• Concerned Citizens of Lakeland TN

So much debt it would be illegal in other cities

Municipal Debt Limits

Most cities, counties and States have Debt Limitation policies that restrict or limit the amount of General Obligation Bond debt a city can issue.  (General Obligation Bond debt = debt guaranteed only by the Government’s ability to raise taxes)  Lakeland stands alone among the listed cities because our Debt Policy has no limit on the amount of General Obligation debt we can incur.  Regardless of whether someone says your contribution is only a small monthly increase, this amount of debt would not be legal using the debt policies of any of the listed communities.

Some reasons for limiting the amount of debt a city can issue:

  • Protect the citizens from unlimited tax increases due to General Obligation debt
  • Maintain a city’s debt rating to ensure best rates for borrowing
  • Align with bond rating agency guidelines

City

Debt Limit Policy

Germantown

G.O. Debt Service/General Fund Expenditures ≤ 12%

Total G.O. Debt/Total Assessed Property Value ≤ 4%

Debt Per Capita ≤ $1,500

Per Capita Debt/Per Capita Income ≤ 3%

Arlington

G.O. Debt Service ≤ 15%** Total Property Tax Revenues

Collierville

General Fund Balance Requirement of 25% minimum

Average Life of Total Debt ≤ 10 years

Percentage of Principal Paid within 10 years ≥ 60%

Per Capita Debt/Per Capita Income ≤ 4%

Per Capita Debt/Per Capita Assessed Value ≤ 4%

G.O. Debt Service/General Fund Expenditures ≤ 12%

Bartlett

Total G.O. Debt/Total Assessed Property Value ≤ 5%

G.O. Debt Service/General Fund Expenditures ≤ 15%

Debt Per Capita ≤ $2,000

Lakeland

No Debt Limit Rules.

** Can be increased to 20% for emergencies by 2/3 vote of Town Council

What does this mean to us?  It means that the Board of Commissioners can obligate us to ANY amount of debt they vote on, whether it will bankrupt the town or not!

If we apply the rules of the listed communities, we can see where we are now and where we will be if we vote yes on the proposed $50,000,000 bond.

Chart 1: Lakeland (now) compared to the listed city’s Debt Limitation Policies:


From Chart 1, Lakeland today is below all the debt limit rules of any of the surrounding cities.  

Chart 2: Lakeland (with $50,000,000 bond) compared to the listed city’s Debt Limitation Policies:

The proposed bond shatters EVERY rule!  If we had the Debt Limitation policies of ANY of the listed cities, we would not be able to issue the bond!

If we followed the sensible debt limitation rules the other cities have implemented, what would be the maximum debt we could afford here in Lakeland?

City

Debt Limit Policy

Maximum Bond This Rule Would Allow in Lakeland

Germantown

G.O. Debt Service/General Fund Expenditures ≤ 12%

Total G.O. Debt/Total Assessed Property Value ≤ 4%

Debt Per Capita ≤ $1,500

Per Capita Debt/Per Capita Income ≤ 3%

$6,187,543

$5,890,689

$12,443,751

$7,277,570

Arlington

G.O. Debt Service ≤ 15%** Total Property Tax Revenues

$3,867,835

Collierville

General Fund Balance Requirement of 25% minimum

Average Life of Total Debt ≤ 10 years

Percentage of Principal Paid within 10 years ≥ 60%

Per Capita Debt/Per Capita Income ≤ 4%

Per Capita Debt/Per Capita Assessed Value ≤ 4%

G.O. Debt Service/General Fund Expenditures ≤ 12%

N/A

N/A

N/A

$11,850,510

$5,890,089

$6,187,543

Bartlett

Total G.O. Debt/Total Assessed Property Value ≤ 5%

G.O. Debt Service/General Fund Expenditures ≤ 15%

Debt Per Capita ≤ $2,000

$8,973,673

$9,613,620

$18,738,751

*Maximum Bond Debt Highlighted in Yellow

These cities must evaluate each of their rules before they can issue debt.  Whichever rule is the most restrictive is the one that limits their maximum bond amount. 

With no debt limit rules, Lakeland stands alone in the local area in its ability to borrow itself into oblivion. 

This amount of debt would be illegal in any of the surrounding cities.  Lakeland is financially by far the smallest city of all these.  What makes anyone think we can break all debt limit rules with no consequences?  We need to stop this debt, implement sound financial management rules and reevaluate how and when we can afford to build our own schools.  Clearly we can not afford it now.

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