What Is Debt Service?

What Is Debt Service?thumbnail
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Published: September 1, 2018 @ 12:00 PM EST

Streets & roads, large construction projects, heavy equipment purchases, large item repairs, improvements to buildings & property – these are the things that a municipal government needs to fund for the benefit of its residents. These types of projects require a significant amount of government funds and much like with personal purchases, most cannot be paid in full all at once. In government, some funds for capital projects are provided through grants from the county or state or the federal government. The rest comes from property taxpayers.

Such projects are financed by municipal bonds (or notes). Think of it as a loan. The municipal government puts out for a loan through what is known as a bond sale and then pays back the principal and interest over time. That payment is known as debt service.

Bond sales are usually held at the end of the year to determine the rate of interest to be paid for that current year’s capital projects. The duration of each bond is determined by its average period of usefulness. That period usually ranges anywhere from seven years to 20 years. But then every year, the current year’s debt service is added to the outstanding debt.

Year
Debt
Authorized
Total Funds
Paid Off
Total Debt Funds
Increased/Decreased
2005
$999,155.00
$735,000.00
$264,155.00
2006
$490,000.00
$742,000.00
$252,000.00
2007
$1,625,000.00
$755,000.00
$870,000.00
2008
$1,740,000.00
$770,000.00
$970,000.00
2009
$2,454,000.00
$780,000.00
$1,674,000.00
2010
$3,610,000.00
$805,000.00
$2,805,000.00
2011
$700,000.00
$1,160,000.00
$460,000.00
2012
$1,020,000.00
$1,195,000.00
$175,000.00
2013
$1,924,000.00
$1,245,000.00
$679,000.00
2014
$1,300,000.00
$1,440,000.00
$140,000.00
2015
$2,030,000.00
$1,475,000.00
$555,000.00
2016
$1,595,000.00
$1,315,000.00
$280,000.00
2017
$2,300,000.00
$1,560,000.00
$740,000.00
2018
$1,583,000.00
$1,610,000.00
$27,000.00

In Roselle Park, as with most everyday people, the goal is to pay off more than is borrowed. Since 2005, that has happened in five out of 14 years; those years being 2006, 2011, 2012, 2014, and this year.

The amount paid off every year is included in the operating budget. This payment is a line item in the expenditures which impacts property taxes.

As of this year, the total outstanding debt amount is $19,689,733.25 with a principal amount of $16,137,000 and $3,552,733.25 in interest. $7,783,155 has amounted since 2005.