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In upcoming years, it could be wise for the city to take on more debt, city Finance Director Don Taylor told officials earlier this week.

In the next five years, the city's debt load will be cut in half as payments drop for long-term debts. The topic of the city's debt load came up at the City Council's annual budget review Tuesday.

"You can start engaging the community about the next big facility they would like to see and start planning for that," Taylor said.

In 2005, the city had budgeted $1.2 million for payment of debt. By 2009, the amount is expected to take a dramatic drop to $500,000.

The cause of the drop is a number of projects completed 15 years ago. Their debt load decreases sharply in five years. One of the projects was the $4 million bond to fund recreational improvements such as to the Yampa River Core Trail, improve the rodeo grounds and upgrade Howelsen Hill facilities. Another project was the Steamboat Springs Airport terminal in 1992, which gave the city a $2.8 million debt.

Taylor told the council that debt can be a good thing in the right amounts.

"Like businesses, it is good for organizations to have a certain amount of debt to leverage what it can," Taylor said.

Governments typically should have 10 percent to 20 percent of their revenue in debt service, Taylor said. Even at its current level of debt and with the general fund revenue at $20 million, the city is below the 10 percent mark. With the $500,000 debt service predicted in 2009, the percentage will be far less, Taylor said.

Debt for city governments can be enticing because the interest rates on bonds is fairly close to the rate of inflation, Taylor said.

"The cost to borrow is pretty small," Taylor said. "It makes sense to do bond issues from time to time to do projects."

A major capital improvement project the city is considering for its 2005 budget would add slightly to its debt.

A proposed $4 million project to build a clubhouse at Haymaker Golf Course would add to the city's debt, but not enough to bump it back into the 10 percent bracket. The city is considering using a lease-purchase agreement, which would come from money raised through the accommodation tax, to cover the cost of the clubhouse.

Although the council has not approved the project, it agreed to discuss it later this month.