City officials discussed the option of splitting up the borrowing for essential capital projects at a Finance Committee meeting held last Thursday night. Council members all agreed that some borrowing was necessary, especially for NY State mandated infrastructure work and road repair. Capital projects being considered by the council total over $3 million. However, Alderwoman Diane Hatzenbuhler proposed borrowing approximately $1 million first, then waiting until after the 2015-2016 budget is approved in June to consider further borrowing, citing concerns about the city’s ability to service the debt.
Corporation Counsel Gerard DeCusatis said that borrowing multiple times would “drive up the interest rate slightly and it will increase the administrative cost.”
According to Mayor Ann Thane, the administrative cost each time the city borrows is $5,000.
“Are you really saving anything in the end? Because you are going to be paying for the second issue.” said Thane.
“Right now, I’m not worried about saving,” said Hatzenbuhler. “I’m worried about are we going to have the money to pay it back? Where do we stand financially? I don’t feel comfortable with the numbers we have at this point.”
According to Controller Matthew Agresta, the official debt figure for the city will stand at $21.8 million for the next fiscal year, which will be down from the $24.7 million figure for the current year. A preliminary list of projects for this year compiled by City Engineer Rich Miller totals $3.7 million, with an additional $1.2 million in projects that would be reimbursed through grants and Consolidated Local Street and Highway Improvement Program (CHIPS) funding.
DeCusatis explained why it is advantageous for the city borrow first for street repairs that will later be reimbursed through CHIPS. “The reason we borrow is so we can pay the contractors in a timely manner so that we can get more favorable price quotes from the contractor. Because if they know they are going to have to wait 3 to 4 months to get paid, then they build that into their contract price. Since our borrowing costs are low, it makes a lot of sense for us to have the money available so that we can pay them at a 1% interest rate [for example] and they’re not borrowing to meet their payroll at 10% [for example] and thereby driving the cost of the contract up.”
DeCusatis also explained that breaking up large projects into multiple years could potentially cost more, due to fixed costs for contractors to transport their equipment to a site each time.
“The deferral of it is not a savings, it will never be a savings because the expenditures are unavoidable. So it may feel better, but it won’t save you anything,” said DeCusatis.
The working list of capital projects being used by city officials also specifies the date each project was initially proposed. Many of the items date back to 2013 or 2014. One item, the purchase of new sewer jet truck for $220,000, dates back to 2012.
“It has to be done,” said Alderman Ron Barone. “Nobody’s done it prior to this, but you have to take the bull by the horns and start doing things, or guess what, it’s going to deplete more than it is now. And this city is depleted. And nobody…is taking the time to sit down and get a list together…we keep passing the buck…and this is why we’re in the position we’re in now, because of the buck passing.”
“We haven’t been passing the buck. We have been tending to roads and water and sewer and the equipment purchases,” said Thane. “We do have a list that outlines all of the projects that we’d like to do over the coming four years. So I think saying we don’t have any kind of a plan and that we’ve been passing the buck is inaccurate.”
Both Alderman Ed Russo and Barone suggested that each council member take a week to look through the list and consider the priority of each project. Council members agreed to a special meeting next week, Wednesday, March 25th at 5:15pm with the hope of coming to a final decision.