Opelika Observer Staff Editorial - 2/3: "Dangerous debt limit? No, not here"

Last week, we used an old, tried and true journalistic device: raising a question in a headline that we proceeded to answer, or at least attempted to answer, in the story.

We thought we had succeeded, answering the question, “Is Opelika in a dangerous debt situation?” with a loud “No.”

We believed that readers would recognize that a debt repayment ration of 14.3 percent was damn good, particularly in these economic times. 

But, no, everybody didn’t get it, so let’s try to make it clear:

Opelika’s debt is decidedly not at a dangerous level.

We also admit to making a small mistake, too.

We meant to say the 2004 school warrants were being repaid from Opelika’s 16 mils property tax, instead of Opelika’s $16 million property tax.

Darn that spell check.

Questions about Opelika’s debt load are particularly relevant, given the publicity attached to Jefferson County’s and the city of Prattville’s financial problems.

Indeed a citizen has the right to ask almost any question that relates to how his tax dollars are being spent.

The answers to those questions are generally readily available from our city officials, elected and otherwise.

As a matter of interest, none of the risk factors that contributed to the Jefferson County crisis are present in Opelika’s past, present or planned practices.

But, we repeat, the question about similarities is overwhelming reasonable and proper. As proud citizens of Opelika, we are glad the answer is that there are no similarities.

Ratings by Moody’s (Aa2/stable outlook) and Standard and Poor (AA/stable) issued in connection with recent debt issuance by Opelika  contained common themes such as:

– solid financial position

– healthy general fund reserves

– stable tax base

– history of prudent financial management and reserve policies

– history of conservative budgeting procedures that provide for consistency in long-term financial management

Only five cities in Alabama have a higher Moody’s rating than Opelika. One of these cities, Huntsville (AAA/Aaa) actually has a less favorable percentage of Constitutional Debt Limit margin than Opelika.

Following last year’s issuance of warrants, Opelika has a Constitutional Debt Limit margin of $24.6 million or about 40 percent of its 20 percent limit of assessed evaluation.

Huntsville’s margin is approximately 37 percent.

Both rating services caution that several factors could make Opelika’s very favorable debt ratings go down.

These factors include increased debt burden, decreases in General Fund reserves and overall financial position and sizable tax base deterioration.

None of these are foreseen.

Additionally our city officials have been able to maintain a “municipal rainy-day account” of 20 percent of annual revenues in the General Fund.

Does everyone now get it?

Opelika’s debt situation is on solid ground!

The only similarity between us and Jefferson County and Prattville is that we are all in Alabama.