Panel debates borrowing policies

FI-greenwich-town-sealThe ongoing debate between town Democrats and Republicans over their views on the town’s borrowing policy for projects continued at an information forum held by the League of Women Voters of Greenwich.

The meeting was held in the Town Hall’s Cone Room on Jan. 15, and fiscal policy, specifically the town’s approach toward long-term borrowing, was a major part of the discussion. As part of Board of Estimate and Taxation (BET) policy, the town has limited its length of borrowing to seven years, two one-year financings and then a five-year bond.

However, BET Democrats have argued — especially in the past year — that the town should take advantage of record-low interest rates and extend financing over a longer period of time for some projects.

Mary Lee Kiernan, a Democratic Board of Estimate and Taxation member, pushed her party’s proposal as part of the panel. She said the Democrats believe it makes more sense in a historic-low-interest-rate environment to borrow over a longer period of time for major projects and that it’s more prudent to have a longer borrowing period for major projects instead of the current policy.

“This proposal allows for a mix of maturities that has a rational connection to the assets we are trying to finance and also a connection to what is going on in the capital markets,” Ms. Kiernan said. “I think it is an alternative that is more prudent and a better business practice and more flexible and more fair to taxpayers as well as less risky than our current practice.”

Democrats argue that a longer period to finance projects is more fair to taxpayers, as it removes the burden on current taxpayers to finance a project. They say it is more fair to have people who will be using a public building, like a library, for instance, or a school, in future years to help shoulder some of the cost. This was a major theme of last year’s municipal election as Democrats pushed, ultimately unsuccessfully, for voter support for their slate on the BET.

Two Republicans on the four-person panel, former First Selectman James Lash and former BET member Joseph Pellegrino, rejected changing the policy. Both men have the perspective of being chairman of the ultra-powerful BET Budget Committee and said changes would not benefit the town.

Mr. Lash pointed back to his time as committee head more than a decade ago and said interest rates were higher than they are now. He said if the town had borrowed money over a 20-year period at that time, it would have seen the town stuck with paying higher rates for many years in a low-interest-rate environment.

“If we had been doing what is now being suggested we would have locked in 20-year financing at interest rates that were five, six percent higher than what we ended up paying the last few years,” he said.

He cautioned that even experts have difficulty predicting where interest rates will be and suggested it would be too much to expect town officials to do better than experts.

“Not everybody on the BET, and not everybody in town government, is somebody that I would want trying to outguess the interest rate markets.”

Mr. Pellegrino defended the current system as more financially prudent than what the Democrats proposed. He said he favored the system where current taxpayers can see the projects they want and know that they are paid for.

“Philosophically I’m interested in my taxes being paid for the projects that I want to see the town do, and I do want the town to do projects,” Mr. Pellegrino said.

Mr. Pellegrino said the long-term financing cost would in the end see Greenwich paying more.

Ms. Kiernan responded by saying that she has heard anecdotal comments from real estate agents that families moving into Fairfield County may opt to choose other communities, such as New Canaan and Westport, because they believe those towns have a better infrastructure. Democrats have warned that not investing now in infrastructure could cost the town in the long run as potential new residents, particularly families, move to other communities.

Mr. Pellegrino noted that the town is constrained in how many projects it can do simply because too many projects taken on at one time could lead to project management problems as town staff had to handle multiple major projects at once.

Greenwich’s comptroller, Peter Mynarski, was also part of the panel. He said the town didn’t have a bonding program since the late 1930s until 2007 to help pay for capital projects after the town realized it was going to have a cash squeeze.  He said it was in 2007 when he and the treasurer realized there wasn’t going to be enough money at one point to pay for the Hamilton Avenue and Glenville schools as well as the new police building.

“We told Jim that we think you are going to run out of cash,” he told the audience, recalling a conversation during Mr. Lash’s four years as first selectman.

He said Mr. Lash was able to convince the BET to go out to bond in order to ensure the projects moved forward.

Mr. Mynarski said that there is only one debt service of $4 million left on the Glenville School, with the other two paid off.

Mr. Lash spoke about his time on the BET, including his early days on the board when he worked closely with Democratic BET member Frank Mazza, who, he said, was a tremendous help to him. He mentioned one time when he was ready for his first budget committee meeting only to have Mr. Mazza tell him they were going outside.

During his first meeting on a winter day, as he was removing his coat, he said Mr. Mazza told him to keep it on because they were going out to the back parking lot at town hall to review vehicles that town departments wanted to replace.

“I said, ‘Really?’ He said, ‘Really,’” said Mr. Lash, who was still slightly amused at the memory of the event.

Although it was interesting to inspect vehicles ranging from dump trucks to police cars, Mr. Lash said, he and others believed it was inefficient.

“That process for me was very unsatisfying,” he said, adding that they discovered that all the information on the cost of vehicles and when they should be replaced was available but hadn’t been shared with the BET.

“The point of the CIP (Capital Improvement Plan) process that we talk about all the time is to try to be more data-driven instead of and less driven by just by what we all think the truth is,” Mr. Lash said.

Part of that move to being data-driven was convincing department heads in the late 1990s and early 2000s to avoid asking for everything and instead focus on priorities for their departments, Mr. Lash said.

“I remember the first year we asked department heads to give us a clear picture of what they thought they needed and what was coming at them in the coming years. One of the department heads said to me, ‘Why should I do that?’” Mr. Lash said.

He recalled that the department head was skeptical that the BET would listen to the departments, and even worse, would cut elements of the department that the department head believed were vital. Mr. Lash said he asked the manager to trust the BET to see how it would work. He said the system did earn the trust of the department heads and continues to be the way the budget process works today.

He said the town has adopted a careful, thoughtful process by which projects are placed on a 15-year plan, part of an effort to be more transparent.

“I think it is very hard for people to understand the complexity of the decision making,” Mr. Lash said.

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