FAQs - Details

Question

How do large capital items like a road project or a new swimming pool get funded?

Answer

There are three (3) principal ways to fund major financial projects. As you know, there are grant sources available for some projects. The City of New Castle is pursuing grants for a wide range of projects. Unfortunately, grants almost always require a local match and very seldom provide sufficient revenues to complete the project. In such cases, the City must borrow sufficient funds to complete the project. This is done through long-term or bond indebtedness. A bond ordinance must be approved by the City Council. The bonds are then repaid by additional tax moneys or higher utility rates. If the bond is to be paid through the general fund by increasing the property tax levy, the project, after approval by the City Council, must also be approved by the Department of Local Government Finance. If that department determines the project to be needed and reasonable, the City may, through its ability to tax property, increase its property tax rates in accordance with its bond ordinance. In the case of utilities, the money needed to repay the bonds is added into the utility rate. Once again, in the case of water rates, those must be approved by the Indiana Utility Regulatory Commission. These major capital improvement projects funded by tax dollars should not be confused with the budget process. These stand alone and should be considered on their merits, if and when they arise.