Krumeich’s policies would saddle Greenwich with debt

FI-Letter-to-the-EditorTo the Editor

It’s revealing how Beth Krumeich’s challenge to Peter Tesei for first selectman exposes the true tax-and-spend philosophies of local Democrats.

Pay as you go is a timeless tradition that’s allowed Greenwich to endure financial boom and bust cycles for almost a century and made us the envy of the nation. Progressives tout the advantages of low interest rate borrowing at longer maturities as an argument for irresponsible spending. Krumeich states that “money paid now costs more than money paid later” and clearly confuses present value analysis with the cost of financing.

To illustrate, assume financing a $1-million town project. A seven-year project and 20-year project both have the same present value, $1 million, because in both cases this is the project cost. The more important question is which alternative has the cheaper financing? Krumeich claims “paying for projects over seven years is much more expensive than costs spread over 20 years.” Not true.

Comparatively, current rates from Treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=yield show seven-year rates at 2.0% versus 20-year rates at 3.4%.

In seven-year bonding, taxpayers pay $20,000/year for seven years. Total interest payments over term are $140,000 and we pay $1 million principal at the end of the term. In 20-year bonding, taxpayers pay $34,000/year for 20 years. Total interest payments over term are $680,000 and we pay $1 million principal at the end of the term. The cost of bonding for seven years is $140,000 and 20 years it’s $680,000. The 20-year term is almost five times the cost and indebts the taxpayers for three times the term.

Ultimately, shorter-term maturity is the more prudent path to take.

Krumeich cites “experts” touting the benefits of excessive leverage over longer maturities during a debt crisis which will probably become the largest financial bubble in history, including unprecedented current debt levels: federal at $17 trillion, state/municipal — $7 trillion.

She, like her friends in Hartford and Washington D.C., need to realize saddling our children with debt-fueled excesses of today is unacceptable.

Join me in support of pragmatic fiscal conservatism and vote for Tesei, Theis, Laudonia, Budkins, and BET Republicans.

 

John Lucarelli
Greenwich

By participating in the comments section of this site you are agreeing to our Privacy Policy and User Agreement

© Hersam Acorn. All rights reserved. The Greenwich Post, 10 Corbin Drive, Floor 3, Darien, CT 06820

Designed by WPSHOWER

Powered by WordPress