10:28 PM PDT on Monday, August 1, 2011

By ALICIA ROBINSON
The Press-Enterprise

Riverside’s current debt load — $1.7 billion — is the highest in city history, partly due to the slew of public works projects over the past five years known as the Renaissance.

At a time when federal officials are scrambling to slash spending and avoid defaulting on the nation’s debts, the city’s borrowing might sound like a cause for panic.

But Riverside — Riverside County’s largest city, with a total budget of just under $993 million — isn’t the only town in this position. And city officials and finance experts say the debt isn’t a concern as long as there are dependable revenues to pay it off.

Riverside’s borrowing fits with a general trend of municipal debt that was on the rise for the past decade as cities expanded, built new roads, parks and sewer lines and had a larger property-tax base to help repay debts, said Matthew Reining, a Standard & Poor’s credit analyst in San Francisco.

It made sense to borrow because interest rates were low and city revenues were rising as the economy improved, said Gavin Murphy, editor in chief at the Bond Buyer, a trade publication focusing on municipal bonds.

“When (the economy) reversed itself in 2008, they’re now having to look at servicing what they’ve already issued, given lower revenues, and now politically it’s become less popular to suggest paying for things through borrowing,” Murphy said.

Borrowing trend

Riverside is not alone in carrying a high debt load and recently borrowing money. For example, Pasadena’s debt is also at a historic high, and the city recently borrowed about $156 million to pay for upgrades at the Rose Bowl, Finance Director Andy Green said.

Pasadena will repay the debt with money from additional luxury seating, increased parking fees and some private sources, so it won’t affect the city’s general fund, which pays for day-to-day services such as police and street sweeping.

“That has been the philosophy for Pasadena, minimizing the general fund impact,” Green said.

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PDF: City of Riverside: Borrowing to build

Special Section: Riverside Renaissance

In Riverside, aside from a slight dip in fiscal 2008-09, the city’s debt has grown steadily for the past eight years and it has nearly tripled since fiscal 2002-03, when it was just under $556 million.

Most of the growth has been since 2005-06, when the Renaissance public works initiative launched. It condensed 30 years of upgrades to water and sewer systems, roads, parks and other facilities into five years and has been projected to cost $1.57 billion.

To pay for the projects, the city issued big chunks of bonds and incurred other municipal debt in 2006, 2007 and late 2009.

Riverside Finance Director Brent Mason noted that most of the recent debt is for water, sewer and electricity projects, which have their own special funds fed by customer revenue. Officials already have adjusted utility rates to cover current debt loads, so no rate hikes are planned in the near term, he said.

The state constitution includes a limit on how much general obligation debt cities can take on — that’s debt repaid from voter-approved special taxes. The state limit is a percentage of the city’s total assessed value, and since most of Riverside’s debt is not general obligation, “We’re way, way, way, tens of millions beneath the limit,” Mason said.

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