LETTER: Variable-Rate Financing Reckless, Irresponsible

November 16, 2013

(EDITOR’S NOTE: The following letter from Jack Forgosh was read by the Town Clerk at a special meeting of Town Council November 14. Town Council subsequently voted to accept the recommendation of financial advisor Davenport & Company to borrow $1.215 million at a variable interest rate.  Mr. Forgosh has given permission to reprint his letter in the Wave.)


I just learned of your intention to refinance a municipal loan based upon the recommendation of David Rose at Davenport & Company.

I am a seasonal resident of Cape Charles and I hope to become a full time resident in a few more years. While I am not privy to all of the details of our financing, I can tell you with a very high level of confidence that the fixed rate available to the Council and our residents is at historic lows.  I understand the appeal of lowering monthly payments by extending the duration of this loan; however, the risks of a rate increase after 10 years outweighs the short-term savings on our principal and interest payments.

The primary saving is not the difference between a 2.65 percent rate and a 3.1 percent rate but rather from the time extension from a 15-year loan via Sun Trust to a 20-year loan via PNC.

The probability that loan rates [in 10 years] will be higher than the current 2.65 percent is a probability approaching 100 percent. There is also a reasonably high probability that interest rates for this loan, 10 years from now, could easily be reset in the 6-10 percent range. Nobody truly knows where rates will be 10 years from now; however, this Council has the opportunity to refinance the debt of Cape Charles at these historic low rates.


A variable-rate loan should not be considered. It is reckless and irresponsible, and whoever we are paying to advise us is putting this Town’s finances and budget at risk. There must be another solution if a 15-year fixed-rate bond does not generate enough new funds needed for infrastructure investments.

Refinancing is the right move. Investing in infrastructure is also needed for growth; however, committing to a variable rate bond should be taken off the table. Please explore additional fixed-rate financing options. A variable-rate loan in what could prove to be a rising interest rate environment could prove to be disastrous for our Town and its residents.

Kind regards and good luck,


Letters to the Editor are welcome, and a diversity of opinions is encouraged. Send submissions to [email protected].



2 Responses to “LETTER: Variable-Rate Financing Reckless, Irresponsible”

  1. Joe McSpedden on November 16th, 2013 5:41 pm

    It is encouraging to read intelligent arguments from gentlemen like Mr. Jack Forgosh. It is unfortunate for the citizen taxpayers of Cape Charles that we do not have the representation nor the Town administration to make conservative and prudent investment decisions with the citizens’ tax money. Since this is not the Wild West of the 18th century, our only recourse is at the polls. Think about it citizens: next May is coming up!

  2. Deborah Bender on November 17th, 2013 1:05 pm

    Of course this latest move by the town is irresponsible. What do they care if we go deeper and deeper into debt? In 10 years when the variable interest rate goes through the roof most of them will probably be gone, in one way or the other. Then the people that truly care about this town will be left picking up the pieces.

    I sure hope when election time comes everyone remembers all that this little bunch has done, behind closed doors and in the cloak of darkness to give away our historic old school and build a new sewer plant that we will end up paying for, because Baycreek sure is never going to pony up and pay their part. They bought a library with our well tap money using $200,000, but now for some reason they need $300,000 to replace the $200,000 — do you see where I am going folks?

    Send the three packing and for goodness sake get an honest, friendly mayor. Maybe even a manager that can run this town alone and get rid of Mr. Panek. Why does a town with a full-time residency of 1,009 people need two managers anyway? Trim the expenses and quit raising our monthly bills and our taxes. Enough is enough!