as other large counties. There’s a range, and the average goes down for smaller counties. But right across the state, counties have a lot of debt. And that’s before we even add in the debt that cities also have.
But what’s more worrying than the numbers themselves is the way local governments seem to be thinking about debt.
For example, the Wake County budget document says, “The ability of Wake County to issue debt in the market place with a AAA bond rating saves its residents millions of dollars by allowing the county to issue debt with a lower interest rate than non-AAA rated.”
It’s like when I come home from a day of shopping with bags and bags of clothes and tell my husband how much money I saved at the outlets. He (rightly) looks at me with skepticism and says, “Show me that money that you saved.”
Because, of course, I didn’t save any money at all. I spent money. I only spent less than I would have if I’d have paid sticker price. That’s not the same as saving. I save money when I avoid buying something that I thought I needed by instead reusing something I already have, or fix something rather than replacing it.
Which doesn’t mean I should never go shopping. It certainly is better to spend less rather than more. Similarly, I’m glad the county is concerned about keeping its Triple-A bond rating so that, if we have to issue debt, we can do so as cheaply as possible.
But anytime the budget document talks about debt, it’s about how much it’s OK for the county to borrow. There’s a sense that it expects to borrow substantial amounts in perpetuity. This year, Wake County’s planning to put more school bonds on the ballot — as much as $1.1 billion — while we’re still paying off the last ones. Dave Ramsey would be appalled. Shouldn’t the county instead be trying to avoid debt as much as possible?
Much like responsible people have to take out mortgages to buy homes, I accept that counties may from time to time need to issue bonds for school construction. But I’d feel a lot better about that if we were spending less on frivolous things, putting that cash instead toward school buildings, and only borrowing to make up the difference. I’d feel better about it if we were repurposing existing buildings to convert them into schools rather than spending more for new, shiny, purpose-built schools. I’d feel better if we were using creative solutions, like athletic facilities shared among multiple schools, rather than pouring millions into new football stadiums for every high school we build.
Counties don’t have money trees. They have taxpayers. Local elected officials do those taxpayers a disservice when they use the general fund to pay for bike lanes and buses that no one uses, artwork on bridges, sports stadiums that could be privately built, and incentives to lure rich international companies, only to turn around and ask those same taxpayers to approve debt to pay for really essential things like schools.
Our local governments need a change in their approach to debt, to the way they prioritize spending. It shouldn’t be about how much we can manage to borrow without hurting our bond rating, but how we can meet residents’ needs as efficiently, and with as little debt, as possible.