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City plans roughly $97 million in GO debt for FY26; finance warns market volatility could raise borrowing costs
Summary
City finance staff told the Budget Committee the FY26 CIP assumes about $97.4 million in general‑obligation borrowing — near the city’s debt capacity under current ratings — and outlined increased principal and interest costs, planned use of committed fund balance and market risks tied to federal policy and interest‑rate moves.
Finance briefed council members on capital financing plans for FY26 and the next five years, with officials saying the FY26 funding plan includes about $97,373,480 in general‑obligation (GO) bond authority plus planned sewer and stormwater revenue borrowing. The CIP presenter said that, “with our current bond rating, the 97 gets us right at our debt capacity,” and warned that a downgrade would reduce borrowing capacity or increase interest costs.
Andre Walker, a finance division debt presenter, summarized the FY26 debt and debt‑service budget. The debt group proposed total expenditures near $199.9 million for FY26 (debt service principal and interest and related costs), with principal payments of roughly $130.5 million and interest of about $68 million. Walker said the FY26 plan anticipates a use of committed fund balance of about $19.2 million; the division estimated committed fund balance entering FY26 near $48 million and projected a post‑FY26 committed balance near $23 million if the proposed plan is executed.
Officials described shorter‑term commercial paper practices and the city’s approach to converting short‑term paper to long‑term GO bonds. The city currently operates a commercial‑paper program with a $150 million limit; finance said the administration expects to return to council later this calendar year or early next to seek authorization to issue bonds to pay down commercial paper that has been drawn for capital projects. Walker said the city is spending capital proceeds more quickly than in past years and expects to come back to council sooner than historical practice to refinance outstanding short‑term obligations.
Finance staff identified two key risks to the plan: (1) potential changes in federal tax policy affecting the tax‑exempt status of municipal bonds, and (2) short‑term market volatility linked to trade, tariff or macroeconomic developments that can move yields and affect timing of bond sales. Walker said market participants recommended building extra time into financing schedules in case market turmoil requires a sale to be delayed.
Ending: Council members asked staff to continue tracking market conditions and to present updated timing and cost estimates before any bond authorization; finance said it would include contingencies in timing and provide the council with the annual audit and full debt schedules for deeper review.
