Submitted by Andy Duus
This note responds to Scott Kalb’s October 5 letter in the Greenwich Free Press. (Kalb: Greenwich Take Note, Republicans Want to Raise Your Taxes – A Lot)
The issue being considered by the BET is whether to extend the final maturity of bonds issued to finance General Fund capital projects from five to ten years. The current debate has been prompted by the dramatic increase in capital spending budgeted for this year and projected for at least the next two years.
Longer repayment periods can ease the immediate burden on taxpayers and accommodate more capital spending sooner. Shorter repayment periods, however, reduce total interest costs by repaying principal sooner and by generally obtaining lower borrowing rates. Also, it leaves future taxpayers with fewer outstanding commitments and greater financial flexibility.
Ultimately, taxpayers pay for capital projects, whether through current taxes or future taxes used to repay borrowing—with interest. Longer-term bonds change the timing of payment; they do not eliminate the bill.
The capital tax levy supports the financing of the Town’s capital investment. As capital commitments increase, reviewing the adequacy of that levy is prudent. A proposal to increase the levy should be evaluated against the alternative: lower payments initially, but debt service continuing for more years and generally at higher interest rates.
Greenwich’s debt policy may be uncommon, but being uncommon does not make it unsound, especially in this era of high borrowings by the federal government as well as many states and municipalities. The Town’s financial resources and discipline have allowed it to repay capital borrowings relatively quickly.
Preserving that discipline, limiting interest costs, and maintaining future financial flexibility are compelling reasons to retain the current debt policy.
Submitted by Andreas Duus
Vice Chair, Greenwich RTC
BET member, 2017-2021