Electing Krumeich and BET Dems will be ‘smart’ financial management

Bill-Gaston-Greenwich-VoicesPeter Tesei, recently honored by the state Republican Party as “First Selectman of the Year,” surely considers himself a “smart” steward of the town’s fiscal health.

Last month, in his annual State of the Town address, he said Greenwich has acted prudently by adhering to its debt ceiling, and limiting borrowing to only short-term financing. He boasted that the town has invested heavily in infrastructure improvements over the past decade.

But how “smart” have Mr. Tesei and the Republican-controlled BET actually been in relying on short-term financing and a modified “pay as you go” approach when it comes to paying for infrastructure?

If you ask town Democrats, they’ll tell you “not too smart.” That’s why, at the top of the ticket, Democratic first selectman candidate Beth Krumeich has made “smart financing” a keystone of her campaign.

“We are wasting taxpayer funds by stubbornly insisting on financing long-term projects with short-term bonds,” says Ms. Krumeich.

She and Democratic BET members believe that Republicans’ refusal to consider the matter — in October, the BET rejected a Democratic-sponsored motion to consider long-term financing on a 6-6 vote, with Republican Chairman Mike Mason casting the tie-breaking vote —  is shortchanging Greenwich residents. It’s time for a change, Democrats say.

Democrats argue that shoehorning the backlog of infrastructure investments into a rigid five-year debt limit schedule is not “smart” finance. And it’s not how other AAA-rated towns in Connecticut, like Darien and New Canaan, manage their finances. Nor is it how towns with higher debt ratios than Greenwich (but still very low levels of debt compared to other AAA-rated Connecticut towns) do it either. Unlike Greenwich, all of these towns rely more heavily on long-term financing.

Our overreliance on short-term debt amortization — coupled with the higher-than-necessary debt service that goes with it — forces Greenwich taxpayers to shoulder projects that disproportionately benefit future taxpayers. The modified “pay-as-you-go” approach not only puts more upward pressure on the mill rate, it sets a limit on the infrastructure projects the town can reasonably undertake.

That means residents ending up paying more for these projects. How “smart” — or fair — is that?

Democratic BET member Randall Huffman is rated as one of the top municipal finance lawyers in the country. He said, “Professionals in municipal finance are puzzled that Greenwich won’t even give serious consideration to a more sensible approach to financing investments in infrastructure.” The head of municipal finance from Goldman Sachs recently appeared before the BET and said this refusal to consider long-term financing runs counter to sound principles of financial management.

The long list of capital projects languishing under the straightjacket of short-term debt is well known by now. It includes dredging Binney Pond, replacing our leaky, undersized Byram pool, routine school maintenance (which is now cut to the bone), and upgrades of our deteriorating firehouses and public parks. These investments are not frivolous spending items, as some Republicans like to argue. They are essential to preserving real estate values and maintaining our quality of life.

Given that interest rates remain at near record lows and that the town boasts stellar AAA ratings, long-term financing — as opposed to higher property taxes, which no one supports — may be the most cost-effective approach. Doing so now makes more sense in the current low-interest-rate environment before inflation and higher interest rates make these investments much more costly.

In a recent Post column, BET member and Democratic candidate Sean Goldrick wrote, “We should be seriously considering locking in record-low interest rates and lengthening maturities to reduce pressure on the mill rate.”

On Nov. 5, a vote for Beth Krumeich for first selectman and for a Democratic BET may be the “smart” way to set Greenwich’s financial house in order.

 

Bill Gaston is a vice chairman of the Greenwich Democratic Town Committee, but the opinions expressed here are his own.

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