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Bond proposal to pay for capital projects
t City needs to go into debt to pay for several public improvements.
City Hall has recommended the issuance of bonds totaling between $1.5 million and $2 million that would be used to pay for ongoing capital projects that the city has been funding this year through its operating budget.
The practice was explained Wednesday during the first reading of bond ordinance, which would be used to fund park, street and dock improvements. The City Council conscientiously discussed the issue for more than an hour before unanimously passing an amended motion that calls for the city’s Finance Committee to finalize the details of the proposed ordinance next week and then present it during a public hearing scheduled for the Aug. 27 council meeting.
If passed at the meeting, the city would commence selling the bonds two weeks later on Sept. 10.
Finance Director Elray Konkel said all of the improvements were on the original capital projects list that the council approved, adding that there has been confusion about operating costs coming into play.
“Several of these items are draining our operating funds and many of these projects are close to completion,” he said. “We literally have been fronting money with our cash flow. We’ve spent most of the money (to fund the projects) already.”
Councilor Bill Knobloch objected to the city incurring debt to pay for capital projects. “At issue is how long we can keep this up,” he said. “We are doing it every year...paying for capital projects with debt. How long can our revenue support this debt service?”
He added that the city is involved in litigation, “and that has to be factored into our ability to stay out of debt. How much debt are we going to issue, and for what? And what are our future liabilities for things like litigation? I’d like to know before we get further into debt.”
City Administrator Mark Dombroski cut Knobloch short by saying that a discussion concerning litigation should be done in executive session.
The improvements ranged from $14,000 for road improvements between Madison Avenue North and Day Road and $281,777 for the Fort Ward Hill Road reconstruction project.
Other councilmanic debt included in the proposed bond were: Strawberry Plant Park ($126,650), Eagle Harbor Head of the Bay ($80,500), Senior/Community Center Expansion ($75,000), Public Works Bathroom at O&M ($100,000), December 2007 Storm Road Repairs ($237,311), Rockaway Beach Drive ($250,000), Trail Easement Acquisition ($100,000), Blakely School Road Improvements ($54,192), Open Space Improvements at Nute’s Pond ($56,192), Shoulder Widening on SR305 ($100,000), Waterfront Park Dock Repair ($168,528), Waterfront Park Restrooms ($270,000) and Wilkes School Road Improvements ($111,317).
Konkel said repairs of roads damaged during the December 2007 storm have been taken off the list, and the Senior Center expansion and Rockaway Beach Drive repairs are “both up in the air funding-wise.”
Konkel said that the bond market is in such dire straits that only two firms, “that we are aware of, are offering municipally backed insurance.”
He said that he and his staff have been working with a financial advisor and that Moody’s Investor Service had all of the information, “and has given verbal assurance that our bond rating will hold at 1A, though we don’t have it in writing yet. We also have assurance from a securities firm that we still have a strong underlying rating and that we’re in good shape.”
There was some discussion that since public comment was allowed during the first reading (no one spoke), a public hearing wasn’t legally necessary.
But one council member said they wanted to hear from the public, especially on the Rockaway and Senior Center projects since they might be dropped from the list.