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MARSHALL -- As a Tuesday vote approaches on whether to extend Marshall's city sales tax to fund construction of a new Aquatic Center, some local residents have raised concerns about the city's current debt levels. Residents have also asked how the aquatic center project could potentially add to city debt.
This week, the Independent spoke with Marshall city staff and officials, MMU staff, and Marshall Public Schools staff to get a more in-depth look at local debt levels.
As of the end of 2022, the city of Marshall had a total of over $63.41 million in outstanding bonds, said E.J. Moberg, director of administrative services for the city of Marshall. According to the Lyon County Auditor's report of outstanding indebtedness, in 2022 Marshall also issued $2.87 million in debt, and made $12.12 million in outstanding debt payments.
Marshall's total 2022 debt included more than $31.7 million in bonds for governmental activities, which range from bonds for capital projects at the Marshall-Lyon County Library, to tax increment and tax abatement bonds, to street improvement bonds. Business-type activities, which included bonds for Tall Grass Liquor and wastewater and storm sewer projects, totaled more than $22.52 million.
Marshall Municipal Utilities had a total of $9.185 million in outstanding bonds at the end of 2022. Utilities debts came from investments in city utilities, like the development of a new water source and well field, and putting the city's electrical system underground, Marshall Mayor Bob Byrnes said.
Moberg said bonds for business-type activities are paid back through revenues, including municipal liquor store revenue, utilities revenue, and surface water and wastewater fee revenue. About 50% of the city's debt in 2022 was scheduled to be paid through utility revenues, he said.
Debts scheduled to be paid through property taxes and assessments made up 34.8% of the city's debt in 2022.
"The net debt payable solely from property taxes at the end of 2022 is $13,579,600," said Marshall City Administrator Sharon Hanson.
About 2.8% of the city's debt in 2022 was scheduled to be paid with state aid.
"One of our street projects was done via state aid bond, where our yearly allocation, a portion of that goes to pay that principal," Moberg said. "If things go sour and we don't get a state aid allocation, it could come back on the taxpayers, but it's scheduled to get paid via state aid."
Part of Marshall's total $63.41 million in outstanding debt was $7.875 million in sales tax bonds, which are paid back through local sales tax, Moberg said. In 2022, 12.4% of the city's debt was scheduled to be paid by sales tax.
Marshall started collecting a local option sales tax to support the construction of the Red Baron Arena and Expo, and expansions at the Minnesota Emergency Response and Industrial Training (MERIT) Center.
"As of today, there's $6,705,000 remaining to be paid on that," Moberg said. If voters approve the extension of the sales tax to fund a new Aquatic Center, Marshall will still need to collect tax for the Arena and Expo and MERIT Center debt through 2026. "The collections starting in January of 2027 and beyond will then go toward the Aquatic Center project."
If Tuesday's referendum on extending the local sales tax is passed, Marshall would be authorized to collect up to $18.3 million in sales tax for a new aquatic center.
"We obviously haven't gone out for bids. We don't know what the total cost would be. But the hope is, and the plan is, that it will be $18.3 million or less," Byrnes said. If the cost of the new aquatic center is more than that, the city could look for additional private contributions or sponsorships for the project, he said. "But the base project is supported by what the question is Tuesday on extending the sales tax."
Other city projects that still have remaining debt include the City Hall renovation project, which will have about $5.65 million left to pay by the end of the year, Moberg said. Part of that debt will be paid with revenue, and part goes to property tax, he said. There is also $1.71 million in debt left for the construction of Tall Grass Liquor.
"There's $225,000 (in payments) that's due this year, so that will get paid," Moberg said. "As of a year ago, we chatted with counsel -- we do have the cash on hand for that at this point already. It's just with changing interest rates, we have not acted on paying that one off yet."
By the end of this year, Marshall will also have about $12.1 million left to pay on a low-interest loan for needed updates at the city sewage plant.
Some of Marshall's debt would be going down by the end of this year, as the city makes payments, Moberg said. Bonds in the governmental activities category are projected to go down to about $30.92 million by Dec. 31. Bonds in the business-type activities category are projected to go down to about $22.09 million by the end of the year.
Kevin Lee, finance manager at MMU, said the municipal utilities' $9.185 million in outstanding debt would be going down to $5.105 million by the end of the year. MMU anticipated that by the end of 2024, the debt would be down to $3.58 million, he said.
In 2023, the city also issued about $3.05 million of new debt in improvement bonds, and $1.73 million in bonds for stormwater and surface water projects.
While it is separate from the city of Marshall, the Marshall Public School District also has outstanding debt. Currently, the school district has a total of more than $43.94 million in outstanding debt, said Business Services Director Dion Caron. The total debt includes facilities and maintenance bonds for a variety of projects, including upgrades to the heating and HVAC systems at Marshall Middle School, roof replacements at Park Side Elementary and Marshall Middle School, and replacing the boiler at Park Side.
The largest outstanding debt for the school district is for the construction of Southview Elementary and the expansion of Park Side. Currently, there is about $28.51 million left to pay on that debt, Caron said.
Two of the district's current bonds will be paid off by the end of this year, and two others will be paid off in the next four years, Caron said.
"So unless any other debt is approved, in four years our debt will be down to $30,630,000," he said. The bonds that will be paid off this year include the bond for construction of Marshall High School.
Caron said the debt service portion of MPS's levy will be decreasing in 2024.
"Our debt levy dollars are decreasing almost a half-million dollars --that's almost 11.5%," Caron said.
The city of Marshall and MMU's debt has gone down over the past nine years, Moberg said. In 2014, when the city issued sales tax bonds, Marshall had $93.97 million in debt. "That was the year that the city issued over $23 million in debt," Moberg said. Part of that amount was the issuance of sales tax bonds, he said.
According to the Lyon County Auditor's 2022 report of outstanding indebtedness, last year Marshall had the most outstanding bonds of any city in Lyon County. The city coming in second was Tracy, with about $27.22 million in total outstanding bonds.
Counting Lyon County cities, townships and school districts, there was a total of over $201.49 million in outstanding bonds in Lyon County in 2022, the County Auditor's report said.
Byrnes said the projects that the city has taken on debt for represent investments in the community of Marshall.
"That's the community investing in the future … whether it's streets that are well-maintained and in good shape, or whether it's a water system that is reliable or an electric system that's reliable," Byrnes said. "And there are examples of cities where they haven't made that investment, and those cities have struggles now because they've fallen behind on everything. And employers can't operate in those communities."
"If you don't continually invest in yourself, you will find yourself at a crossroads that you don't want to be at. You'll have too much all at once to take care of," said Marshall Public Works Director Jason Anderson.
City staff said there are other regional centers that are looking at the potential of double-digit levy increases for 2024. Moberg said the city of Worthington set its preliminary levy increase at 18% for 2024, and the city of Willmar set its preliminary levy increase at 15%.
In September, the Marshall City Council approved a preliminary levy increase of 9.9% for 2024.