On September, 24th, the BET voted on the single most important financial issue that Greenwich faces today and will face over the next several years: how to finance major capital projects. How we as a Town approach this issue has ramifications not only for our capital planning process and our annual budget but also on the mill rate that impacts each and every one of Greenwich’s taxpayers.
Greenwich is a wonderful community. We pride ourselves on our history and traditions, but also on being a statewide leader in municipal financial management. There are times, however, when some traditions conflict with prudent thinking. It is when those two collide that our elected leaders should allow prudent and responsible change to trump dated and risky traditions. Such is the case with long term financing.
This was evident in 2007 when, after many decades of a strict “pay as you go” financial philosophy, members of the BET and RTM recognized that in order to stay on top of a deteriorating capital infrastructure, change was necessary. Under the leadership of former BET member and then First Selectman Jim Lash, and then BET Chair and current First Selectman Peter Tesei, Greenwich first deviated from financial tradition and began to bond for non-sewer capital projects. We called it “modified pay as you go”.
Well, here we are six years later and it is time for Greenwich to once again change and substitute sophisticated, practical and prudent financial thinking for the current burdensome, outdated and risky financing model we use for capital projects. The BET’s current debt policy for financing major capital projects with 5-year bonds, regardless of a project’s useful life, is not only a risky financial policy, it is also unfair to current taxpayers.
At September’s BET meeting the Democrats made a motion to amend the current policy so as to provide the kind of flexibility and sophisticated thinking that rating agencies are looking for. The motion was supported by all six Democrats on the BET, but opposed by all six Republicans (to approve a motion seven votes are required). Judging from recent Republican statements one would believe that Democratic BET members who support long term financing will somehow send Greenwich into a financial tailspin. Nothing could be further from the truth. What we support is a debt policy that provides for a critical and thoughtful examination of how we bond for our major capital projects; some may be over a period of five years but others may be over ten, fifteen or twenty years.
The proposed modification in the language of the policy was prudent and responsible because it would have enabled the Town to be responsive to the economy, to interest rate movements and right now, to take advantage of historically low interest rates. It would have also given us breathing room on the mill rate when we are faced with a perfect storm of issues: large unfunded pension liability, environmental remediation at the Greenwich High School property, and increases in healthcare premiums.
The suggested debt policy modification presented by BET Democrats is a policy that is widely acknowledged as prudent, reasonable, and the norm for AAA-rated municipalities. The head of municipal finance from Goldman Sachs suggested to a BET debt policy working group that a prudent and flexible debt policy should allow for a diversified debt portfolio matching debt maturities to the useful lives of the assets being financed. Such a policy reduces interest rate risk, locks in near-record low interest rates, and creates fairness for taxpayers by spreading out the cost of major facilities rather than heaping the entire cost onto current taxpayer. We need to create optionality and flexibility in our financing practices, and the first and easiest step is to long-term finance some, but not all, of our capital projects.
Greenwich should strive to be one of the State’s most financially astute municipalities when it comes to financing capital projects. The Democratic candidate for First Selectman, Beth Krumeich, has made prudent and fiscally responsible long term financing a key plank of her platform, a position shared by her running mate Selectman Drew Marzullo. As the Democratic candidates for the BET, we hope the majority of the Greenwich voters share our prudent and fiscally responsible approach to bonding for capital projects, and demonstrate that support by joining with many of our fellow citizens, Democrats, Republicans and Independents, by voting for us when they go to the polls on November 5th.
Mary Lee Kiernan
Greenwich Patch will publish election-related letters to the editor through Oct. 31. The submission deadline was 5 p.m., Wednesday, Oct. 30, 2013.)