WARNER: How Towns Manage Debt Today…Except for Greenwich

Letter to the editor from Mike Warner, Past Chair, RTM Finance Committee

Before spending taxpayers’ dollars for a capital improvement, towns everywhere must answer two basic questions: “Is there a real “need” for the improvement?” and “What’s the best way to pay for it?” The “need” question is usually answered by citizens at a public town meeting or equivalent body.

To answer the “How to pay for it?” question, towns today (including triple “A” rated Gold Coast towns), apply a well-established principal of good governance: “Citizens who benefit from a capital improvement should pay for it.”

This principal works for all capital improvements, but especially when a town needs a large “inter-generational” improvement – like a school or the Eastern Greenwich Civic Center – that will have a “useful life” of 20 to 30 years. Following the same bedrock fairness principle, towns across the country typically bond for 20 to 30 years, based on the useful life of the asset.

Look at New Canaan’s finance policy, for example: Their policy, says, “Long-term financing is an important tool in the management of intergenerational assets.” As such, when they need to complete a large project, like a school, the impact on town budgets is minor and predictable when the expense is spread over 20 or 30 years.

Does long-term financing cost more, given the bond’s longer life? Of course, it does. Just like it did when many of us bought our first home. We arranged a 30-year, fixed-rate loan, “locked in” a low interest rate and obtained modest and predictable payments (which became less and less substantial as time went on and inflation grew). The low impact of those small payments on our family budget allowed us to meet other important family needs, like repairing the roof, buying a
lawn tractor or sending the kids to summer camp.

But in Greenwich the former Republican controlled BET did the exact opposite! Instead, they cleverly found a way to foreclose any consideration of,” What the town needs?” by requiring that all bonds for town improvements be for no more than 5-years! With such a ridiculous short payback term (and sky-high debt service payments) the role of the RTM, to determine what the town “needs” became meaningless; they could only consider the few town improvements that
the restrictive debt policy allowed, not what citizens need.

In effect, our debt policy eliminates the “What does the town need?” question, with the, “How can we possibly pay for it?” question, given the punishing 5-year payback requirement.

Supporters of the debt policy contend that it is responsible for our low mill rate; this is untrue. Our mill rate is low because, we maintain a robust “Grand List,” of taxpaying businesses and families attracted by our Greenwich reputation for providing excellent services, and our access to a lovely shoreline and a vibrant world capital city.

Others say, “Long term debt requires us to pass debt along to our children.” Don’t they know that the debt exists whether that debt resides in our obsolete schools, or on the Greenwich balance sheet? However, if we elect to keep our balance sheet pristine, then we must also accept significant risk from the debt building-up in our crumbling, outdated schools.

Today in Greenwich, with so many non-compliant ADA school buildings, when Jonny sprains an ankle and arrives at school on crutches, the teachers and staff must scramble to move Jonny’s room from the second floor to the first, then move a first floor class to the second, playing “musical chairs” with our kid’s classrooms

This year, a ceiling tile fell and injured a child due to poor maintenance; and we were lucky. What if next time part of a school roof falls in? Then where do we go to get our reputation back? Maybe we could publish a copy of our pristine balance sheet, see how that works.

The deadline to submit a letter to the editor regarding candidates in the Nov 5 municipal election is Tuesday Oct 29 at 5pm.