St. Paul Council hears bonding 101: $660.7M debt outstanding, legal limit far higher than practical capacity

City finance officials told the St. Paul City Council that municipal bonds function like long-term loans and that the city currently carries $660,700,000 in principal outstanding — $249,000,000 in general-obligation bonds and $411,700,000 in revenue bonds — while legal debt limits set by state statute are far higher than the levels city staff say would be prudent to approach.

The briefing, delivered by Neil Younghands, debt manager in the Office of Financial Services, and Sarah Brown, city treasurer, summarized how bonds are underwritten, the difference between general-obligation (GO) and revenue bonds, the city’s current bond programs and the three practical constraints on additional borrowing: state legal debt limits, credit ratings and the city’s property-tax debt levy.

City staff said GO bonds are backed by the property-tax debt levy and historically have funded programs such as the Capital Improvement Bond (CIB) program, streets and mill-and-overlay work; revenue bonds are repaid from specific revenue streams such as sewer, water, parking and a half-cent sales tax. Younghands told the council that the city sells bonds competitively to banks and underwriters and typically awards to the bidder with the lowest true interest cost.

Why it matters: although state statute (chapter 475) limits city debt to 3 1/3 percent of market value — which the presentation translated into a statutory ceiling of about $1.94 billion using an assessor estimate of $35.8…