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Iowa’s debt increase not concerning to officials

BY CASSIDY RILEY | NOVEMBER 27, 2012 6:30 AM

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While Iowa’s debt has risen to more than $14 million, officials aren’t concerned. In fact, some say now is a “good time” to be in debt.

Iowa’s State Treasurer’s Office recently released its annual Outstanding Obligations report, stating that Iowa’s debt has risen more than 4 percent to approximately $14 million. The report broke the debt down into several categories including state, county, and city debt; each entity is responsible for its debt.

State Treasurer Michael Fitzgerald said he is not concerned about Iowa’s rising debt and that current low interest rates make now a good time to have debt.

“The cost of money has never been this cheap,” he said. “The argument could be made that maybe they ought to be borrowing a little more.”

According to the report, state agencies actually decreased their debt by nearly 4 percent. Fitzgerald said Gov. Terry Brandstad’s plan to reduce the state government’s debt is to simply not borrow.

“He made it a point to say we’re not going to do any borrowing at all,” he said. “If you’re going to say a plan, that’s the plan.”

The only other group in the report that decreased its debt was Iowa’s counties. Johnson County’s Treasurer Tom Kriz said Johnson County makes a point of paying back its debt within a few years.

“I think Johnson County does an excellent job in managing its debt,” he said. “The length and the terms we borrow for are usually very short, [and] we only borrow when absolutely needed.”

Kriz said Johnson County officials are planning to borrow $5 million in the upcoming fiscal year for various projects and will plan to pay it back within two and a half years. He said Johnson County uses a percentage of property taxes each year to pay down its debt, and it has been able to successfully pay it down that way.

Kriz also said now is not a bad time to have debt.

“If you’re going to have debt, this is an ideal time,” he said.

Patrick Barron, University of Iowa adjunct lecturer in economics, said he disagrees and that any increase in debt is a problem.

“There’s no reason for Iowa to accumulate debt, and there’s really no time to say this is a good time to accumulate debt,” he said.

Barron said he is concerned debt taken out now will be left behind for younger generations.

“I think it’s something to be concerned about,” he said. “I’d like to see the state of Iowa gradually reduce its debt. We should start reducing our debt to be completely out of debt. There’s no reason to burden future generations with debt unnecessarily.”

Cities make up 35 percent of the state’s outstanding debt, the largest percent of all groups listed in the report, and despite this large chunk of responsibility, Iowa City’s Mayor Matt Hayek said he believes Iowa City manages its debt well.

Hayek said he doesn’t foresee Iowa City ever being debt free because the city is always in need but the city is also constantly paying it back. In general, he said, Iowa is managing its debt well in comparison with other states, such as Illinois, which currently has more than $44 billion in debt.

“Our debt is very low relative to other governments and it is constantly paid back,” he said. “It’s not realistic to say that governments should never have debt. Our state government has been well managed for many years, and you don’t see the kinds of crisis that you see in Illinois or California or these other places. I’m not an expert, but I would say we’re in pretty good shape.”


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