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Anchorage's debt keeps on growing.

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In the past 10 years, the city's long-term debt from public works and school projects more than doubled from $500 million to about $1.2 billion.

That might seem astronomical, but credit rating agencies and the city's financial consultants say Anchorage's debt level is "moderate" and the city is operating well within its means.

Why the big growth?

The city has expanded in the past decade, fueling demand for new schools, roads and other services, said Mayor Mark Begich.

In the past five years, for example, the city has built five schools and three fire stations. At the same time, the cost of materials like steel and concrete skyrocketed and federal and state funding eroded, he said.

"We've ended up having to carry a heavier load," Begich said.

This year, city and School District officials have proposed seven bonds to pay for additional improvements in the city. The bonds add up to $102.7 million and will be up for a vote on Tuesday.

Plenty of Anchorage residents gripe about the property tax increases that repay the debt.

In the 2006 mayoral race, challenger Jack Frost pounded Begich on high property taxes. Frost lost the race but his message seemed to take: Voters rejected almost three-fourths of the bonding proposed that year. In campaigns for Tuesday's Assembly election, many candidates have resurrected the theme of high property taxes.

Don Smith, a former assemblyman, is one local who believes the city's debt is too high.

"It's not chump change anymore," he said.

However, the property tax growth rate has slowed, and last year taxes paid by the average Anchorage homeowner fell by almost 3 percent, the first time in more than a decade that had happened.

This year, if all of the bonds pass, a taxpayer who owns a $300,000 home could see an annual increase of up to roughly $100 to his or her property tax bill to pay for the bonds and related maintenance costs.

But because the city and School District have broken up the bonds into seven ballot propositions, voters will get to pick and choose which is most important to them.

The question for voters: Do they want to take on more debt to fix roads, schools and swimming pools?

THE CASE FOR BONDS

Well-managed debt can help most people live better lives or invest for the future. They can borrow to buy a house to settle down in or to start a small business.

The same is true for cities. They can pay for a road, school, park playground, fire truck or ambulance today while letting the current and future taxpayers who will benefit pay back the debt over 20 to 30 years.

Local voters obviously agree that over $1 billion in debt is acceptable. They approved every cent of it, and almost every year they OK new ballot propositions allowing the city to issue more municipal bonds.

As a result, they get projects like the new Clark Middle School, the Elmore Road extension or the rebuilding of the fire station off Tudor Road, to list a few recent voter-approved projects.

Since 1986, voters have approved about 70 percent of the city and School District's bond proposals on the ballot, city records show.

The municipal bonds are sold to investors. They are a preferred method for cities to finance large and expensive projects. In Anchorage, the debt from the bonds is repaid from local property taxes and state appropriations.

VOTER REVOLTS

Not all bonds pass muster: Anchorage voters frequently turn down new bonds for recreation, public transportation and school projects.

In recent years, some bond packages to fund school and park projects went down in flames due to voter sticker shock, says Assemblywoman Debbie Ossiander, who represents Chugiak-Eagle River.

"There's been a lot of concern about the size of some of the projects," she said.

In 2001, Anchorage voters rejected all the proposed school projects -- $122 million worth of bonds. The School District didn't propose any new bonds in 2005, but in 2006 voters again rejected all the school bonds -- $98.9 million worth. Since 1989, voters have rejected 38 percent of the School District's proposed bonding.

But voter sentiment changes from year to year. In 2007, the district persuaded voters that $95 million in new debt -- including the current project to rebuild Clark Middle School -- was necessary.

Local voters also tend to reject bonds for certain kinds of public works projects. Though voters almost always pass road and public safety bonds, they have OK'd only 45 percent of the parks and recreation bonds and 54 percent of the public transportation bonds since 1989, according to city records. In all, voters have rejected 31 percent of the city's proposed bonds since 1989 -- totaling $785 million in projects.

Bonds tend to fail if they are out of touch with the community's wants and needs, said Ian Carroll, an analyst with Standard & Poor's, a global financial services company that evaluates Anchorage's municipal bonds on behalf of investors.

"You (need) to show good value to taxpayers and provide good services without the cost of those services going too high. It's a difficult balancing act, at times," he said.

Despite the occasional voter revolts, the tax-supported portion of the city's debt has grown to $436 million in bonds. The School District owes nearly $800 million, but the state pays off much of that debt. Local taxpayers are expected to shoulder $365 million of the school borrowings.

LESSONS LEARNED

School officials are especially aware that some residents are recoiling from the growing debt level.

They've felt it when bond packages fail.

"We have a growing concern in the public about indebtedness," said Ray Amsden, the School District's director of facilities.

The past failures have led to rethinking of how the School District and the Assembly offer bond packages to voters.

Pressure to keep debt down led the School District's decision this year to not ask to borrow more than it paid off last year, for example.

The result? This year, the School District is proposing $43.7 million in new bonds, which will not trigger a property tax hike if voters OK them.

"That's a reaction to the school bond failures," said Ossiander, a former School Board member.

But that strategy is too conservative in the long run, Amsden said. "You begin to not keep facilities up at the level that they should be," he said.

The School District estimates that it needs to spend about $15 million per year on major building renewal projects, he said. But this year, the proposed bonds include only $9 million for such projects, leading to some concern that the district will fall behind on important upgrades, Amsden said.

City officials are also rethinking their approach to parks and recreation bonding, after voters rejected most of those proposals between 2002 and 2006.

For example, the city is reducing its reliance on property tax revenue by enlisting support from nonprofit organizations -- the Rasmuson Foundation awarded the city $6 million last year to rebuild soccer fields, for example. Also, the city has stopped proposing bonds as a way to pay for raw land, Mayor Begich said.

IS THE DEBT TOO MUCH?

Each year, politicians and voters watch and worry over the city's rising debt and property taxes.

But the city's recent steps to manage its debt are gratifying, even to Smith, who erected 40 to 50 "vote no on bonds" signs at major street intersections during the buildup to last year's election.

"In defense of the elected officials, they have been a little more careful in the last several years," Smith said.

During the past four years that Begich has been in office, property taxes increased at a lower average annual rate -- 3.3 percent -- than they did under the previous two mayors.

Last April, Carroll authored a Standard & Poors report that says Anchorage's debt is moderate and paid down rapidly, with about 80 percent of the principal paid off within 10 years and 100 percent within 20 years.

S&P gives the city's bonds a double-A rating -- a high mark -- on the basis of the city's financial management and its growing economy, and rated the city's financial management as "strong."

The good credit rating allows the city to pay lower interest rates to investors -- a bigger bang for its buck.

And it also makes for optimism and support for new bonds to improve roads, schools and parks from the mayor's office.

"We're well below what we can afford. ... Our city's financial health is in order," Begich said.

The city has hired a national investment banking firm, First Southwest Co., to take a periodic look at its debt management.

The firm concluded in its last report, in September 2006, that the city had a reasonable debt level. Annual debt payment consumes about 11 percent of the city's operating budget, according to city finance officials.

School debt will not grow at all this year. It will actually shrink slightly even if the district's two bond proposals pass. That's because the district plans to pay off more debt than it proposes to issue in new bonds.

On the city side, its debt from bonds would grow 7 percent if its five propositions pass, according to the city's calculations.

Find Elizabeth Bluemink online at adn.com/contact/ebluemink or call 257-4317.

How heavy is Anchorage's tax burden?

Anchorage gets its revenue from property taxes while many other cities also levy sales and income taxes.

Here's how Anchorage ranked in 2006 comparison with the largest city in each state for a family of three with a household income of $75,000:

18th highest property taxes

50th highest local taxes overall

Source: District of Columbia government

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