The city of Durango and La Plata County are concluding their budget processes for 2022 and both governments find themselves with a lot of money.
The city is starting 2022 with $79 million in the bank and the county has $100 million in the bank. Both governments also plan to collect record amounts of revenues. In addition to hiring additional staff members and giving raises, they plan to spend a large amount of money on construction projects, such as roads and buildings.
The city is budgeting to spend $57 million, and the county is budgeting to spend $43 million on construction projects. With the addition of Durango School District 9-R’s new Miller Middle School and Durango Fire Protection District’s possible fire station, there may be over $200 million of construction projects funded by our local governments.
Some projects are paid for by debt that will require future residents to make the debt payments, and some projects are paid for by previously collecting millions of dollars from the residents. I ask you to consider: Are our governments wisely issuing debt; are they wisely spending the saved cash; or should some of this money go back to the citizens?
One must first understand debt funding versus cash funding in the context of local governance. Debt is a useful tool to fund construction projects because it matches the costs of the project to the future residents who will benefit from the project. Cash is useful to fund the maintenance of infrastructure because it prevents future residents from paying for the damage previous residents caused. This is known as intergenerational equity.
An example of a suitable use of debt is School District 9-R’s effort to rebuild Miller Middle School; future residents pay for infrastructure that benefits future residents. An example of improper use of debt is if 9-R uses the debt proceeds to complete maintenance projects such as repairing sidewalks; future residents pay for projects that should have been paid for by previous residents.
Examples of suitable uses of cash are the efforts to repave roads and the airport runway; previous residents pay for the damage caused by previous residents. An example of improper use of cash is the city building a new $9 million utility administration building; they have forced previous residents to pay for a project that benefits future residents.
An example of money that should be returned to the citizens is the money collected for the ill-conceived Ridges Basin Water Treatment Plant. The city increased water charges for what leaders said was needed to pay off the debt for a water treatment plant. After six years of collecting money, the water treatment plant idea is undecided. Approximately $10 million was collected to service the nonexistent debt on the non-existent water treatment plant. The consequence of this plan is a water fund that was funded by previous residents, many who may have been priced out of Durango. The priority of the city should be to maintain the water system and then return the money before more people are forced to leave because of affordability.
The use of debt to fund construction is a tool to help solve the affordability problem we face. My opinion is that intergenerational equity must be considered, which requires a combination of debt funding, cash funding and also returning money to the citizens.
John Simpson is a Durango city resident with an interest in local government, particularly financial planning and infrastructure planning.