Citizen fiscal scrutineer John Marshall Lee raises a number of questions about city finances in a commentary that he also shared with city finance officials. Finance Director Ken Flatto responded to Lee with a defense of financial practices citing comments from rating agencies.
Commentary from Lee, followed by Flatto:
Holiday time coming? Invitations to parties? Cards wishing you well in a New Year? Gifts to buy? Any of those things on your mind today?
If you have things to buy for current use, 2017-18, which of the following do you do?
A. Consider the cost and your bank balance, and if possible, pay CASH?
B. See that you have some near-term cash flow challenges; use a CREDIT CARD?
C. Know that your annual operating budget is sorely inadequate, and apply for a MORTGAGE to pay a current expense? (Absurd, you say?)
(I write about City fiscal issues regularly. Many people are not interested in the subject in general. Others are bothered by the detail I raise. But I remind any and all that the “devil may be found in the detail,” a great reason for monitors, audits and watchdogs that bark and when necessary clamp down and don’t let go.)
Over the years I have written about city budgets and finances, no one has characterized the taxes we pay as a fair burden. No one has written an editorial or article supporting our city financial practices. No administration of the past decade has done anything to restore faith and respect for local municipal financial practice or acumen. All comment has been negative. Do we need a change? Especially when, as I fear, we opt for a 25-year mortgage, in effect, to buy “groceries” today and pay a higher interest cost?
At its September 5, 2017 regular meeting, the City Council unanimously approved these five matters from the consent calendar:
— Approval of a $99.26 Million bond–the first (*116-16) is for General Obligation Bonds to Fund an Unfunded Accrued Liability due to CT Municipal Employees’ Retirement System (MERS) the bulk of which is the cost of funding retirement overtime benefits (excluding interest) for public safety officers.
— Approval of an additional $93.6 Million bonding–the second, third and fifth matters are for General Obligation Bonds to fund certain Capital needs of the City and to Refund Certain (existing) General Obligation Bonds (to create interest expense savings).
— Approval of more than $3.2 Million in bonding–the fourth (*118-16) is for Tax Anticipation Notes (TANS) to pay Current Expenses and Obligations of the City in our current Fiscal Year 2018.
The first, second, third and fifth are approvals for long term, 20 year or more bonds. It is comparable to mortgaging your home residence. But the fourth one (*118-16) is bonding to assist our inadequate “City fund balance (wallet) because it has inadequate cash flow to pay routine expenses and payroll at critical times of the year. Instead the City borrows enough to get through a two to six month window until property tax payments or other planned receivables may come in. Interest expense is low for TANs.
Thus you can see that the City mirrors somewhat our own personal finances … hoping to keep those things in balance … while growing some wealth in addition (instead of seeing more than $1 Billion of value wiped away from the City taxable Grand List last year including a portion of value on our own homes).
A document for the $99,255,000 bond offering (#116-16) has been available for review. On page 7, the purpose is stated: “The proceeds of the Bonds will be used to: (1) Fully prepay the twenty-six years of all the remaining past service liability obligations of the City to the CMERF as discussed herein; (2) retire a short term taxable bond anticipation note in the amount of $3,228,696.60; and (3) pay costs of issuance of the Bonds.
Page A-13 tells us: “The most recent City TANs issued in the amount of $10 Million in June, 2017 were repaid on July 31, 2017. The City plans to issue approximately $20 Million of TANs in early December 2017 and a second installment of $20 Million of TANs in later December 2017. All such TANs are expected to be repaid by February 1, 2018. The City has authorization of up to $75 Million for TANs issuance.”
Q. What do these two paragraphs indicate to taxpayers as part of City plans?
A. An intention to borrow short term funds at a lower interest rate (about 2%) and pay them off with bonded and higher long term rates (~3-4%) on over $3.2 Million of debt. Thus current expenses of this FY2017-18 OPERATING BUDGET will be funded by long term debt (and the public may never learn the difference.)
Q. Is this plan of the Ganim administration, essentially paying for $3.2 Million of current necessary “groceries” and salaries through a 20-25 year mortgage, shown in the APPROVED Minutes of any Budget and Appropriations meeting or City Council meeting?
A. No. Council approval is absent from the record, apparently never having been sought.
Q. When the dust settles and it is agreed that permission for “retiring a short term anticipation note” was neither sought by the administration or Bond Counsel or the City Council, what will the City say regarding this “windfall” of $3.2 Million?
A. Likely they will tell us it is necessary to make up for lost State revenues. And it is equally likely that they will ignore the lack of notice to elected representatives. Will they be held harmless of consequences?
Q. Did State revenue cuts affect the Bridgeport BOE as well as City anticipated sums?
A. Yes. Perhaps the Council might demand that 50% of these funds be directed to the Board of Education as a cash windfall rather than any City in-kind funding?
Q. Do you now know more than previously about how fiscal governance works in Bridgeport? Are you better at fiscal choices than certain folks in power? Time will tell.
Just for the record, Mr. Marshall Lee, actually people have written articles about our good financial management … and EVERY rating agency has rated the current City financial management team as ‘strong,’ ‘experienced’ and ‘capable’ and several have lauded the financial borrowing plan and budget management prowess of the City managers during these turbulent times.
In fact, in my position, I have documented the cutting costs and savings the City literally millions of dollars in less interest payments and lower billings on long term debt and hundreds of thousands less in costs on TAN borrowings by restructuring the way the CITY issues such TANS through a variety of methods.