Friday, August 30, 2013

There's Exaggerating - Then There's Outright Lying

I attended last night's Public Works committee meeting for two items - the proposed hike in stormwater management fees and the budget.  Among other agenda items, there was Prop 250, which looked to use some new gas tax money from the state, to float bonds to pay for infrastructure improvements.

Gary Welsh over at Advance Indiana, and Jon Murray over at IndyStar, both did a good job relaying particulars.

The late night newscast by WTHR, channel 13, however, did not do a good job.  All they did was quote the Mayor's press release - which was so far beyond exaggeration as to be an outright lie.

Here's what the press release said, from Murray's report:
“Democrats on the City-County Council turned their backs on every neighborhood in Indianapolis,” Ballard said in a written statement. “By placing politics ahead of the best interests of the community, they rejected a plan that would have provided sidewalks in many of our neighborhoods, repaved every one of our worst streets, made our bridges safer and fixed flooding problems in some of our poorest neighborhoods.”
Lie, lie, lie.

Here are the particulars from last night's debate on floating these bonds.

The state is sending the City/County an additional amount of money from the gas tax revenue it receives.  Lori Miser, head of DPW, and Deron Kintner, head of the bond bank/deputy mayor, said it was $7.8 million in new money.  Hope Tribble, CFO for the Council, said it was $6.2 million.  This is not guaranteed every year, although it appears that the State has committed to try to send it - if they can.  The gas tax has been a hot topic in Washington for years now, as it is not as much of a revenue source for transportation as they would like.

In either case, the proposal was to pay $9 million per year in debt service on new bonds.  Depending upon the interest rate at the moment the bonds were floated, this could generate anywhere from $135 - $150 million.  The bonds would be paid back over 30 years - so the taxpayers would spend $270 million over time to get maybe $150 million now.  That computes to paying $120 million in interest and fees - nearly half.

The City would add this $135 million to money it will spend on infrastructure anyway, to make a grand total of $350 million in spending over the next 3 years.  Without bonding, they would have $242 million to spend over the next 3 years (I added the $9 million per year to the base $215 million).  So, the City can still repave 'every one of our worst streets', and make 'our bridges safer'.  The flooding issues I'll leave to another blog post.  Suffice it to say, the City doesn't direct stormwater projects to the poorest neighborhoods in any case - they direct the money to flooded neighborhoods.

DPW has been circulating a list of infrastructure projects that total between $500 and $600 million.  Of course, any neighborhood looks to see if it's roads are listed.  But that is clearly far more projects than can be done with the money - bond or no bond.

So, the pivotal question was, is it fiscally sound to borrow additional funds using a shaky revenue source as collateral?

The committee vote was along party lines - 5 to 2.  The Democrats were fiscally responsible, choosing to avoid the situation where an unreliable stream of money from the State would be used to float bonds that would have to be repaid even if the State stops sending that extra.  If the extra money continues to come in, well we and the next generation will have $270 million to spend on streets and sidewalks.

I just don't understand why $242 million is somehow chump change to spend on infrastructure over the next 3 years, and why we have to continually reach into the pockets of the next generation to get what we want today - and wasting half of the money we steal from them on interest and fees, to boot.  There should be no sin in patience, prudence, and protecting the next generation.  There is, however, a sin in lying to the public.  Shame on Mayor Ballard for lying and shame on WTHR for passing that lie along as the entire story to its viewers.


Racoon said...

I made similar arguments against an EDIT bond whose intended purpose (a sports field complex) was ruled illegal due to flood plain issues. The city council decided to keep the bond, but use it for a grab-bag of deferred maintenance items. I told them they could finance those same items just out of the EDIT's cash flow; there was no need to borrow the money at 4% which meant that every dollar spent on that grab-bag of deferred maintenance carried a big (upwards of 40%) penalty for interest. That argument was ignored or not understood. When they see money, they spend it.

Here's a two-pager I used to make my point:

Had Enough Indy? said...

Great points. I've been looking over outstanding TIF bonds here in Indy - we seem to have fees and interest approaching half of the cost of bonds - not 'just' one fourth. Plus, we like 'collaterized interest', meaning we don't pay on the bonds for a year or two, and the amount that would otherwise be due is added to the principle. UGLY.

Jon said...

Let's just cut to the chase, we divide Indianapolis in two parts; anything North of Washington St. is the Colt's TIF and anything South of Washington St. is the Pacer's TIF.

Had Enough Indy? said...

Excellent idea, Jon. Only, the well connected developers will stop donating to campaigns.

Jim Sack said...

Nicely written and reasoned. We have a similar discussion going on in Fort Wayne...

Had Enough Indy? said...

Good luck, Jim.

Anonymous said...

It's a local debt Ponzi scheme. Because no one that the mainstream listens too has explained to the public that debt (particularly long-term debt) is theft from the future to mask fiscal malfeasance, thereby creating additional fiscal malfeasance - a debt Ponzi. The bigger problem is that are so-called leaders can keep a government Ponzi going much longer - because they continue stealing from the rest of us now and in the future.