After an independent review, Reedy Financial Group concluded the City of Carmel’s debt load is reasonable and plans to pay it down are sound.
Gary Smith, a CPA with the firm, presented the final report to the Carmel City Council during a special meeting held Sept. 26 at City Hall.
“There are not really any key findings or things to be concerned about,” Smith said.
With five of the nine city councilors joining the council for first terms in January, the council commissioned the study to better understand Carmel’s debt and ability to manage it. Reedy Financial Group had not done business with the city before the study.
The study showed that Carmel has 14 general obligation bonds outstanding payable from property tax and local income tax revenues. Of the original $28.9 original principal amount, $23.5 remains outstanding. The bonds, issued between 2016 and 2021, primarily funded roundabout construction. Per state law, Carmel has $52.4 million in general obligation bond borrowing capacity remaining.
Smith said Carmel is in a “strong position” to service its general obligation debt.
Carmel has 66 outstanding equipment leases for items that range from city vehicles to IT equipment that are generally payable from operating fund revenues, according to the report. The city has paid off 37 percent of the lease payments and has $20.1 million principal outstanding.
The study also looked at Carmel Redevelopment Commission debt, which is primarily covered through tax increment financing. TIF uses taxes generated from improvements to an area to pay for the debt acquired to make the improvements.
TIF revenues are expected to fall short of debt service payments in 2035, so for years, the city has set aside funds to cover those payments when they are due. Smith said the city’s plans to cover the CRC debt are sufficient and that they should prevent a special benefits tax – which would raise property tax rates – from going into effect to cover shortfalls.
Smith also said the water and sewer rates adopted in December 2023 are expected to be enough to cover utility debt but recommended the city continue working with its advisor to review the rates and charges over time.
The study recommends that the city evaluate the feasibility of an “exit strategy” for the Hotel Carmichael grant agreement with Pedcor, as hotel revenues are expected to continue to be enough to cover mortgage payments. The city is set to receive 75 percent of the hotel cash flow for approximately a decade as part of a plan to repay more than $12 million the CRC covered when construction costs were significantly higher than the initial estimate. After the CRC has been repaid, it is set to become a 50/50 split.
Councilor Rich Taylor, a finance professional who initiated the study, said the city is “positioned well to address (financial) challenges and opportunities.”
“This council and the leaders that we have on our team in the administration are the right people at the right time,” Taylor said. “We’ll all work together to protect the Carmel taxpayers in the future.”
