Arcadia may use state grant to invest and reduce debt

Arcadia council members appear to be leaning toward using state money that arrived unexpectedly early to both invest and pay down some city debt.

Last Thursday’s discussion of how best to use up to $3.8 million in grant money the state released early to help Arcadia cover flood control project expenses follows weeks of debate. As council members considered whether to use the money to meet immediate city needs or invest it, a local bank president calculated the city could as much as $1.8 million over an eight-year investment.

Several council members noted that the city should not delay its decision too much longer since interest rates could drop. Members also speculated that it might be possible to reduce debt and invest. The council is scheduled to meet today (Wednesday). 

The city has about $2 million in debt borrowed at a 2.75 percent interest rate.

Najib Schlosstein, Arcadia resident and president of Alliance Bank, told the council that investing in either municipal or treasury bonds, which could offer either a 5 percent or 4.2 percent rate, could give the city a “once in a lifetime” opportunity to help Arcadia grow. He urged the council to create a “legacy” of income for the city. Schlosstein’s estimate of the city being able to earn $1.8 million is based on investing $3.5 million and reinvesting interest.

“You should look at this as an opportunity to change people’s lives,” Schlosstein said.

He also noted that the city could purchase investments in several smaller dollar amounts and be able to sell them individually, potentially at a profit, an option that appealed to some members.

Council member Kyle Myhre, who has advocated for paying down debt to free money to increase city employees’ pay and possibly hire an additional police officer, noted that reducing debt could also reduce property taxes. He also announced he is not running for re-election.

“I’ve tried to make my point,” he said last Thursday. The investment period for the bonds “will impede the city’s ability to add staff.”

Jason Lockington, a council member who has advanced the idea of investing, said the question before the council is “do we want an extra million dollars after eight years or do we want to pay off debt right away?”

“If we can make this kind of money,” said council member Paul Anderson, “why wouldn’t we? But the trend is going the wrong way. We can’t sit on this.”