Voter apathy and having the wrong people in office cost Bossier City more than first realized.

Beginning almost three decades ago, the city, doing decently financially, went on a spending spree. Dissatisfaction across the Red River with the State Fairgrounds’ arena for events, particularly ice hockey, aroused the City Council to count coup on Shreveport and build its own. Controversy ensued over its siting and costs, with the numbers initially bandied about eventually almost doubling. What followed was a parking garage tied to a private development that soon teetered into receivership, the city contributing about a third of the expense for a high-tech office building that failed to attract its intended client and took years to find any substantial tenants at all, construction of compressed natural gas alternative fuel stations requiring more expensive city vehicles that quickly turned into a money-losing proposition, and building a $50-million-a-mile road that didn’t do fully what it was supposed to and perhaps has increased accidents.

None of this was needed, but it seemed to be cool and made it appear that councilors and the two mayors involved were doing something to make the city more than America’s biggest small town posing as a bedroom community, enabled by an inattentive electorate. Its own arena! A destination outdoor shopping center! A Silicon Valley-like building to land a new Air Force command! Leveraging shale assets to skim the cutting edge of low-emission transportation! Relieving congestion on major arteries for the growth boom ahead! Which hardly came, although had the Walter O. Bigby Carriageway been built for its purpose of a true north-south corridor from downtown to the foot of Interstate 220, an extra $20 or so million might have made sense. But that couldn’t be pursued because of the over $100 million wasted on these other things that made the proper extension unaffordable, adding debt and interest owed needlessly.

But this week’s Council meeting laid bare the additional costs beyond this $200 million or so. One item dealt with increasing costs of reconstruction of the alternative fuel stations, now at about $1 million. It turns out that a tank used to hold liquid now leaks, so another will have to replace it. Originally, when the city finally decided to throw in the towel after years of losses, it tried to sell the facilities into which millions of bucks had gone originally, but it couldn’t even entice a buyer at a fraction of that amount. So, it was decided to repurpose these to serve city vehicles using typical gasoline and at least find a pittance of savings.

Still, the waste on these might pale compared to money lost on inferior financing arrangements. The Council also dealt with a bond refinancing of debt issued over a decade ago when the Carriageway first began construction, a maneuver it has engaged in a few times already since the new Council entered office 13 months ago.

Republican Councilor Joel Girouard described these two series as particularly onerous. He said this refinancing would save about $3.5 million over the next decade, particularly because they started as interest-only coupons. That’s not atypical for a municipal bond, but the problem is these variable rate demand obligations often have a put option allowing the buyer to sell back to the entity when rates reset. In a falling interest rate environment, as was experienced in most of the period since 2015 (with ups and downs along the way, although with a big plunge in 2020 before heading back higher) until the past four years, if too many are redeemed, a city may get caught having to pay higher interest rates for short-term borrowing if it doesn’t have cash on hand to handle the redemptions, unless the bonds are immediately sold to other buyers at the new interest rate.

In other words, a city that borrowed to the hilt, as Bossier City did, not only had to suffer incrementally higher rates because of its exposure, but also in this environment is more likely to get caught out and pay extra because so much debt leaves less wiggle room to meet calls, unless it cuts services. Thus, converting the bonds into a fixed rate provides more predictable coupons and savings, the larger point being that perhaps a VRDO was the best a city with a high debt burden, as Bossier City had, could do back then.

We can count the excess $200 million that never needed spending as a loss and add to that somewhere in the neighborhood of $150 million (assuming a 3.75 percent rate over 20 years) in interest paid out. But part of that is also an unnecessary premium paid out because the city’s high debt load put it at a disadvantage in handling its credit. Thus are the wages of city mismanagement, from which other Louisiana cities (New Orleans being the obvious example) also suffer, and which in their entirety may never be known to their full extent.

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