posted by Mike Madison at 11:18 AM /
There is still more to say about the sale of bonds to finance street paving and sidewalk repairs in Mt. Lebanon.
In The Almanac, Bob Williams quotes Commissioner Dan Miller, who dissented from the decision to authorize the deal:
Pay close attention to the implications of that quotation.
First: Not only is the bond issue designed to cover street repairs (which Mt. Lebanon has paid for with bond financing from time to time in recent years), it is also designed to cover sidewalk repairs. The residents of Mt. Lebanon reasonably expect that the Municipality has enough cash in the operating budget to keep sidewalks up to date. These aren't extraordinary or unexpected sidewalk renovation; this is upkeep. This is the sort of thing that citizens and taxpayers expect to be accounted for in the annual budget that is so helpfully distributed to everyone in MTL magazine. And we're borrowing money for this? Like we didn't know that this was coming?
Second: But we did know that it was coming. As Dan Miller points out, back in December a majority of the Commission (not including Dan) voted to take sidewalks out of the annual budget -- with the result that the majority of Commissioners were able to tout a trivial "tax reduction" with no reduction in services. Raja posted a summary of December events on his blog that is proud and enthusiastic about the cost savings.
The most cynical version of the story here -- a version that Dan doesn't indulge, but nothing stops me from speculating -- is that that the Commission was/is trying to hoodwink the citizens of Mt. Lebanon: Pay attention to the tax cut! Don't pay attention while I pick your pocket! Re-elect me!
The less cynical version of the story is that the Commissioners just weren't paying attention to the implications of what they were doing. They cut sidewalks, then (I suppose) heard from constituents who legitimately wanted sidewalks restored, and then were caught with their pants down -- an obligation to maintain sidewalks and no way to pay for it.
That explanation doesn't call for cynicism, but it does call for an accounting. These are smart, sensible, experienced men, at least some of whom campaigned for the job on the basis that they would bring rational fiscal policy to the Municipality. On his blog, Raja justifies the new bond issuance on the ground that Mt. Lebanon can amortize issuance costs over a larger bond, given that Mt. Lebanon has borrowing capacity available. But he doesn't explain or justify the need to borrow at all for sidewalks, which could have been paid for in the regular budget. He doesn't note that including the cost of sidewalk repairs in the bond will affect the amount of money available to repair streets. He doesn't explain or justify the need to borrow for street improvements generally, when Mt. Lebanon has done that at times in the past, but not regularly. There is a case to be made for borrowing here rather than spending out of annual revenues, but neither Raja nor the Commission has made it. (That case would be something like: "True capital projects require a consistent funding source that doesn't fluctuate with annual tax receipts.")
One clear implication of this sequence of events is that the Commission's decision to give us a tax "cut" back in December means fewer street repairs this year. So much for tax cuts coupled with consistent levels of service. We can't have our cake and eat it too, or, there really is no such thing as a free lunch.
Nor has Raja or the Commission justified or explained the "wrapping" of the bonds.
Lots of action; no explanation. And based on Dave Franklin's review of the process, a little bit of after-the-fact rationalizing, but remarkably little before-the-fact inquiry into the why or how of all of this. Is this how they run their own firms? Is this the future of Mt. Lebanon?
Demand explanations.
In The Almanac, Bob Williams quotes Commissioner Dan Miller, who dissented from the decision to authorize the deal:
"Streets should be done every year. Sidewalks should be done every year. In December I voted against taking sidewalks out of the budget. Sidewalks should have been in the budget. But the majority decided to take sidewalks out of the budget. Now what the majority is doing, is taking a routine annual expense and putting it in a bond issue. So over 20 years instead of paying dollar to dollar, we are paying interest on the debt. At the end of the day, we are spending $3.7 million on a $2.1 million bond.
"By taking out sidewalks from the 2009 budget we were able to give you a tax break. Mt. Lebanon residents got an average $15 back. But now we are saying, we gave you that $15 back, we are going to actually take debt on that $15 that we gave you instead of doing the sidewalk program," Miller said.
Pay close attention to the implications of that quotation.
First: Not only is the bond issue designed to cover street repairs (which Mt. Lebanon has paid for with bond financing from time to time in recent years), it is also designed to cover sidewalk repairs. The residents of Mt. Lebanon reasonably expect that the Municipality has enough cash in the operating budget to keep sidewalks up to date. These aren't extraordinary or unexpected sidewalk renovation; this is upkeep. This is the sort of thing that citizens and taxpayers expect to be accounted for in the annual budget that is so helpfully distributed to everyone in MTL magazine. And we're borrowing money for this? Like we didn't know that this was coming?
Second: But we did know that it was coming. As Dan Miller points out, back in December a majority of the Commission (not including Dan) voted to take sidewalks out of the annual budget -- with the result that the majority of Commissioners were able to tout a trivial "tax reduction" with no reduction in services. Raja posted a summary of December events on his blog that is proud and enthusiastic about the cost savings.
The most cynical version of the story here -- a version that Dan doesn't indulge, but nothing stops me from speculating -- is that that the Commission was/is trying to hoodwink the citizens of Mt. Lebanon: Pay attention to the tax cut! Don't pay attention while I pick your pocket! Re-elect me!
The less cynical version of the story is that the Commissioners just weren't paying attention to the implications of what they were doing. They cut sidewalks, then (I suppose) heard from constituents who legitimately wanted sidewalks restored, and then were caught with their pants down -- an obligation to maintain sidewalks and no way to pay for it.
That explanation doesn't call for cynicism, but it does call for an accounting. These are smart, sensible, experienced men, at least some of whom campaigned for the job on the basis that they would bring rational fiscal policy to the Municipality. On his blog, Raja justifies the new bond issuance on the ground that Mt. Lebanon can amortize issuance costs over a larger bond, given that Mt. Lebanon has borrowing capacity available. But he doesn't explain or justify the need to borrow at all for sidewalks, which could have been paid for in the regular budget. He doesn't note that including the cost of sidewalk repairs in the bond will affect the amount of money available to repair streets. He doesn't explain or justify the need to borrow for street improvements generally, when Mt. Lebanon has done that at times in the past, but not regularly. There is a case to be made for borrowing here rather than spending out of annual revenues, but neither Raja nor the Commission has made it. (That case would be something like: "True capital projects require a consistent funding source that doesn't fluctuate with annual tax receipts.")
One clear implication of this sequence of events is that the Commission's decision to give us a tax "cut" back in December means fewer street repairs this year. So much for tax cuts coupled with consistent levels of service. We can't have our cake and eat it too, or, there really is no such thing as a free lunch.
Nor has Raja or the Commission justified or explained the "wrapping" of the bonds.
Lots of action; no explanation. And based on Dave Franklin's review of the process, a little bit of after-the-fact rationalizing, but remarkably little before-the-fact inquiry into the why or how of all of this. Is this how they run their own firms? Is this the future of Mt. Lebanon?
Demand explanations.
6 Comments:
Mike, I have been a frequent reader of your blog, but a first time commenter. Thanks to you and Dave Franklin for pushing this issue. Embarrassingly, while I have watched many a school board meeting in recent years, I have been what I would label “an absentee landlord” when it comes to overseeing my interest in the township through the work of the commissioners. Shame on me.
What I find most troubling in Dave’s post from the other day was this line: "Mr. DeIuliis noted that the ONLY reason that he was voting for the bond was because the municipality had already signed the contract and the contractor had already started to perform."
Reading the last line of the Almanac article you cite it states: “The actual sale of the bonds was the morning before the commissioners voted to approve.”
I’m not a student of Mt. Lebanon’s Home Rule Charter or the Municipal Code/Ordinaces that undoubtedly define in more detail the powers of the Commissioners, but I have to ask: How can we (Mt. Lebanon) enter into a $2 million dollar road/sidewalk improvement contract and actually sell the bonds to finance such a project prior to the Commissioners actually conducting a hearing on this issue and voting to approve the measure(s). Unless of course this was all worked out long ago when the residents of this community received their $15 a year tax cut.
I’m not big on conspiracy theories, but I do think that your “self preservation” theory is spot on. “Re-elect me, I cut your taxes.”
And sadly as Dave laments in a later post/comment about whether the Commissioners are in fact listening to their constituents, my fear is that too many have acted like me. “Oh, you’re not raising my taxes … okay, I can go back to what it was I was doing until next year’s budget debate comes up.” Hopefully this serves as a wake up call for more of us.
Dont you think if this was about getting re-elected that Mr. Daley would have voted against the bond. He is the only one up for re-election in November. There has to be more to this. I am not sure what it is, but I hope we find out. Like Mr. Bruni I have been an "absentee landloard," many of us have been. We all need to get more involved and get to the bottom of this.
I am glad to find some common ground with Mr. Franklin this time.
Short term borrowing would be fine to cover one year's shortfall if we pay up the next year. But I completely agree you don't incur long term debt for regular ongoing expenses. Long term debt is for funding investments. When did all the smart people in this country forget that?
Borrowing money to give people a tax break is the same old tired ideology that we have seen at the national level for the last nine years. It is a prime example of a whole class of upside-down thinking that has gotten this county into a real jam. I am sorry to see it manifest at the local level, if that is indeed what I am seeing.
Also, remember that the cumulative effect of everyone's micro economic decisions to borrow adds up to a gigantic net national debt to China and the oil producing countries. This is the economic equivalent of eating the young. You can't begin to affect that without making concrete lifestyle changes, starting with a serious personal commitment to pay-as-you-go.
Please, Mr. Brown, don't try and correlate what has gone on "over the past nine years" with this particular dose of chicanery at the local level. You are inferring that because President Bush cut taxes that our national debt has exploded and the economy went into the tank. Unlike the goofy arguments about temperatures and global warming (now "Climate Change") it is pretty easy to track national revenues to the Federal Treasury after the marginal tax rate has been cut by Presidents both Democrat and Republican alike over the past eighty years or so....
A simplified version for your reading pleasure can be found here, http://www.mackinac.org/article.aspx?ID=676
The reality is that it is the SPENDING that our elected politicians have and continue to engage in that has left us in misery both on a local, state and national level. It is unfortunate that supposedly level-headed individuals here in Mt. Lebanon have decided to engage in a spending frenzy equivalent to what has gone on over the past six months in every area of the budget. The municipality has wrapped all of its bonds for the new Public Safety building and Municipal Center, the schools are wrapping their bonds on the renovations of the elementary schools and want to borrow more than they are even legally allowed to do for the construction of the new high school, and now we have incurred 3.7MM dollars in new debt for a few streets and sidewalks.
For whatever reason intelligent people at every level are refusing to learn from past mistakes. I just don't get it.
Hi Bob,
I started counting at approximately the last time we did not run a deficit, which I believe was around 1999 or 2000. I said nine years because I'm also counting the current administration so far.
But my point was that, whatever level of spending is decided, "tax and spend" is preferable to "borrow and spend."
Dave
Dave- I would add, if you don't have it, don't spend it until you get it- otherwise, agreed.
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