The current village board is piling up debt at an unsustainable rate and plans to continue this reckless practice for the next several years. This cannot go on! Greg Schmidt, Bob Anderson, and Ken Walsh will reverse the trend and bring fiscal sanity and stability back to Croton.
Where does our money go?
There are two major components to village finances. First is the Operating Budget that deals with day-to-day operations and is funded principally by our property taxes. The tax cap imposed by New York State (starting in Fiscal Year 2012) has forced the Wiegman administration to limit increases in this area.
The other component is the Capital Budget, under which money is borrowed, through the sale of bonds, for major projects like water system improvements, etc. The interest on the bonds and funds for repaying the bondholders when the bonds mature are included in the Operating Budget each year as Debt Service. And it is in this area that the Wiegman administration has been totally irresponsible.
Bond debt has doubled in 6 years
When Mayor Wiegman took office in Fiscal Year 2010 (June 1, 2009-May 31, 2010) Croton’s total debt stood at a little over $20 million. By the end of FY 2015 (May 31, 2015) the total debt had climbed to nearly $32 million—an increase of more than 59%.
But the Wiegman board has just recently approved an additional $11.6 million in new debt for later this year. Once these bonds have been sold, Croton’s already monumental debt will leap up to more than $41 million. That’s a 38% increase in a single year and a 100% increase since Mayor Wiegman took office!
The associated annual Debt Service was $2.1 million in FY 2010. Even without the new borrowing, it will rise to $3.4 million this fiscal year, up 60%. The annual Debt Service on the $11.6 million in new bonds will be a function of the interest rate at which they are sold, but we have estimated it to be about $767,000 at 2% interest and $883,000 at 3% interest. This could mean more than $4 million in Debt Service next year, which would represent fully 21% of total spending for FY 2016.
Bond Debt Has Doubled Under Wiegman Dems
One of the other problems with this year’s borrowing is that the board has included a number of items in the Capital Budget that really belong in the Operating Budget (e.g., $4,000 for replacing a damaged utility pole). This device, used to artificially keep the Operating Budget under the tax cap, is one of the principal reasons New York City teetered on the brink of bankruptcy in the 1970s. It’s akin to taking out a second mortgage on your home in order to buy groceries, and is a potentially disastrous financial practice that must stop.
It is true that a portion of the debt is used for water and sewer projects (approximately 39% of the recently approved borrowing), and the related interest and principal will be paid through your water and sewer bills. But those fees still come out of your pocket and they have gone up astronomically over the past few years.
Croton Water Rates—Up 67%
This year’s water rates are 67% higher than in FY 2012 and the sewer rates are up 115%. And they will be a lot higher once we have to start paying for this year’s new borrowing. In addition, while property taxes are deductible from federal and state income taxes, water and sewer fees are not, so their effective impact on taxpayers is greater than if they were general obligation bonds.
Croton Sewer Rates—Up 115%
Looking ahead, things don’t get any better. The board has budgeted more than $20 million in additional borrowing over the next three years. And not one member of the board has even raised a question over whether this is a prudent path to follow.
The Myth of Croton's "Improved" Bond Rating
In three separate letters to the Gazette the Wiegman Dems have made the false statement (which they still have not acknowledged) that the bond rating agency Moody's had raised Croton’s bond rating by two levels. For the true story see here.
At the end of 2014, when Moody’s Investors Service last rated Croton’s bonds, the financial challenges identified included: “Higher than average debt burden” and, of even greater concern, “Lack of formal financial procedures.” Listed among the items that could make Croton’s rating go down (leading to higher interest rates on our bonds), was “Increase in debt issuance that results in an unmanageable debt burden.” It is frightening to contemplate what Moody’s will say about the $11.6 million increase in Croton’s debt this year.
How does Croton compare?
But how does Croton compare to our neighboring municipalities? To find out, we analyzed data published by the Comptroller of the State of New York for small villages (population 6,000-10,000; Croton is at 8,070) in Westchester, Putnam, and Rockland Counties through FY 2014, the most recent information available.
Of the 11 municipalities for which data was published, Croton ranked No. 2 in total debt and No. 2 in annual Debt Service. Compared to the average of all 11 villages, Croton’s debt was 235% of the average value for debt and our annual Debt Service was twice the average value. If we add this year’s new debt, and that planned for the next few years, Croton will undoubtedly be No. 1 in both categories, not something that we expect the board will be bragging about.
The village’s total debt in FY 2014 was 45% higher than the Croton-Harmon School District, whose Operating Budget is more than double that of the village. In addition, because the school district has established a capital reserve fund in which money is put aside each year for future capital projects, it has been able to finance $15 million of new capital projects over the past six years without borrowing a dime. Maybe the schools can teach the village something about prudent financial management.
What is the solution?
The answer to the profligacy of the Wiegman Dems is to take an adult attitude toward future capital expenditures. Most (but certainly not all) of the items included in this year’s borrowing are good things for the village, and some of them are essential. But the fact is that we simply can’t afford all of them at the same time.
Immediately upon taking office Greg, Bob, and Ken will review all proposed projects, including those in this year’s borrowing for which the bonds have not yet been sold, and establish priorities. Which are essential; which are not essential, but desirable; and which are not cost effective for the village? We will also explore less expensive alternatives wherever possible. Only then, will we authorize new borrowing for essential projects and those non-essential items that we can prudently afford. We will also put in place the formal financial procedures to which Moody’s referred.
It will take some time to get Croton’s financial house in order, and it will not be easy. But it must be done. And we pledge to do it as quickly and painlessly as possible.