This type of presentation gives a deceptive and distorted view of the population growth in Georgetown and on which to make long-term debt decisions. The following chart gives a more realistic view of the population growth.
Using a 10-year compound annual growth rate gives a more likely projection over the next 10-20 years (the term of bonds). One can observe the growth rate is 3.59% over the last 10 years. Why would anyone expect it to be substantially different over the next 10 years?
Now let us examine the growth rate of the city debt over the last 10 years.
The 10.48% compound annual growth rate far exceeds the population growth for the city. It is generally accepted that increasing debt faster than the ability to pay the debt payments is unsustainable over longer periods of time.
Some argue that inflation must be taken into account when projecting financial parameters into the future, so let's examine the inflation rate.
The inflation rate over the last 10 years is 2.3% The Texas Public Policy Foundation recommends and Governor Abbott spoke about limiting budget growth to population plus inflation in his "State of the State" message.
Applying that metric to the growth of Georgetown's debt would mean it would be capped at 2.3% + 3.6% = 5.9%. This is slightly less than the 6.2% cap the Governor has targeted for the State.
It is difficult to find consistent debt numbers for the city, however, the total debt identified in the 2015 Debt Overview document to be presented in next week's council workshop is $191,970,008. The city separates the debt into three categories, (1) Tax Supported - $103,056,309, (2) Self-Supported - $16,760,348, and (3) Revenue Bonds - $72,153,351 for the total of $191,970,008. It is observed that is a substantial increase over 2014.
The debt growth rate of 10.48% compared to a population plus inflation growth rate of 5.9% is divergent. This trajectory is unsustainable.
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