For the first time in more than 20 years, the City of Aiken is debt free. However, as the fiscal year 2015-16 budget nears its beginning, staff continues to find ways to fill a budget shortfall in its general fund.
In January, the City posted a press release on its website stating with the payment in December of a little more than $1 million of a utility bond, the City of Aiken is debt free.
"That ($1 million) number was our final installment on our revenue bond, which was our water and sewer improvements," City Finance Director Kim Abney said. Abney said she couldn't recall whether this was the first time the City could claim debt free since its existence, but it is the first in her 22 years with the City.
According to the City's press release, Reba Hull Campbell, the deputy executive director of the Municipal Association of South Carolina, said although her group doesn't track what cities have what debt, she stated, "I think it is safe to say that very few cities can claim to be debt free."
"Prior to that, we had general obligation bonds, bonds for things like recreation that are supported by regular taxes; this is the water and sewer revenue bond paid back by water and sewer revenues," Abney said. "When you pay your water bill, part of that money went toward paying off our debt. That's a revenue bond."
The payment, which Abney credited to good timing and planning, gives the City some "moving room" to pay off an interfund loan, or money borrowed from themselves, which is how the city was able to construct the Silver Bluff water treatment plant. Abney said it's not very typical that cities borrow from themselves; they typically "issue bonds because some cities don't have the resources Aiken has had through planning and city managers putting Aiken in the position to be self-supporting and debt free," she said.
Although the City is currently debt free, staff and Council are still discussing ways to make up a budget shortfall in the next fiscal year budget, which could come in at several hundred thousand dollars. Since staff realized its $700,000 shortfall in the last fiscal year budget, Council has discussed several ways to either cut expenditures or raise revenues, like raising fees or bringing in a hospitality tax.
Abney said the budget shortfall and the debt should not be confused.
"The budget shortfall is in the general fund, and the City is required to keep the general fund separate from the water and sewer system," Abney said. "We've talked a lot about enterprise funds, which are self-supporting funds. The revenue we charge for water and sewer is used for water and sewer only; it supports things like the water meters that are now in process of being changed."
Abney said the City hasn't had bonds in the general fund since its obligation fund bond was paid off in 2003. General obligation funds are used for funding concerning departments like recreation and Public Safety.
"A lot of people might be confused because in the paper, we've heard a lot about the budget shortfall; the debt free is great, but that is just talking about the water and sewer system," Abney said. "The general fund hasn't had debt since 2003, and that's where we're facing shortfalls and trying to find ways to cut expenses or possibly increase revenues."
"Debt is something that so many people have and so many cities have," Aiken Mayor Fred Cavanaugh said. "Not having debt is a tough thing to do, but right now we're lucky we don't have any."
Maayan Schechter is the local government reporter with Aiken Standard. Follow her in Twitter @MaayanSchechter.