City Council voted on Jan. 9 to increase the City’s debt limit from $90 million to $113 million, not including amounts owed for pension obligations.

In some ways, the debate mirrored similar efforts on the federal level. But in other ways it was substantially different, most significantly in that City projections show a trend downward starting in 2013.

Evanston’s tax-supported general obligation debt consists of debt incurred by selling bonds to pay for capital projects. Typically, capital projects include large-scale public works renovations such as the sewer and water-main upgrades and replacements.

Historically, though, Evanston has dipped into the borrowed-money pot for projects such as sidewalks, road resurfacing and other public works. Ninth Ward Alderman Coleen Burrus has often said she believes such projects qualify more as maintenance than capital projects.

The debt limit, set by City Council, is a City budget policy rather than a hard and fast rule and thus serves as guidance only. Alderman Donald Wilson, 4th Ward, said, “Caps and limits are arbitrary.”

In fact, the City has already blown past the current $90 million policy limit, to more than $101 million, and the debt is expected to peak at more than $112 million in 2012 and 2013, according to a staff memo accompanying the resolution to increase the debt limit.

The policy on debt limit makes a difference in some circles, however, because although the ratings remain stable, the City could face trouble borrowing.

The City of Evanston’s debt (in the form of bonds) remains “AAA-rated because of our debt and how we pay it back,” said Assistant City Manager and Treasurer, Marty Lyons. The City may run into trouble borrowing capital funds in 2012 and 2013 unless the policy matches the actual debt level, he said. City staff therefore proposed an increase from $90 million to $120 million.

At the Administration and Public Works Committee meeting on Jan. 9, Ald. Burrus objected to the amount of the proposed increase.

The City needs to “pay as we go,” she said – a sentiment echoed by Ald. Wilson. She also said the Council should follow a suggestion by City Manager Wally Bobkiewicz that the City fund some capital projects from the operating budget (the General Fund) rather than paying for them by issuing bonds.

The current budget allocates $5 million of operating funds for capital projects.

While she did not oppose an increase to match the current level of debt, Ald. Burrus said she “had problems going above $110” million.

Alderman Delores Holmes, 5th Ward, suggested a limit of $115 million, saying that with a projected debt of more than $112 million, $115 million also leave a little room for unforeseen adjustments.

Alderman Jane Grover, 7th Ward, suggested $113 million, and Ald. Holmes agreed. Ald. Burrus stuck with her figure, and the resolution passed out of the Administration and Public Works Committee and on to City Council by a 2-1 vote.

All three aldermen on the Administration and Public Works Committee noted the positive trend.

The staff memo showed a peak in 2012 or 2013, then a downward slope thereafter. “The trend is going in the right direction, which is downward,” said Ald. Grover.

Obviously, the changing trend has not come without significant sacrifice, as the City’s reduced staffing levels, increased taxes, and proliferation of new and increased fees, clearly indicate.

The trend toward lower debt is not good enough for all. At citizen comment, 7th Ward resident Kevin O’Connor said that “with pension obligations added, we are beyond bankrupt,” then urged the City to file for bankruptcy immediately.

Council members showed no indication that they would consider his suggestion.