Raise the bridge or lower the water?

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Greenwich-Voices-von-KeyserlingThe BET Budget Committee deserves recognition for its firm fiscal discipline by setting a cap for next year’s annual budget with no more than a 2.5% increase in the tax mill rate.

This is particularly critical in the correlation between the three major sectors of the budget, operations (town services), capital (infrastructure and construction) and fixed costs (health and retirement benefits, etc.). If operations is increased above the cap level, then capital and/or fixed costs budgets must be reduced to achieve balance. But reductions don’t have to mean automatic loss in benefit since better approaches or strategy could result in no loss to the town or residents.

The elephant in the room is not the mill rate cap but the town’s retirement fund. Health benefits are massive, but they are already being addressed. The nation’s fiscal collapse reduced the value of the retirement fund assets so severely that we must contribute approximately $19 million this next year from the tax levy. It’s our rate of return on our investments we should be looking at. The key number determining the tax dollar contribution is the assumed 7.5% interest, a very conservative number.

How conservative is conservative? Church and foundation investments have returned 10%-14% lately and these are very careful investors. Some Republicans on the BET have suggested that an 8% target is safely conservative and that would free up $2 to $3 million for capital or operations budgets, roughly the same extra amount produced by a traditional 3% increase in the mill rate.

The great irony is the stand of the BET Democrats. They are very liberal in pushing for a higher level of operations expenses and encouraging a more liberal approach to municipal bonding of capital projects (which is not without basis).  But these same Democrats are ultra conservative in their funding projections for the retirement fund. They aren’t even that comfortable with the earnings estimate of 7.5% and staunchly oppose adjusting the annual cash contribution to a level based on the almost as conservative 8%.

I would not use “hypocrisy” here, but this is a puzzling reversal of traditional political party philosophy.

Extra money from the fixed cost budget won’t help the capital budget. We do have the cash flow capacity but not the operational and staff capacity to properly handle more than a certain volume of capital project work. The BET, Parks & Rec and DPW were quick to make the Hurricane Sandy repairs a priority. We will be reimbursed by FEMA, but not before the summer beach season. However, the shift in staff assignment will mean that other normal projects and maintenance will be bumped back. The same would be true for the normal capital projects in the CIP.

If we want to increase our capital project capacity, the economic solution would be to create a fourth division of the DPW dedicated to managing the $400 million of capital projects which the town anticipates over the next 20 years.

We have moved from the old days of a few big projects a decade to several running concurrently each year. The DPW Maintenance Division has pinch-hit, but we must keep our infrastructure maintenance their priority. We now have the volume which will produce the savings of an in-house capacity, as against the greater expense of outside contractors.

Transferring $2 million from the retirement fund budget to the operations budget would close the gap between Mr. Tesei’s realistic operation budget request and the budget committee’s mill rate cap. Therefore, it appears that the resolution of this week’s annual budget battle lies firmly in the hands of the BET Democrats.

 

Christopher von Keyserling is a Republican and a longtime member of the town’s Representative Town Meeting, though the opinions expressed in this column are his own.

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  • Richard

    I find it disturbing that Town Budgets are subject to the same degree of political orthodoxy that you customarily find in religion. Whether you are a Republican or a Democrat or someone with enough common sense not to belong to any party, the residents of Greenwich are all losers when “good” or “bad” budget decisions are based on party affiliations.

    When people suggest that “infrastructure maintenance” is a priority, one must assume that Greenwich has something close to an ideal infrastructure. Anyone with an ounce of common sense, knows that not to be the case so it begs the question: “Why is infrastructure maintenance a priority when that ‘infrastructure’ lacks vitality and relevance today/”

    Surely, we can do better than blame one party or another for thinking small while our Town continues to decay.

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