Borrowing Options

The cost to rebuild the plant is too much for the city to pay cash so it will need to borrow the money and repay the debt over time.  Debt options include:

• General Obligation (GO) Bonds – Must be approved by majority vote in a city general election, or by a majority of registered voters in a non-general election.  Approval results in a pledge of the city’s full faith and credit to repay the debt.  This is the strongest credit issue a local government can make.  Repayment is generally made using an ad valorem assessment on all property in the city, but the city council may authorize other sources, including utility revenue and system development charges.  The Oregon Constitution allows cities to issue GO bonds outside the Measure 5 property tax limitation when the proceeds are used for pollution control related capital improvements.  Payments are considered local taxes and are deductible for those who itemize federal and state tax returns.
• Revenue Bonds – This type of debt may be approved by legislative action and pledges revenue collected from rate payers to repay the debt.  The interest rate on a revenue bond is usually higher than a GO bond.  A revenue bond is more restrictive and bond measure must specify a single repayment source.  In Rainier’s case, it would be sewer fees deposited to the sewer utility fund.  Unlike a GO bond, the city may not substitute other funding sources for repayment except SDCs if the SDC methodology is amended to allow for this.  Utility fee payments are not considered local taxes and therefore are not tax deductible for those who itemize federal and state tax returns.