Letter to the editor submitted by Brooks Harris, a member of RTM District 10 and RTM Finance Committee who said his views are his own and do not represent the RTM or Finance Committee
Greenwich is evaluating a major overhaul of its public schools. The Board of Education is proposing a “master plan” which could cost more than $1 billion over the next 15 years. Many have argued the Town has skimped on school CapEx over time, and now we must play catch up. This would more than double our rate of capital spending and increase taxes and debt dramatically. Pursuing this plan would be a generational decision for the Town with enormous consequences for current and future residents.
Given the importance, it is critical that we do all we can to educate ourselves about the plan and the costs and benefits. We also need a system for evaluating components of the plan to ensure that spending is within our means and that we only invest in the stuff we deem necessary.
To give some idea of how momentous this plan is, consider the impact the plan could have on the financial health of Greenwich. Currently, we are rated “AAA” by the major rating agencies. This is a source of pride and reflects the wealth of our community and the care we have taken over time to insure fiscal responsibility. Many believe our pockets are bottomless and we can spend whatever we wish because of our wealth. While this is true to an extent, it is not necessarily the case when you consider $1+ billion spending plans.
Many financial metrics are considered in determining rating. One of the most important is debt outstanding as a percent of the value of all property in Greenwich (the Grand List). This makes sense since we fund ourselves with property taxes, and the more our property is worth the more taxes our residents will bear. When debt gets to 1.5% of Grand List, the Agencies start to be concerned about a “AAA” rating. The Town currently limits its borrowing to 0.55% of the Grand List because we like being very secure within our rating. But if we borrow about $500 million more, we will be approaching the
1.5% limit. Could we borrow more than that and maintain our “AAA” rating? Perhaps. Could we borrow $1 billion more and maintain our rating? I doubt it.
The other side of the equation is taxes. We don’t need to borrow to fund the expenditures, we can just increase taxes. While that is easy on paper, it may be harder in practice. Most of the spending in Greenwich is on labor contracts, which build in automatic increases often in the 2-3% range. This means that even before we start increasing capital spending, taxes are likely to go up by this amount. Add increased funding for an overhaul of our schools, and that number can go up even faster. Many residents are just now starting to realize the impact reducing the deductibility of state and local taxes (including property taxes) for federal tax purpose has on their overall tax burden. It may be a tough time to ramp Greenwich property taxes by too much. It is conceivable that to keep debt within current constraints over the 15-year plan of investments, taxes could double or more. Given the modest growth potential of property values in our town, this could also mean a doubling of our mill rate. While our low tax rate is routinely lauded as an attraction for our town, will this still be true if taxes rise this much? People will be concerned about this.
Much of the debate over how to achieve excellence in our schools while maintaining financial prudence has been waged with little consideration for the impacts of the proposals. Advocates of reigning in the sweeping BOE proposals have argued that our track record of investing wisely is not good, and a $1billion program would likely lead to huge waste and mismanagement. They argue we need to be financially prudent and continue to fund investments with debt no longer than 5-years. Because of the short payback on these borrowings, we cannot make large investments without increasing taxes to an unpalatable level, therefore limiting spending without a debate on the merits of the expenditures.
Proponents of increased spending appeal to our emotions, reminding us to “think of the kids!” They also argue that better schools will attract more people to our town without considering the effect higher taxes will have slowing the arrival of newcomers. Finally, they believe that by funding with long-term debt, making larger investments will be possible without raising taxes too high, the major roadblock to spending. While in the short-term taxes will go up more slowly if we fund with long-term debt, it just defers the problem, and taxes will still go up over time, but more slowly at first and then faster later.
There is no right answer to this debate. We need good schools. We should endeavor to keep taxes low. But these are not readily compatible goals, so we, as a town, will have to decide the optimal tradeoff. If we had to decide today, we would probably make that decision based on our existing predispositions rather than analytically, and this could lead to bad outcomes over time.
There are a few things we should do to make sure our decision is as informed as possible and represents the views of as many residents as possible. First, we need to bolster our financial planning. This year the Town, the BET and the RTM have been working towards better models to show the impacts of taxing, spending and borrowing over time. This effort has been constructive, but the results need to be incorporated into the decision-making process. Our credit rating is jeopardized? Our mill rate doubles?
Or maybe our analysis shows that we can afford it all if we get the right balance of debt and taxes? This is vital information to have as we decide on that playing field, pool or civic center.
Second, we need to have a better process for prioritizing capital expenditures. The First Selectman’s CIP is a start, but project ranking should include more objective ratings so we can see why one project ranks above another and how urgent a project is. And any ratings should involve some independent assessment. Unsurprisingly, proponents of projects tend to focus more on the benefits than on the weakness of their projects, and we need balance to make informed decisions.
Finally, we need to increase awareness by residents around this process. Everyone in this town wants the schools to be good and the taxes to be low. If we are going to have to make tradeoffs, they should be decided in the most transparent and publicized way possible. I know this is inconvenient for special interests who understand the system and can get their projects through, but our obligation is to all residents. Not just those who happen to know the system.
If you are interested in learning more about this issue or wish to get involved in the debate, please drop me a note at [email protected]. Now is the time for interested residents to weigh in on this issue.
Brooks Harris
RTM District 10
RTM Finance Committee
These views are my own and do not represent the RTM or Finance Committee