Why Coral Gables’ Refinancing and Capital Spending Decision Is Not Urgent–What Happened To Community Participation and Consultation?

May 2, 2011 1 Comment

The city manager of Coral Gables had a few cards up his sleeve, so to say, at the last meeting and he sold the commission on three bad ideas.

First, he said that it is urgent to refinance the city’s debt.  I take it that this is because he believes that interest rates will soon rise.  I guess he believes in that there is inflation at our doorsteps.

The economic facts don’t justify that view in the slightest.  Our economy is growing slower than thought, the Chinese are dampending their growth, Japan is stagnant and Europe, except for Germany, Europe is weak.  Inflation is a recent blip in energy and some materials caused pay political uncertainty in the Middle East.  The Fed has announced that it will continue with its low interest rate policy. There is at least one banker on the commission–he should have known better.

Conclusion:  It is not urgent to refinance without first thinking a bit more about the use of the monies and consulting with the citizenry.

Second, he sold the commission on the idea that the $22 million from the refinancing is free–but it will cost about $35 million.  He says we won’t spend more on debt financing than we are paying now.  That is wrong.  By refinancing existing debt we should spend less, not more.

Conclusion:  Refinancing of existing debt would reduce the amount we pay on the current debt and free up money for other purposes.

Third, the city manager has sold the commission on the idea that he has come up with a good list of capital projects.  But the city manager admitted that he had concocted this list pretty much on his own without community participation, and the new mayor and commissioner apparently did a sort of “shoe leather” test of what we need.  Shouldn’t a new, large spending program be consulted with the taxpayers.

Conclusion: What happened to open government, invited and active consultation and participation–on these terms, the new mayor’s and the commissioners’ campaign promises stand out as pure fiction.

Filed under Budget, Community, Coral Gables, Finance, Government

Namon on Coral Gables’ $35 Million Increase in Spending

May 1, 2011 Leave a comment

I reproduce the comments by Mr. Richard Namon on the first meeting of the Cason Commission.

On Tuesday April 26, Coral Gables had its first official Commission Meeting.  It’s clear who was in charge of the City Commission – City Manager Salerno.  He was decisive and dominating.  By restructuring the City’s current debts and increasing the years of debt obligation, the City Manager said he would raise about $22,155,000 of “new” money.

That money will be used for his vision of a Neighborhood Renaissance.  Using a tactic commonly used by conmen he urged: If you don’t act now, you will lose this once in a lifetime opportunity.   He pushed his vision for the City’s most important needs through the Commission.  The only other participant on the dais wearing pants was Commissioner Ralph Cabrera who voted NO on the proposal.  Ralph felt a Vision for The City Beautiful should come from resident meetings that would guide the Commission – not from the City Manager.  No one else dissented.  The City Manager keep pushing saying this was only an approval to go forward, not a final approval.

In his presentation Salerno droned away, making his $28 million Vision sound boring.  I wondered how much we would save in taxes if he only refinanced the existing debt.  No one on the dais asked.  After the meeting I asked Don Nelson, the head of the Finance Dept. how much this $22 million of found money would cost the taxpayers when it was paid off?  He estimated $35 million!

Our new Commission, at its first public meeting, has agreed in principal with the City Manager’s vision that costs $35 million over the next 20 years.  During the pre election campaigns, the main talking points were fiscal conservatism and dealing with City debt.  As a start this is not only ominous, it is disappointing.

Richard Namon, Sr.

via Home Page.

Filed under Budget, Coral Gables, Finance

Mr. Cason’s Commission–Meet the Big Spenders

April 27, 2011 Leave a comment

The first major decision of the Cason Commission was apparently innocuous, but it was a decision to spend $22 million of newly borrowed money for vaguely defined capital projects.  This is the local equivalent to doubling down on the current national debt crisis.

This is your household’s equivalent of getting a bigger mortgage to add a room or two to your house in middle of a financial crisis.

This decision doesn’t stand up under the most elementary financial and economic analysis.  The Cason Commission, with the exception of Mr. Cabrera, has shown itself incapable of asking even the most basic questions about this “surprise package.”

Aren’t you supposed to make these kinds of decisions by first looking at the city’s budget?

No public discussion, no community involvement in the project list, no serious questions from the commission about the economic, social and financial feasibility of the investments.  The Cason Commission took the city manager’s word that we have a $6.5 milliion reserve:  are we sure this is enough, what is our income, what is out total spending.

Has the Biltmore problem been solved?  Have the pension problems been ameliorated?  Has the organizational inefficiency of the city been improved?  Have taxes been reduced from last year?  Where are the questions?

Why hasn’t the Cason Commission begun to resolve or just talk about our really important financial and institutional problems before running out and spending $22 million.

Filed under Coral Gables, Finance, Government

Coral Gables’ New Mayor and Commission–First Big Step is Backwards

April 26, 2011 Leave a comment

Only with profound concern and disappointment one observes today’s vote of the new mayor and commission to increase the city’s debt to spend on millions of dollars of 17 new projects-albeit at a lower interest cost, but at the same annual servicing cost–completely independently of a deep discussion of our city’s budget and our overall financial condition.

This is classic big spending that we have lived with on the commission for the last ten years.  This is indifference to the budget, taxes, spending, efficiency and everyday tax payers.

We still are a city that makes big financial decisions without having a multi-year financial plan, let alone a well analyzed annual budget.
Unfortunately, this action will almost certainly lead to unnecessary spending on low impact and low priority projects based on a “pile of money”  or “free money” effect of the expanded debt.  Once financed, you will have to spend the money, rather than following a more prudent approach of financing manageable packages of projects in shorter periods of time.
At no time did the city manager, mayor or commissioners mention that there is another financial alternative to increase debt to finance multi-million dollar projects, and that is to lower the costs of the debt payments to the city–this assumes we don’t need that money for other uses.  If we say that the money might go into operating costs, then they are admitting that you have no control over our budget.  This was rich–justify more debt and capital spending to help reduce operating expenses share in the budget.
Interest costs are only a small part of the costs of an investment program–more important are the unit costs of the projects, their relevancy, timing, cost escalation, these are the real costs.
(I was also wondering if the city’s financial advisors are receiving a commission base on the size of the package?)
It is very disappointing that this commission has not changed it ways, and again avoids wider community consultation and openness on important decisions.
This is a very surprising vote–I believe someone used the work “shocking”– given the serious financial questions that this city is facing.  The new mayor and most of the commissions (except for Mr. Cabrera) choose to ignore the city’s financial problems.

Filed under Coral Gables, Finance

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