The District might have eventually needed bonding to optimize our infrastructure replacement, but only if we assumed that we had to rebuild it on the same two-decade timescale it was installed. The question is practically moot now that the District has taken on bond debt, but let's consider whether a pay-as-we-go alternate reality was ever within reach.
At the outset, I want to be clear: some projects in the bond plan are urgent. Lift station rehabilitation and mandated sewer line repairs top that list. (Water accountability is also urgent, though the bond plan does not attack this head-on.) But the majority (by cost) of the proposed projects can be safely deferred for several years without risk to the District. There is a dirty secret in infrastructure modeling: scheduled replacement has a hard time beating the run-until-failure baseline. Deferring work is generally cheap, provided there is a rigorous distinction between calculated deferral and actual neglect. Almost all (by cost) of our infrastructure is underground pipes with low failure risk. We have the luxury of time. With that comes the luxury of paying as we go (PAYGO).
Measuring long-term financial health is complex, but one metric is universally clear: a district with zero debt and a healthy operating surplus has the agility to meet whatever the future throws at it. In 2023, the District retired the last of its original bond debt. Since then, the District has generated millions in operational surpluses, peaking at over $1 million in 2024. In the 2027 budget, that surplus drops to zero. It tells a story of a goal attained and then let go.
We had the cash flow to start a perpetual PAYGO engine. Instead, the current board chose to adopt bond funding. The sudden drop to a $0 surplus in 2027 isn't an accident; it is the consequence of cannibalizing the budget to feed the new debt without breaking the board's political promise that the bond wouldn't cause a tax increase. In fact, the board was so faithful to its promise that they allowed estimated tax revenue to drop 5% to avoid increasing the rate. The failure to keep tax revenue at par and the nuance of tax law have likely locked the District out of pay-as-you-go financing, at least for many years.
The M&O Ratchet Trap
The District is not free to raise its Maintenance and Operations (M&O) taxes at will. Tax revenue increases higher than 3.5% trigger a mandatory rollback election, giving voters the final say.
Here is the catch: that 3.5% year-to-year cap applies to M&O revenue and ignores debt service taxes. The board will shift 1.3 cents of its M&O tax rate to debt service this year, and an estimated 4.6 cents next year. The trap closes here: once that revenue capacity is shifted to the debt service ledger, it cannot be moved back to M&O later without requiring a rollback election. It is a one-way ratchet that permanently shrinks our operational flexibility.
The Debt Treadmill
Consider a back-of-the-envelope look at our system. The District has about $100 million in underground infrastructure. Assuming an optimistic lifespan of 100 years, we must invest $1 million (today's dollars) annually just to keep pace with inherent depreciation.
Under the current bond, we get $4,988,666 for projects at a debt service cost of $388,000 per year over 25 years. To keep up with $1 million a year in baseline depreciation, we would have to issue a similar bond every five years. The total annual debt service for that cadence levels out at $1.94 million per year. We are paying almost double the cost of paying as we go.
An obvious objection is that this analysis ignores the time-value of getting projects done sooner. But when it comes to borrowing, time is luxury. If there's no urgency, there's no value in getting what you want sooner.
Another objection is that the cost of borrowing is almost free when you consider the rate of infrastructure inflation. But infrastructure inflation is the wrong index; the value of the District's real property is the correct one. If you believe that infrastructure inflation will go up faster than the value of the District for many years, then piecemeal bonding is an absurd half-measure. The logical move would be to issue a $100 million bond and replace the entire system today before costs go up. The absurdity of it proves the point: nobody seriously believes in a catastrophic inflationary future. It is equally absurd to finance five years of maintenance with 25 years of debt. That's the problem in a nutshell.
Extortionate Maintenance Bond Elections
When government holds a bond election for new infrastructure or amenities, voters are presented with a genuine choice: Do we want to pay to improve our community? That is a fair democratic question. But basic maintenance isn't an optional upgrade. We don’t hold household elections to decide if we get to put a new roof on our homes. It is natural to assume that once an asset is built, it will be maintained. If we used PAYGO financing from our M&O budget, we could continuously fund the District’s infrastructure without asking voters for permission to fix the roof every few years. By funding routine maintenance through bonds, the board changes the dynamic entirely. The choice presented to voters is no longer, "Should we improve our town?" The choice becomes, "Will you approve this debt, or will you let your water system collapse?"
Do voters really want to face that question every other election, and the inevitable hyperbole that goes along with it?
The rapid property value increases of the 2021 era, which coincided with the retirement of the District's original debt, handed the District a golden ticket. We had the operational surpluses required to establish a permanent, self-sustaining pay-as-you-go infrastructure program. The current board just traded it for paper.