DATE: Wednesday, September 10, 1997         TAG: 9709100001

SECTION: LOCAL                   PAGE: B11  EDITION: FINAL 

TYPE: OPINION 
SOURCE: GLENN ALLEN SCOTT

                                            LENGTH:   81 lines

NORFOLK YES, THE CITY IS CARRYING RECORD DEBT, BUT IT'S NOT IN THE RED

``Norfolk's red ink hits high-water mark in '97'' proclaimed the headline.

The report by staff writer Jon Glass (Hampton Roads section front page, Sept. 3), about how much debt the old port city had accumulated by investing heavily in economic development since 1990, was illuminating.

But the ``red ink'' in the headline should have been blue-penciled as misleading. As Glass reported, Norfolk is carrying $552.2 million in bonded debt and obligations. That sum is more than twice the total of the $224 million debt in fiscal 1990, when the general-fund budget was $376.5 million.

But Norfolk is in the black, living within its means, balancing its budgets with recurring revenues. The fiscal 1998 general-fund budget calls for more than a half-billion dollars in spending, including debt service, to which 10 percent of the budget is dedicated.

The FY98 budget is tight, of course. The city has slashed staff and raised taxes and fees in the 1990s to produce balanced budgets. In recent years, Norfolk has been retiring debt at record levels - $20.2 million in 1995, $23.4 million in 1996, $26.1 million in 1997.

No windfall for the municipal treasury is expected this year or next. But neither is ``red ink'' a prospect. Before 2000, Norfolk will be reaping tax revenue from MacArthur Center, upscale housing between Boush and Duke streets, a new hotel at City Hall Avenue and Granby Street, and new housing at East Ocean View and Stonebridge Crossing (bordering the Norfolk State University campus).

Meanwhile, Waterside festival marketplace and Harbor Park are carrying their weight. The city subsidy to Nauticus is running about $500,000 a year and could shrivel further after MacArthur Center opens.

Norfolk need no longer offer immense incentives to entice investors. Yes, like its neighbors, it will still have to come up with deal sweeteners. But Herculean inducements should no longer be necessary.

Norfolk's bonded debt is not permitted by law to rise above 10 percent of the assessed value of taxable real estate within the city limits.

Norfolk's self-imposed debt limit, adopted to maintain a favorable rating in the bond market, is 7 percent of assessed value. With wide-open eyes, City Council has authorized debt higher than its 7 percent ceiling. Currently equal to 7.3 percent of assessed value, the debt is projected within the next five years to decline to less than 5 percent. Norfolk's rapid running up of debt to underwrite or stimulate major economic projects is over. City council is now bent on paying the debt down.

That Norfolk's taxes and fees are, with four exceptions, higher than any other Hampton Roads municipality's is undesirable. Among other drawbacks, high taxes and fees are a disadvantage to the city when competing for new investment or attempting to retain existing businesses and residents.

Below-average income and housing values and above-average per-pupil expenditures for education and social-welfare programs add to the city's handicaps.

That so much real estate within the city's boundaries is exempt from taxation (41 percent of assessed land) is another big problem for Norfolk.

Yet Norfolk's financial condition may now be sounder than at any time since its founding nearly four centuries ago. And its outlook brightens. For Norfolk has arrested decay. Its public schools are better in some respects than the perception of them. And Norfolk cargo terminals are the busiest in the port of Hampton Roads, which could overtake New York/New Jersey in the 21st century.

The colleges and universities and medical complex within Norfolk are thriving. If City Hall will do its part to expedite Old Dominion University's ambitious plans for a university village, the city's economy and tax base will be further strengthened. Norfolk also maintains its position as the regional arts-and-cultural center.

Not bad. Now Newport News, Norfolk and Portsmouth have set out together to win state payments in lieu of taxes for Virginia Port Authority property in the three cities, and a Norfolk City Hall team is exploring ways to coax revenue from some tax-exempt real estate.

The 21st century may see reversal of the socioeconomic slide of central cities, which were drained of vitality by the migration of middle- and upper-middle-income Americans to the suburbs after World War II (federally aided by money for roads, VA and FHA loans and mortgage-interest deductions).

Thanks to the base for rebirth constructed during a half-century of business and professional leadership on City Council, Norfolk could be in the forefront of any urban resurgence. MEMO: Mr. Scott is associate editor of the editorial page of The

Virginian-Pilot.

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