City bonding $3.1M to cover capital costs
The Board of Aldermen will be borrowing $3.1 million to cover capital projects - some of which have already been completed - approved over the past 17 months.
The aldermen, at a special meeting Friday, Dec. 6, unanimously approved the bond resolution, which allows Mayor Mark Lauretti to borrow the money. What makes this loan different is that the city will be borrowing from a commercial lending institution with a 1.72% interest rate.
“I initiated this a few years ago,” said Lauretti of borrowing from local banks to cover these costs, “because I got sick and tired of paying exorbitant costs to go to the bond market. This draws resentment from all the professionals around the state, mostly the bonding attorneys and rating agencies. I do not mind telling anybody that.”
Lauretti said doing these smaller loans made more sense for the city.
“If you go to the bond market for $3 million or $30 million, you pay some costs, maybe a couple thousand dollars more here or there,” said Lauretti, adding those critics of this move “do not understand how all of this works. For us, that was around the $100,000 mark. By using banks, we save that money.”
"I agree 100 percent,” said Alderman Anthony Simonetti. “Why pay $100,000 for nothing?”
The city charter allows the aldermen to borrow up to 2 percent of the budget for each fiscal year. For this bond resolution, the city will be borrowing $2,488,245 for fiscal year 2018-19 and $610,000 for the first six months of projects during the current fiscal year. The current fiscal year budget is $127,571,474, meaning overall $2,551,429, 2 percent, could be borrowed. The city right now has chosen to borrow $610,000 on this year’s total.
According to the city charter, Lauretti said that aldermanic bonding must be repaid in five years. The city will make two payments per year, and ultimately pay some $148,000 in interest on the loan.
Board of Aldermen President John Anglace, Jr., called this standard operating procedure, and the city is not using this money to “pay its operating costs” as some have rumored on social media.
"This (bond resolution) is to authorize the administration to go out and obtain a commercial loan of $3.1 million to put in the general fund, replacing money already used to cover already approved capital projects,” said Anglace.
Anglace said city officials have chosen to negotiate low-interest rate commercial loans over bonding for cost savings.
“Our job is to watch over the city’s finances and get the best rates we can get,” added Anglace.
The aldermen have already approved the capital projects, and the money from this bond resolution will be used to cover the costs of the 26 capital projects - 14 of which were approved during the 2018-19 fiscal year, 12 during the present fiscal year.
“For purity sake, for transparency sake … that’s the political buzzword today, transparency … we are approving this twice in the public arena,” said Lauretti.
The projects for the 2018-19 fiscal year include the purchase of a new automated refuse truck ($296,000), the Plumb Memorial Library elevator installation ($264,423), desktop computers for teachers ($236,700), the Echo Hose Fire House slab ($195,000), and Lane Street Bridge replacements costs ($389,760) and a 2019 John Deere backhoe ($119,833).
For the present fiscal year, projects include replacement of air conditioning at the Richard O. Belden Cultural Center ($44,840), sidewalks along Canal Street East ($27,891), civil construction work on Canal Street ($117,500), the purchase of Chromebooks for the Board of Education ($158,000), purchase of two unmarked police vehicles ($42,000) and renovations to a residence on city property at 58 Perry Hill Road ($57,500).