Councilmanic debt is final
September 12, 2008 · Updated 4:35 PM
Usually, the third reading of an ordinance before the Bainbridge City council is a perfunctory affair.
But Wednesday’s final approval of $1.77 million in councilmanic bonds was anything but a formality.
Council members drew out the final vote necessary to pass the issuance of bonds and subsequent debt to the city with debate and heated speeches that sent waves of applause and head shaking through the emotive audience.
“The way I felt last night, the bond that was passed should have been the last gift of borrowed money, the last gift of debt,” said council member Debbie Vancil, who voted against the bond. “From now on this council needs to dig its heels in, no matter how much it has been harangued, cajoled or sweet-talked.”
Council members Vancil, Kim Bracket and Bill Knobloch mounted the 11th-hour attack against the bond, despite approving the second-reading of the ordinance two weeks prior.
“That was kind of surprising to me,” council member Chris Snow said. “The council voted on it two weeks earlier. To me it seemed like a change of heart.”
The three-member bloc wanted to review cuts that would need to be made at the city level, cuts to capital projects and more current information on the status of grants coming into the city. They insisted they lacked the complete financial picture needed to vote on the bond.
Council members in support of the bond argued that denying or amending the bond this late in the process would have affected the city’s standing in the market.
“I feel that the city council did what it needed to do to honor commitments made to market its bond and raise funds for the city,” council member Barry Peters said. “To change the ordinance last night would have put the city in a very disreputable position when it needs to find funding next time for its capitol projects.”
There is no lack of controversy on the issuance of these bonds, which were approved by the familiar 4-3 vote within the council. The reasoning for or against these bonds reflect on two things: the length the city and council have gone to cut expenses, and if these projects should be funded by councilmanic debt or more expenditure cuts.
So far, some council members have applauded themselves for reducing the amount of proposed councilmanic debt by $2.3 million. However, former council member and opponent of the bond, Bob Scales, has vocally opposed this line of thought, criticizing the council for not only taking on the debt, but not reducing councilmanic borrowing to zero.
“When we passed the budget with $4 million in councilmanic bonds, we had a completely different set of financial assumptions. If they told us in December (2007) that we would be $2.5 million in the red we would have cut the debt to zero,” Scales said. “Compared to now, we were operating in a completely different world.”
However, cutting debt to zero would have been a major blow to the city since payments were made with the assumption of councilmanic revenue bonds, according to city administrator Mark Dombroski
“(Capital Projects) are paid out of the general fund, and you have various funding sources,” he said. “While payments come out of the general fund... the budget always anticipated debt as a funding source.”
Despite $4 million in cuts to capital projects and $1.516 million in operating cost cuts by the end of the year, there is still not enough money to cover the projects without the bond. The city used debt to pay itself back for the money it spent on these projects from the general fund, Dombroski said.
“The bond is reflective of capitol projects that have been approved and most have already been completed,” he said. “The city had anticipated using debt as the funding source... we are re-paying the city based upon what was put together in that plan.”
This repayment is what has irked many people, including Scales.
“They are issuing debt to fill their budget hole,” he said. “Instead of making the cuts, they issued bonds. What they did this year is they used the cash for other things. They basically robbed these projects of cash.”
Peters believes that making payment adjustments and issuing debt to cover projects is a sound financial plan given the current financial situation.
“I don’t think the city loses out when it shifts capitol projects from one form of payment to another, the key decision is to avoid borrowing more than necessary and keep expenses under control, the success this year was reducing capital project expenses and reducing borrowing. Deciding to move some capital projects from cash to loan was not in any way harmful to the city’s finances.”
Peters said citizens should look at the proposed councilmanic debt at the beginning of the year compared to what is eventually approved. If approved councilmanic debt is higher than was originally budgeted, then “citizens would have reason to worry.”
But there is more than one way to fund shortfalls besides debt. Even in the final moments before the vote, council members floated revenue-generating ideas such as four-day work weeks for city staff, the selling of city-owned property and waiting on grants that may be coming to the city.
However, with the bond passed all eyes are on the upcoming budget and if councilmanic debt will remained shelved, as has been proposed, for the 2009 fiscal year.
“The reality is, there is no appetite for going into more councilmanic debt, at least not in the current situation,” Snow said.