Clayton’s town council began an interesting conversation last week when they started to tackle the question of how much debt is too much.
This town is blessed, more than most people realize, with a diverse and growing tax base. That helps insulate the town against changes in the economy. A town that relies too heavily on taxes from industry to fund its goverment operations will find itself in trouble when plants close and operations cease. A town that relies too heavily on a large residential tax base can find itself struggling when the housing market slumps.
Clayton has a nice mix of both kinds of property and, with solid growth in the early 2000s, money was plentiful at town hall and the town’s ability to borrow more money grew.
The town, which needed to provide an increased level of services to meet the demands of that growth, borrowed money to meet those needs.
So far, so good.
The town borrowed money, but stayed within its means.
Now the town finds itself nearing the top end of its ability to borrow. Town manager Steve Biggs has alerted council members to that fact, but it doesn’t change the town’s need to continue to provide expanded services as the town continues to grow.
The weakened economy of the past five years has stemmed that growth to some degree, providing the town government with an opportunity to slow down its own growth.
But now, council members must be careful moving forward. Biggs has proposed a pay-as-you-go model, which would require the town to set aside money each year to save up for its needs. Thats a god short term step, although most folks will say it’s unsustainable for the long term.
But a short-term solution is what’s needed right now, while the town continues to chip away at its current debtload.
Mayor Pro Tem Michael Grannis pointed out last week that the town just needs to be careful in how it spends its money. He’s right.
And managing debt is an important part of that equation. Council members are wise to take a look at it now, before they begin to cobble together next year’s budget.