Consultant: assessed-value growth could sharply reduce mill levy needed to cover 4 Greer debt

At a city council budget workshop, a finance consultant and city staff walked council members through the city's outstanding debt profile and projected the mill levy implications of the installment purchase revenue bonds (IPRBs) issued for the "4 Greer" initiative.

Brent, the consultant asked to brief the council, said the IPRB structure uses a nonprofit issuer that pays bondholders while the city makes annual installment payments to that corporation. "It's basically the city's paying the debt service, but it's called an installment payment," he said, and noted the plan was drafted in coordination with the city's existing obligations, such as a single general obligation bond issue and 2017 installment revenue bonds funded in part with hospitality-fee collections.

Brent told council members the financing plan was conservative for credit purposes: the model assumed a frozen assessed value and no growth over the 30-year planning horizon used for the rating agencies. "So we froze that for 30 years," he said. Those conservative assumptions make credit analysis more predictable but also understate the potential effect of assessed-value growth.

Using recent reassessments and several growth scenarios, the consultant showed that the original advisory recommendation of 14 operating mills to cover combined debt service was reduced administratively to a 12-mill levy in a later budget cycle because assessed value had grown. Brent summarized the difference: "If we hold the line and we see that same kind of growth within a handful of years, the existing mill levy may come to cover about 100% of the debt service on these IPRBs." He cautioned that this outcome depends on sustained growth and that the plan's no-growth assumption is what obtains for credit ratings.

Council members pressed for specifics about near-term cash freed by recent payoffs. Staff and the consultant cited roughly $1 million per year in hospitality-tax debt-service reductions over a two-year window and noted a separate line item of about $673,000 in annual savings that had not yet been re-encumbered in the budget. A council member asked whether that freed cash was already assigned; staff said it remained available for budgeting decisions and could be directed to debt service, capital reserves, or other purposes.

Members debated using freed revenue to accelerate payoff versus creating a capital account. One council member asked whether large infusions should be used to pay debt early or deposited in an interest-bearing capital account for future maintenance; staff said they would run analyses and present options. "We've baked you a pie... and you all slice it up however you see fit," the presenter said, describing options for prioritizing debt reduction, capital replacement, or rate relief.

On the subject of a two-mill rollback under consideration by some members, staff and the consultant gave illustrative math: a 2-mill reduction in the instant year would create an immediate revenue shortfall on the order of about $650,000, and one year of growth alone would not fully restore the revenue needed to cover all debt service in that same fiscal year. Brent and staff committed to modeling how many years of assessed-value growth at various rates would be required to recover from different rollback scenarios.

Staff also reviewed the budget's revenue picture: general-fund revenue projected near $60.7 million and all-funds revenue at about $84.4 million for the fiscal year presented, with specific restricted funds singled out (lease purchase, debt fund, hospitality tax, stormwater, capital projects, paving fund). Council members asked about a projected 25% increase in paving revenue; staff said the increase was a mix of county appropriations and property-tax dollars tied to a long-standing paving mill and that the slideshow and budget books would be distributed to council for review.

The workshop closed with staff committing to: (1) provide the requested multi-year scenarios showing when assessed-value growth could offset millage reductions; (2) deliver the slideshow and printed budget books; and (3) return to council in scheduled follow-up workshops ahead of first reading on the budget.