MOODY'S PLACES MONTGOMERY COUNTY'S (MD) GO ULT RATING ON REVIEW FOR POSSIBLE DOWNGRADE AFFECTING $1.8 BILLION OF OUTSTANDING DEBT
To review, let's see how eager Jerry Weast and the Board of Education were to spend taxpayer's money just a few short months ago:
The October 14, 2009 edition of the Gazette reported the following statements by Superintendent Jerry D. Weast, concerning his view that the Board of Education must seek more money for capital projects. The statements were made at the Tuesday Board of Education meeting:
"We gotta build buildings because we got growth," Weast told the school board during its meeting in Rockville. "I'm not gonna put pressure on the politicians to come up with a new revenue source. We should take advantage of the opportunity to use bonds. They're going to use the bonds anyway; we just want half of them. I think that's a fair ask."
These statements fit right in with those he made at the County Council lunch in February, where Jerry Weast urged a "substantial" CIP, because "bonds are cheap."
Now, I'm no expert in municipal finance, but I sure don't believe that there is such a thing as FREE MONEY (all those Nigerian emails notwithstanding). As far as Jerry Weast is concerned, his budget doesn't pay the debt service. Maybe we should change that. But citizens need to realize that whatever school project we pay for with municipal bonds is one less local capital project that won't be funded, or will have to be paid for some other way. Need a new roof on your library? A bathroom in the park? Or maybe a road widening or an improved intersection that can handle traffic flow? The line forms in the rear.
Jerry Weast is essentially saying that the public schools must get their half of our money off the top, first. And just like the TV preacher who promises salvation if you cough up the dough, he's convinced his flock at the Board of Education to ask county residents to be cheerful givers.
If the Bond Rating is downgraded, that means we residents will be paying more for projects (because of the higher interest) than we did before. So that means there will be fewer projects! It's not that complicated to understand.
Why didn't the Board of Education and their financial oversight authority, the County Council, rein in spending? Weren't they warned about possible Bond Rating Downgrades?
They apparently didn't believe this day would ever come. I guess they believed Tom Perez when, praising Doug Duncan and his legacy, Perez said Montgomery County can weather any potential ecomomic downturn.
‘‘We’re fundamentally fiscally sound. One of Duncan’s legacies is the continued triple-A bond rating,” Perez said. ‘‘It’s important not to overstate the doom and gloom.”
Mr. Duncan: pick up the white courtesy phone. It's the Bond Rating agencies calling. They want to know why you let spending on county schools explode beyond reasonableness. Maybe you should conference in Jerry Weast and the Board of Education on this one.
What County Councilmember George Leventhal said in 2006: the county’s triple-A bond rating is proof of strong management. http://www.connectionnewspapers.com/article.asp?article=308678&paper=70&cat=109
ReplyDeleteNow that the AAA bond rating is in jeopardy, what does that tell us about county management?
Was anyone listening in 2005? Here's a snippet from a Gazette article:
ReplyDelete"In all, cost overruns on county construction projects in the past two years have totaled nearly $40 million.
The overages have contributed to higher tax bills. In 2003, the executive and council approved $86 million in new taxes on personal income, energy consumption and regular telephone and cell phone use.
Several fiscal analysts employed by the council said last week the overruns were not unusual for large building projects. Yesterday, however, council members argued that the added costs threaten the county's reputation in Annapolis and undermine efforts to clear a backlog of school construction projects.
"One of these days, we are going to say, 'You know it's a good project, but it's time we send a message,' " said council member Steven A. Silverman (D-At Large). "In the private sector, people would get fired for this."
Although the county has a AAA bond rating, which allows it to borrow money with the lowest interest rates, there are signs that spending on projects has taken its toll. Two years ago, a study by Governing Magazine and Syracuse University gave the county a C grade for capital management. Fairfax got an A."
http://www.washingtonpost.com/wp-dyn/articles/A55393-2005Feb1.html
The course was set as long ago as 1999. (You-know-who appeared on the scene in 1999. Coincidence? I think not.)
ReplyDeleteFrom the Gazette, March 31, 1999:
"County Executive Douglas M. Duncan called the bypass of the budget limits irresponsible and said the council was "out of control."
Leggett said he was disturbed by Duncan's comment and added, "If that is so, the executive's budget is out of control."
Duncan's proposed 2000 operating budget exceeds the October spending cap by 5.8 percent.
Duncan said of the council's action: "It's going to hurt us in Annapolis and it's going to hurt us in New York with the bond rating agencies.
"It helps (anti-tax gadfly) Robin Ficker," Duncan added. "I don't know why the council wants to help Robin Ficker."
Duncan said it was an abuse of the council's emergency powers, adding: "The only emergency I can see is they have more money to spend."
Leggett said the council could increase spending by $20 million above Duncan's budget by increasing revenue estimates, which Leggett said have been too low in the past.
In 1997, the estimates were $42 million too low, in 1998 $97 million too low and more than $90 million too low in 1999, Leggett said.
Duncan called that possibility even worse than getting rid of the caps.
"Oh, my God," Duncan said. "He's going to play with the numbers and just assume more dollars, ignoring all the experts. That's the exact opposite of spending affordability. That is absurd. That is totally irresponsible and that means we need to do a lot more in restraining this council. Ike above all should remember in the late '80s when they added all of the new spending (right before the recession)."
Some council members bristled at Duncan's criticism.
"Considering that Doug Duncan has just sent over a budget that exceeds the spending affordability guidelines by more than $113 million, his criticism is stunningly hypocritical," said Philip M. Andrews (D-Dist. 3) of Gaithersburg.
"If he thought the process was working, he wouldn't have sent over a budget as large as he did.""
http://www.gazette.net/gazette_archive/1999/199914/montgomerycty/county/a42740-1.html
An argument can be made for the bonds in that construction projects for the past two years have been completed under budget and ahead of schedule. Construction firms are so hungry for business that building additions can be had on the cheap. In 2005, when those overruns were the complaint, renovations during the housing boom were the rage. THAT was the time to delay our construction projects; even though property tax revenues were blossoming.
ReplyDeleteLet us not forget that Ficker amendment. Since it passed, increases in revenue to help pay for those bonds will be substantially harder to come by. Witness PG county. The credit agencies are concerned that this new restraint will make default likelier.
Excessive spending; past, present, and future is not the only force in play here.