Early bond payoff unnecessary

Editor,

Why do Eureka Springs Finance Director Lonnie Clark and Mayor Butch Berry fear the Securities and Exchange Commission so much?

At the May 14 city council meeting, Clark reported that he and the mayor want to accelerate paying off two sewer bonds to get out from “under the thumb of the Security and Exchange Commission.” Clark also reported that he and the mayor want the city to be “debt free” by 2025. Bonds bring SEC oversight, added accounting requirements, and probably more work for Clark. However, the added protection well serves the bondholders, the city, and the citizens.

Because of the existing sewer bonds, the SEC requires an outside audit of the Eureka Springs Sewer and Water Department. Joyce and Eric Knowles used the outside audit performed last year to inform Clark, the mayor, and city council that the amortization schedule they attached to Ord. 2265 overstated the bond indebtedness by $1,815,000! While Clark and the mayor thanked us for finding this error, they now want to eliminate the audit that allowed us to find it.

The more fundamental question has to do with why this city would want to be debt free. This is an odd and counterproductive goal.  Cities incur debt so that they can have nice things now and pay for them later, like Eureka Springs has done with the sewer treatment plant and the new police building. 

Debt is a problem only when one cannot make payments. The sewer bonds are no longer a problem. They are at a very low interest rate (3.2% and 4.2%) and are now covered by recent sewer rate increases. There is no need to pay them off early and the extra money to do so would better be better applied to fixing the water infrastructure. 

“Debt free” seems to be a goal only to escape audit and oversight. But the SEC is not interested in taking over a city or city department and would only do so when there was gross financial or administrative nonfeasance. 

Debt is not the problem. In fact, debt can serve this city very well. A parking structure downtown could be explored to see if it would help citizens, visitors, and the economic lifeblood. The city could investigate whether bonds for a downtown parking deck could be guaranteed with CAPC tax collections and paid off with parking fees.

The city should stop acting out of fear of the SEC, and start thinking about how best to use our money to better the city.

Eric and Joyce Knowles