posted by Mike Madison at 12:20 PM /
Bill Matthews put together an analysis of the recent "paving and sidewalk bonds," of Mt. Lebanon's debt strategy, including an assessment of the impact of "wrapping" bonds, that he shared with the Commission before the recent vote to authorize a new bond issue. [I've corrected this part of the post in light of Bill's clarification in the comments.]
Bill sent a copy to me, and I've posted them here for everyone to read.
[A note to everyone who may have materials to share via the blog: You can post them on the Internet yourself, for free, at http://www.scribd.com/.]
Bill sent a copy to me, and I've posted them here for everyone to read.
[A note to everyone who may have materials to share via the blog: You can post them on the Internet yourself, for free, at http://www.scribd.com/.]
4 Comments:
Are we ever going to hear from the 4 approving Commissioners on the blog or are they willing to let their public comments at the hearing stand alone (I would hope not for their collective sake...)
Stu Getz
Clarification - the analysis in my letter is on the 2004 bond issue. An equivalent analysis could have been done on the recent 2009 bond issue, but I did not have the maturity schedule at the time.
When I did get the maturity schedule, I found it to be be far more offensive. In the 2009 bonds, 87.7% of the principal is not paid until the last three years of the twenty-year issue.
Talk about kicking the sidewalks down the road!
Until 2026 it is interest, on top of interest, on top of interest. Hundreds of thousands of dollars of extra, "unwarranted" interest expense because the Commission is purposefully paying the principal down not for years into the future.
For the record, according to the 2009 maturity schedule, the amount of principal paid each year is as follows:
2010 - $5,000
2011 - $5,000
2012 - $5,000
2013 - $5,000
2014 - $50,000
2015 - $50,000
2016 - $50,000
2017 - $50,000
2018 - $5,000
2019 - $5,000
2020 - $5,000
2021 - $5,000
2022 - $5,000
2023 - $5,000
2024 - $5,000
2025 - $5,000
2026 - $475,000
2027 - $500,000
2028 - $880,000
Again - 87.7% of principal is not paid until the last three years.
Are there other bonds maturing around the same time? I definitely won't be able to afford living here in another 17-20 years from now. First, the high school renovation and now this, what was once a routine annual expense. And if the "municipality" already signed the contract without the consent of the commissioners,are we to hold them accountable? What would have happened if the commissioners voted against this? Sounds like they didn't have that option. Seems like we need to look at the full-time employees who signed the contract.
E. Gillen
It came to my attention over the weekend that a well known and regular commentator on this blog was reportedly recently advised by a municipal public official that the $2 million, 2009 street reconstruction and sidewalk projects were recommended to be financed by a bond issue by the municipal administration (ie. Manager)"from the very beginning" (ie. last summer). Municipal documents, available on the muni website, do not agree with this allegation. To wit:
The muni. 5-year "Capital Improvement Program 2009 - 2013", a/k/a the "CIP", was issued by the Manager on July 30, 2008. On page 18, the planned capital expenditures for street reconstruction are detailed and amount to $1.8 million/year over the entire time period and which were planned to be financed, each year, by general tax revenues, not bond issues ! That was, in fact, "..from the very beginning".
Then, on Nov. 1,2008 the Manager submitted his "2009 Manager's Recommended Budget", in which he stated the budget recommendation resulted in "No change in tax rates" (page 1). This result was undoubtedly derived at the prior direction of several Commissioners. Study of this budget recommendation reveals that sidewalks were to be financed by general fund taxes, not a bond issue (pages 32-33). And, street reconstruction is conspicuously absent in its entirety in the Public Works section of the budget where it is normally included; however, it appears on page 62 as a $1 million "Capital Improvements" expenditure, which is then shown on page 66 to be financed in a bond issue ! Note that on page 66, the remainder of the recommended capital projects to be financed by a 2009 bond issue totaling $6.15 million did not survive the cut as one means of not having to increase tax rates for 2009.
The end result of all this in May/June , however, was that (1) sidewalks were added to the 2009 bond issue, (2)street reconstruction was increased to just under $2 million, (3)the bond issue was structured so that the 1st. debt service payment will not occur until early 2010, which dodges a 2009 *cost* and budget adjustment, and (4)the bonds were "wrapped" in order to minimize an initial tax increase to pay for the bonds but will require additional, excess interest payments of some $600,000 over the 20-year term of the bonds !
Don't believe everything you hear from government , particularly if their official documents state or even suggest otherwise.
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