Dear Mayor Guerin and City Council Members:
I will not be able to attend the August 23 Council meeting but wanted to express my opposition to the plan to proceed with revenue bonds.
Here are my reasons:
1 The city should refrain from future major expenditures until it knows the size of its unfunded pension liability. As you know, the 2004 liability was substantially greater than the 2003 amount. In 2005, staff received pay and benefit increases. Unfortunately, we do not know the unfunded liability amount for 2005 (Mr. Lembach told me the numbers will be available in October or November), but I would guess the amount is very substantial. We should know how big this (debt) mountain is before we float more bonds.
2 Bonding is unnecessary now. The City could pay for fire stations and the public works yard by selling the Quail Garden property and using the money that would have been spent on bond issuance and interest. It will be years before we are ready to do anything with the Hall Property. The Hall Property EIR is not even done, and we can pretty much assume it will be challenged in Court.
3 The City will pay millions in fees, expenses and interest on the bonds. Mr. Lembach told me the issuance expenses will include over $600,000 in professional fees and charges, and over $900,000 for capitalized interest. Annual interest will be $1 million. All these expenses and interest will be wasted because we have the capacity to pay-as-you-go until we are ready to develop the Hall Property.
4 The rationale that we need to float bonds to save construction costs makes no sense. No one has actually projected how much construction costs will increase over the next several years (which is of course impossible). No one has attempted to compare the cost of bonding with the cost of pay-as-you-go utilizing a realistic assessment of when the City's projects will actually be ready to build. The financial projections prepared in May were clearly designed to support bonding, and are not believable.
5 The City could save money by selling general obligation bonds. Why is the Council is so opposed to a public vote that it will spend extra money floating revenue bonds?
6 I gather the proposed bonds will be paid from a revenue stream to be created by leasing the library from the EPFA to the City. I have seen a lot of gimmicks in my time, but this seems over-the-top. Are you sure this plan could withstand a legal challenge? Why start a process that seems so legally flawed? The Council made the same mistake trying to put the public works yard on Saxony Road.
I do not have an agenda here other than the fiscal health of my city. I think unnecessary debt is a bad idea. I have not seen anything that tells me this is the right time or the right reason to sell bonds. Many of us claim to be fiscal conservatives; this proposal is anything but fiscally conservative.
721 Saxony Road
Matt Walker is a local attorney. We have never met.