Column: The New Debt Policy is Risky
By Bill Drake and Brooks Harris
It is a critical moment for the Town of Greenwich’s finances. Residents need to be aware of the recent changes that are likely to result in higher taxes and greater town borrowing. The Board of Education has developed a “master plan” to spend between $1 and $1.2 billion to refurbish the schools. At the same time, the Board of Estimate and Taxation (BET) recently changed the Town’s long-standing debt policy to allow the use of long-term debt of up to 20 years maturity. The combined result of these policies could be a tripling of our debt and a potential increase in the tax mill rate of more than 60%.
Historically, Greenwich has been able to make substantial capital expenditures while preserving low taxes and low leverage. Greenwich has the lowest tax rate in the State. And as a result of our fiscal strength, Greenwich enjoys a “AAA” rating, the highest available. While some complain that we have not spent enough, there is no question Greenwich is one of the most desirable locations in the country. We need to make sure this remains the case for our kids too.
The Town’s debt policy is important. Historically, we have been able to fund most expenditures from our substantial tax receipts. Our pay-as-you-go debt policy has kept us from taking on more projects than we could handle. Unlike other municipalities, we have not had to borrow too much. Since we typically borrowed for five or seven years, the Town lived within its means. Town borrowings and tax rates have been kept low, an important benefit to every resident.
This is why the recent change in Greenwich’s debt policy is so significant. When you borrow long term, you can spend a lot of money today. The reckoning comes in the future. The new debt policy allows for maturities as far out as 20 years. Decoupling the spending from the inevitable repayment is one reason so many governments become overextended and over-leveraged. Many politicians have gotten elected by freely spending and are long gone by the time the bill arrives. You do not have to go much farther than Hartford to see this problem first hand. A policy of short maturities will prevent this stress on every taxpayer.
As we contemplate the largest capital spending program in town history, we must consider the intermediate and long-term impact on taxes. Right now, when we pass our budgets and approve capital spending, the Town only projects one year of impact on taxes and mill rate. To preserve the low taxes and strong finances of Greenwich, we need to act carefully and think of future generations.
The debate on borrowing and spending is a critical one which will be strongly impacted by the upcoming election. The Democrats who control the BET voted to change the debt policy and allow long-term borrowing on strict party lines, with Jill Oberlander as Chair casting the tie breaking vote, despite the projections developed by our debt policy committee which showed that these longer maturities would result in large tax increases and a tripling of our Town’s debt.
How the town moves forward on spending, taxes and borrowing will depend in large part on which party controls the BET. We are seeking nomination as Republican candidates for the BET. We promote the following common-sense policies:
- Continue to invest in Greenwich to keep it an excellent, family-friendly community. The Town residents pay over $384 million per year in property taxes, which is more than adequate to pay for very high quality education and other public services, while making all the capital investments we need.
- Manage our budget to ensure that our taxes and borrowing do not get out of hand. If we want to spend money on something, residents have a right to know how it will affect their taxes and the financial health of our Town.
Doing things the right way is often hard, but residents trust their representatives to do just that: provide the best services and facilities while preserving the financial health of the Town for our children. We are at a critical juncture where spending is about to increase dramatically while the new debt policy is a risk to our long-standing financial strength and quality of life. We must act prudently and responsibly, for the benefit of all.
If you are concerned about these matters, please reach out to us and we will help get your voice heard. Thank you.
Bill Drake is a member of the BET and served on the BET Debt Policy Committee. Brooks Harris is a member of the RTM and served on the RTM Finance Committee Debt Policy subcommittee. We can be reached at firstname.lastname@example.org and BrooksHarrisGreenwichRTM@gmail.com