Town Council Votes to Borrow $1 Million for New Projects

Town Treasurer Kim Coates: Without more borrowing, “we would definitely need to increase utility rates.” (Wave photo)

By DORIE SOUTHERN
Cape Charles Wave

December 10, 2013

Town Council voted December 5 to borrow up to $1.03 million for projects including water and sewer infrastructure, sidewalks, and breakwaters. At a public hearing preceding the vote, three residents spoke against the borrowing and one spoke in favor.

Deborah Bender stated that in 2006 when Mayor Dora Sullivan assumed office, Town debt was under $3 million – now it is about $11 million. She asked why, although the Town had just spent $19 million on a new sewer treatment plant, more money was now needed for sewers. “How is it that Onancock built their sewer plant which is three times bigger and paid $12 million,” she wondered.

Bender also noted that the new borrowing includes $300,000 to connect new wells, but money that had already been borrowed for that purpose was instead used to buy the new library building. Additionally, she pointed out that the loan includes $150,000 for sidewalks (multi-use trail) that were already budgeted this year. Mayor Sullivan gaveled Bender before she could complete her statement.

The next speaker, David Gay, noting that the Town is already $10 million in debt, asked, “How much debt is enough? – There seems to be no accountability on how these borrowings are spent. The same projects keep coming up year after year as the justification for the loans, but the projects are never completed and the money is used for something else.”

CONTINUED FROM FIRST PAGE

Roger Munz said the proposed bond was “like a Bernie Madoff deal. None of you would take a variable rate mortgage this year because you don’t know what it will be in the future. Don’t indebt the Town anymore in the future.”

Only George Proto spoke in favor of the borrowing, and he qualified it as the lesser of two evils. “I don’t like the idea of borrowing more money, but it’s a tradeoff,” he said. “We’re trading off risk – risk of interest rates going up versus the risk of inflation if we don’t do the projects now. We’re talking about what is the minimum risk to the Town – not whether the projects need to be done or not.”

During Council discussion following the public hearing, Joan Natali said there was a disconnect: “We have priorities for $1.6 million, but only a $1 million bond.”

Frank Wendell complained that an earlier presentation by the Town’s financial advisor mentioned only a fixed interest rate, not a “reset.” He questioned why the Town was in such a hurry to borrow money instead of operating more efficiently.

Treasurer Kim Coates interjected that unless the Town approved the loan, “we would definitely need to increase the utility rates.”

Wendell conceded that “everybody knows that water and wastewater are two things you’ve got to have. I realize you’re trying to shield people from a burden, but that doesn’t make the burden go away – it has to be paid back.”

Steve Bennett said he agreed with much of Wendell’s thinking, “but I don’t think this will put us into bankruptcy. By law we could have $40 million in debt,” he said.

Voting in favor of the bond issuance were Chris Bannon, Steve Bennett, Joan Natali, and Mike Sullivan. Frank Wendell was opposed and Tom Godwin was absent.

The statements by Deborah Bender and David Gay are below. (The other two public speakers did not have written statements.)

STATEMENT BY DEBORAH BENDER

My husband calls Cape Charles “little Detroit” – the city that filed for bankruptcy a few years ago. We are not there yet but in a few years after the interest rates have gone up and we have to start paying principal and interest, who will pay those bills? Or is the plan to raise taxes, water and sewer bills to cover that?

Back in 2006 when Mayor Dora Sullivan took office the town had a debt of less than $3 million. Today the treasurer tells us that the debt is about $11 million. In fact, we have yet to find out just how much money the town owes in bonds and loans and car payments. How can we borrow more money when we don’t know what we owe right now?

Our banking advisor is giving us tables full of information about interest rates and costs of borrowing but no straight answers about what the money we borrow will cost us in the future. Right now the plan is to only pay interest and perhaps not all of that. It is borrow, spend, borrow, spend, borrow, spend.

Hello Detroit, we’re on our way to join you. Our town just spent $19 million on a sewer treatment plant, and guess what? We did not build in the cost of keeping inflow and infiltration out of the system. So now we have to borrow $100,000 to fix that. Five years ago two nor’easters caused the sewer plant to have to handle 750,000 gallons per day. We also have to borrow $460,000 for pump stations not thought of during the sewer project. Even though there is not a check valve that is more than three years old in the pump stations that we have, according to Dave Fauber.

How is it that Onancock built their sewer plant which is three times bigger and paid $12 million?

We need a grinder pump for the Mason Avenue pump station. Didn’t we just redo the force mains and other infrastructure on Mason Avenue? Why not the grinder pump?

We need $300,000 to connect the Keck Wells — an increase of $100,000 since we took the $200,000 borrowed for them to buy the Bank of America building to make into a library. In the process we removed $40,000 per year from the town tax base.

We need breakwaters for the pleasure boats that come over for the day from Virginia Beach and Norfolk. I know the old ladies on Jefferson Avenue will be happy the town did that.

Finally, the town budgeted $150,000 for the multi-use trail. But no, we must take that $150,000 to spend somewhere else and borrow it instead.

I would also like to know why with a full time manager and a part time manager did we have to pay an advisor $37,500 to tell us where to borrow the money? Perhaps we should take that $37,500 out of the town manager’s salary.  Add to that the advisor advised them to get this loan that for the first 10 years is a fixed rate and then it turns into a variable rate loan.  A variable rate loan is a BAD move. Usually the only people that have to get variable rate loans are folks with bad credit.  No one knows what the interest rates will be in 10 years.  The advisor claims the interest rates won’t go up too high in 10 years.  Is he psychic?

Again I ask, why does Cape Charles need so many employees?  Onancock has more full time residents than Cape Charles does and somehow they manage to run their town with half the amount of employees. Maybe our town managers need to go to Onancock for the day and get some lessons in how to run a town.

Just be clear that you are borrowing from our children and our grandchildren, because it is they who will have to pay for your borrowing and spending later.

STATEMENT BY DAVID GAY

How much debt is the Town Council willing to obligate the taxpayers of Cape Charles? I think it was mentioned at one of the earlier sessions that we are already $10 million in debt. How much more debt is enough?

Also, there seems to be no accountability on how these borrowings are spent. The same projects keep coming up year after year as the justification for the loans but the projects are never completed and the money is used for something else. That seems a little dishonest.

What assurances can you give the taxpayers that, this time, the projects used to justify the loan will be completed? Will the town council indemnify the taxpayers if the money is sidetracked on some new pet project?

We need a town council that is fiscally responsible and can be trusted with the people’s money. Unchecked borrowing is the road to ruin.

Share

Comments

Comments are closed.