LETTER: Writer responds to anonymous letter
Wednesday, March 07, 2012 6:05 AM
Since you didn't sign your letter, I have to respond through the Herald.
Your letter you sent to me is off the mark, except where you say that I "have continually campaigned for responsible financial management of city funds."
Mike Bubany, the city's financial advisor, told the 2007 city council to pay off the pool bonds as soon as possible (see Herald article). That is the best choice; however, Bubany's advice was not followed.
According to preliminary calculations by a banking professional, the existing pool debt could be paid off in 6-7 years if the city cut $130,000-$150,000 per year out of its regular budget and redeemed some of the bonds each year.
That, combined with the regular principal payments on the remaining bonds, would wipe out the debt, save a lot of interest and save the $50,000 refinancing fee.
The new bonds (if the city refinanced) would not be callable without penalty until the ninth year.
The $50,000 refinancing fee would be paid for in the bond issue, meaning we would pay interest on that. It would take several years to recoup the fee from the interest savings.
Given the city's history of financial mismanagement, the taxpayers have a right to ask questions now; so there are no more surprises later.
While I know that the May tax bills will be lower than the preliminary ones for the Truth in Taxation hearing (there is still a tax increase but not as big), the lowering was apparently made by filling in the gap between taxes and spending by pulling money out of the city's reserve fund, not by spending cuts.
The state auditor recommends a specific reserve level; eventually the taxpayers are going to have to replenish the fund. The amount of reserves and city debt determines the city's credit rating.
A city with a low credit rating has to pay higher interest rate when borrowing. What is the city's credit rating? Are the low interest rates guaranteed for us?
The residents have never seen the new Capital Improvement Plan that the taxpayers are beginning to fund. Perhaps, the money should be used to redeem bonds for the present.
The current information is that all single-family owner-occupied homes will comprise this Tax Abatement District (TAD) to refinance the pool, and the TAD will not include rental units or business parcels.
Does this violate the law, which limits how much of a city's property can be in a TAD? How will the TAD affect the city's credit rating and ability to bond for sewer and water in the future? How does this affect future property tax raises? Is the pool a permitted use for TAD?
Refinancing will not reduce your taxes. The 2007 council began budgeting $115,000 per year toward the day when all pledges would be in, and the taxpayers would be paying the whole $143,000.
There should be a good balance accrued. There is still the $30,000 per year for 10 years. The EDA owes $45,000 on its pledge. How will the money be used?