This past March 25, City CFO Robert Cortinas gave a PowerPoint presentation before City Council in which he discussed his 5-Year Financial Forecast.

On page 71, he cited $300 million of debt that was issued in 2016 and told how the principal payments will slam into the City budget starting in FY 2025.

Nearly ten years ago, on May 17, 2016 under agenda items 16.1 and 16.2, the City Council voted unanimously to issue $200 million in general obligation bonds and $100 million in certificates of obligation, with Mayor Leeser choosing not to exercise his veto.

Accordingly, on June 15, 2016 the City issued $200 million in general obligation bonds to fund some of the 2012 Quality of Life projects, with zero principal payments for the first 10 years but nearly $80 million in interest.

On June 30, 2016 the City issued $100 million in certificates of obligation to fund a broad range of non-emergency projects, including mass transit, streets maintenance, improvements to facilities and parks, and information technology enhancements. That debt issuance required only $7 million in principal payments over the first nine years with more than $41 million in interest payments.

Moreover, the City issued additional certificates of obligation on June 3, 2021 with interest-only payments for the first three years to help offset the financial crisis resulting from COVID.

CFO Robert Cortinas, budget presentation, 3/25/24, p. 71.

Thus, starting in FY 2025 (beginning Sep. 1, 2024), the City will face a $5.6 million increase in principal from the 2016 and 2021 COs, plus a $6.9 million increase in FY 2026 from the 2016 GOs.

That is another $12.5 million in additional debt servicing that will be dropped like a bomb on the City budget in FY 2025-2026, the result of City Council decisions that were made eight years ago.

None of the City Council Representatives who voted for the $300 million in debt in 2016 with deferred principal payments are still in office. CFO Mark Sutter retired in August 2017 and City Manager Tommy Gonzalez was fired in February 2023.

But now the current City Council, CFO Cortinas, and Interim City Manager Westin will be forced to deal with this budgetary challenge and will have to get very creative if they are to minimize the impact on the taxpayers.

Fortunately, Cortinas and Westin are a talented duo and we feel confident they can navigate the impending storm, as long as there is no new spending!