Sunday, July 15, 2012

Will Rossbach - Budget Misconceptions

Did you ever have your spouse buy something very expensive that overdrew your account? Then give you the reasoning that "it was such a good deal I just had to buy it"?  Well Will Rossbach had such a moment in a City Council workshop recently.

Maplewood Mayor Will Rossbach made an astounding comment as they were discussing the interest rate the city might be able to get for more loans.
"We could probably say however that if we did actually bond now we would get a rate that around what we got before? … And, umm,  you know its a little bit like going to Walmart I guess, but uh, the more we would bond for the more we'd save…If we're saving $20,000 a year on $4.3 million, we'd be saving 40 on twice that?"

From watching the video of the comment, I am not sure the city staffer giving the report knew what to do with that comment.  The truth is that you save by not spending money you don't  have.

Maplewood held the workshop on June 25 to reconsider the bonding bill they had proposed to spend $9.5 million dollars to build new fire (they just closed a couple that probably could have been updated much less expensively) and police facilities.  A petition had been submitted to call the bonding to a referendum vote by the citizens.  The City had dismissed the petition by disqualifying 70 signatures.  The bonding company however subsequently had significant concerns about that, and the petition, so the bonding for this year was put on hold.  Since they were essentially blocked on the bonding as proposed (either by the petition, or by other points in the presentation that said they really only had about $1.5 million left of their borrowing cap of $10 million bank qualified rate amount, the 1.7666% rate), they were considering two alternative ways around it.

The story is very similar to that of many other cities, among them the City of Scanton, which demonstrates where poor fiscal management can lead.

From CBS
"Sad that it came down to this," Pugliese [who has worked for Scranton's Department of Public Works for 26 years] said. "I can't understand how it could get this bad. I could never run my household down this low. Don't know how they could run a city down this low."
Amid a dispute with the City Council [Democrat] about raising funds for their cash-strapped Pennsylvania city, the mayor of Scranton faces a lawsuit from union workers after he cut their pay to minimum wage.
"We don't have enough money. That's what it comes down to," Doherty [Democrat, Mayor] told Quijano. After paying city workers, Doherty said Scranton only had $5,000 left and very few options.

Investors Business Daily Progressive City Learns Big Government Perils The Hard Way
But the mayor isn't necessarily a hero. A source in the Scranton city council who spoke on condition of anonymity said the big problem was that the mayor and the city council had agreed to borrow to cover the shortfall but a couple of consultants warned banks not to lend to the city until its recovery plan was approved.
The city council balked because it included a 78% tax hike on businesses [this and loans are part of the Mayor's plan], some of which are already leaving for friendlier climes.

And all from poor budgeting and debt policies.

Full video available from the archives at: Maplewood City Council Manager Workshop June 25, 2012

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