Courthouse Bonds Approved

The Fredericksburg City Council gave final approval for the issuance of $38.7 million in general obligation bonds. Most of that money, approximately $35 million, will go directly to the construction of a new court facility and associated costs such as relocation. The other $3 million will be used to refinance general obligation bonds issued in 2001. The bonds go on sale at the end of November.

Of the $35 million share for the courts, $32 million will go to First Choice Public Private Partners for the construction of a 78,000 square foot court facility at the corner of Princess Anne and Charlotte Street as well as the renovation of the existing General District Court building into the new home of the Juvenile and Domestic Relations court. The other $3 million will be set aside for other costs such as property acquisition at 707 Princess Anne Street and costs for furnishing the new building.

This will increase the city's debt significantly, which currently stands at $73.9 million. With the addition of $725,000 for bonds to purchase land at Riverfront Park and the new courthouse bonds, the city's total debt will rise to $109.6 million. Debt levels, restricted by city policy, are not allowed to increase to more than 4.8 percent of the assessed tax value within the city. With the addition of the courthouse debt, the city's debt ratio, when compared with assessed tax value, stands at 2.44 percent.

However, city officials say that the debt ratio will likely increase this July when a new general property re-assessment goes into effect. With property values dropping along with the regional and national economy, city staff project a 15 percent decline is assessed value. This decline would leave the city with a 2.74 percent debt ratio.

The increased debt will take a larger bite out of the city's operating budget as well. Currently, debt payments make up about 7.2 percent of the city's 75 million General Fund budget. For comparison, that's roughly the same amount of money it takes to run the city's fire and rescue services. By 2014, debt service fees from the courts projects and existing debt is projected to make up 9.25 percent of the city's General Fund.

But that doesn't account for additional debt which the city is likely to take on in the coming years. Projections by city staff show that the debt service could rise to a high of 10.23 percent in 2017 before declining.

The money will be paid back starting in 2013, paying off $1.19 million in interest. From 2014 and beyond, the debt service payments will total about $2 million per year. Financial advisors working for the city projected an interest cost of 3.65 percent over the life of the debt. Over the 25 year life of the bonds, total principal and interest payments are projected to run $54.8 million.

In the face of increased borrowing, tax increases will likely be needed to maintain city services. Real estate taxes in Fredericksburg could grow by roughly 13 cents by 2020. More than half of that, roughly 7 cents, is the direct result of the construction of a proposed court facility for downtown Fredericksburg. The balance comes from projected debt increases incurred by other projects.

The City Council approved the debt issuance by a vote of 4-3. Mayor Thomas Tomzak, Vice Mayor Mary Katherine Greenlaw, At Large Councilor Kerry Devine and Ward 2 Councilor George Solley voted for the measure. Voting against were Ward 3 Councilor Fred Howe, Ward 2 Councilor Brad Ellis and Ward 4 Councilor Bea Paolucci.