Letter To The Editor: What Might Not Be Realized About Rec Bond

By JESSICA CHIPERA
Los Alamos
 
I wish someone else had brought up these important notes on the recreation bond because I try not to get political. But I also think it’s irresponsible for me to leave these remarks unsaid.
 
It is disappointing to see Los Alamos county suggest a general obligation bond to pay for income-producing facilities. This essentially means that people in Los Alamos will be paying for the amenities twice if they vote yes. I don’t know about you, but I tend to only pay for purchases once.
 
The way this bond appears to be set up, the increase in property tax is supposed to partially pay the bondholders, and the residents are supposed to pay additional money to use the facilities, along with alleged people from out of town. It looks like the income from the facilities will go to pay the rest of the amount due to the bondholders.
 
General obligation bonds are not supposed to rely on revenue to make the project feasible. The fact that this one needs two sources of funding to be viable concerns me, and it’s not just because it makes the actual cost of the facility much higher than the proposal says.
 
Income-producing projects are typically financed using revenue bonds. Revenue bonds pay investors a higher interest rate, and they typically do not cause a rise in the taxation of the dwellers of the municipality (you) because the bondholder is paid with the income produced by the project.
 
Sports arenas and stadiums are usually paid for with revenue bonds, so it would make sense that a recreation center, pool, and golf course would be too.
 
If there were a high probability that the proposed new amenities would be used as often as the county alleges, there would be no problem finding investors willing to buy the higher-paying revenue bond securities, and the county would be able to fund this project without a tax hike.
 
Unfortunately this recreation bond doesn’t follow the rules of well-behaved bonds.
 
As stated before, the county is making an assumption that people from outside Los Alamos will pay to use the amenities funded by the bond issue. I personally find this a bit ironic considering that most of the people I’ve talked to who are in favor of the bond, lean that way because they don’t want to travel to Santa Fe to recreate. And let’s get realistic here. I don’t even like driving from Los Alamos to White Rock. Are people in Espanola and Santa Fe more willing to travel?
 
I’ve seen people ask what happens if the facilities don’t get used. Let’s explore this scenario.
 
Because it’s a GO bond, Los Alamos residents would be obligated to repay the loan regardless of whether or not revenues can recoup some of the costs. This means another tax hike, if necessary. Property tax, sales tax, corporate tax, income tax, excise tax, gas tax, or any other tax can be increased in order to pay the bondholders if the recreation center doesn’t generate the revenue the county says it will produce.
 
As it is structured, the recreation bond is somewhat regressive in nature. Sure, the people with the nicest properties will shell out the most money in the form of a property tax increase. However, let’s look at what happens to another group of people in Los Alamos: retired people.
 
I’ve brought this up before, and people asked me to explain it. There’s a reason why I’m not a teacher, but I’ll try. Hopefully this is sufficient.
 
Let’s say you are 70.5 years old and have saved $350,000, which is in a tax-deferred retirement account (an IRA, 401k, 403b, etc). You no longer have any tax write-offs, and you are obligated to take a required minimum distribution of 3.65% or $12,775, which is taxed as income. The required amount increases every year. If you don’t take the full distribution, you’re punished with a different tax.
 
The thing is, I’ve done the math and even when living frugally, there is a greater than 50% chance that a retired person will run out of money before they die because of three things: 1) Taxes. 2) The safe withdrawal rate for their retirement account is probably less than the required minimum distribution (taxes again!) And 3) The law of percentages.
 
Increasing property tax means increasing the probability that retired people will run out of money.
 
This is why I’m hesitant to vote for something that adds a tax burden to retired people unless it is a requirement for the community. Schools are requirements. Recreation centers are luxuries, not requirements.
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