Borrowing money getting expensive

It’s problematic for public agencies that seek to raise money for big projects paid for by their taxpayers via voter-approved bonds. Cost projections based on previously low interest rates have become out of date in too many cases.

An example: If the interest rate for a long-term $100 million bond package was projected to be 2.5% last spring, the annual borrowing cost would be $2.5 million; an unanticipated increase to 5% would double that figure to $5 million yearly.

In the end, soaring rates, once loans are activated, can put a crimp in construction plans going forward. Taxpayers could wind up paying more than initially estimated. Projects can be delayed or reduced in scope to make up the difference.

And it may get worse during a period of booming inflation. The actual price tag for physical aspects of the construction work itself (materials, transportation, professional fees, etc.) also rises right along with the painful higher interest rates.

So it can become a double-whammy of sorts. That has to be on the minds of public officials who are in the midst of shepherding new projects financed by previously approved bonds or who have bond packages pending before the electorate Nov. 8.

For years, very low rates made borrowing cash attractive and very cheap. It was a period of easy money. Not so now. It’s a stark financial reality that has to give authority figures some pause.

There is an important caveat to consider, too, according to one retired public agency fiscal director who cautions: “We are headed for a recession. That means construction costs could actually come down.”

She noted cautiously, “You have to see the big picture. It’s complex.” Very.

FREE CHILD CARE ISN’T FREE: There are any number of questions surrounding a controversial ballot measure in South San Francisco.

As we noted, not long ago, Measure DD is a bold attempt to secure massive sums of cash from large South San Francisco employers to finance free child care services for all South City toddlers.

Based on the proposal’s specifications, kids between the ages of 2 1/2 and 5 would be the target demographic. The amount to be raised via a parcel tax on medium-sized and large office buildings is estimated to be $56 million if the measure is approved by a simple majority of voters next month.

How many youngsters are we talking about? The reported number is 3,496, according to a municipal report. Those include youngsters who live in South San Francisco and those whose parents work in the city.

If that city-generated total is reasonably accurate, the estimated cost per child at full rollout would be about $16,000.

For comparison, the South San Francisco Unified School District spent $14,600 per pupil in 2020-21, according to data provided by the state Department of Education.

The city’s analysis also projects a need for 379 child care workers if Measure DD passes. South San Francisco Councilmember James Coleman, a prime mover of the proposal, said those would be public employee union jobs, with all appropriate health insurance benefits, pensions, etc.

A SCREAMING EAGLES EVENT: It was 1968, a year of tumult and tragedy throughout the United States. The Vietnam War was raging; racial tension was high; key national leaders were assassinated; divisions among the populace were wide and growing.

Into that cauldron, the city of San Mateo decided to adopt a unit of the U.S. Army’s 101st Airborne, the Screaming Eagles. It was a signature moment in the community’s history.

On Saturday evening, beginning at 5:30 p.m., the city will host several members of the 101st in a reception and book-signing by author Linda Patterson, a prime mover in the original adoption plan, at the Main Library. The title of her book is “A Dove Among Eagles.”

Please visit www.cityofsanmateo.org/101st for more information.

Contact John Horgan by email at johnhorganmedia@gmail.com.