The Federal debt has been the subject of extensive coverage in the mainstream media, and rightly so. 

But the Federal government does not have a monopoly on amassing debt for future generations to pay. Earlier this year, the Iredell County Commissioners unanimously voted to borrow $106,000,000 to finance various school construction projects. 

 The commissioners’ action, which increased the county’s indebtedness by about 50 percent, received only minimal coverage in the mainstream press.

Iredell’s debt load has been building for some time. Prior to 1991, the county had very little debt. By fiscal year 2006-2007, Iredell’s per-capita debt payments  were the 11th highest  of the state’s 100 counties, and nearly twice the state average (NC Association of  County Commissioners Budget & Tax Survey). The commissioners’ recent action will likely place Iredell in the state’s top ten counties in per-person debt.

A full payment on the bonds will not be due until the 2009-10 fiscal year. That means the commissioners will not have to raise taxes in an election year. But the odds are the tax rate will be raised either next year or in the near future.

It is theoretically possible the debt could be paid at the present tax rate. To do so, one must assume that: (1),  property tax and sales tax collections will continue to increase at close to the rate of the past few years; and (2), the school systems will not need any large amount of additional money in the near future.

Whether revenues will continue to grow at the projected rate is anybody’s guess. What is not a matter of guesswork, but is nearly certain, is that the school administrators will not be satisfied with the $106,000,000. They will be back asking for another large bond, probably sooner rather than later. When that happens, a tax increase will be unavoidable.

Regardless of the tax rate, Iredell residents will pay more property tax than they would have if the commissioners had not issued the bonds.  The payments on the $106,000,000 loan will run between $8 million and $10 million per year. This represents more than 4 cents of the county tax rate of 44.5 cents per hundred dollars valuation, or about 10 cents of every dollar of county property tax.

A portion of the sales tax, as well as lottery proceeds, is reserved for school capital projects. But current spending on school buildings and existing debt service far exceeds this amount. If the commissioners had not borrowed the $106,000,000, they could have maintained the present level of services and reduced property tax bills by 10 percent.

Beginning in fiscal year 2009-2010, Iredell county’s total debt service, including payments on the $106 million and on prior debt,  will total over $24 million per year, a sum equivalent of more than 12 cents of the tax rate, or more than one of every four dollars the county collects in property taxes.

When future county commissioner boards plan the budget, they will have to reserve about $24 million to fund existing debt. This will have to be paid before money is available for school operating expense, additional school buildings or renovations, or any of the dozens of other services the county funds.