Why do I say this? Well, the city has bond issues outstanding, and has to make periodic payments on those bonds. Fair enough... though it is my opinion that governments at all levels should avoid going into debt. It's NEVER a good idea.
Anyway, the city passed their yearly budget just a week or two ago, and somehow neglected to budget $3.1 million for a lump-sum payment on their existing debt. Hmmm... What to do? (Here's where the trailer-park money skills come in.)
The Mayor has asked the City Council to approve a $3.1 million loan from a local bank in order to make the debt payment on their bond issue. Wait... What? Isn't that a bit like using your MasterCard to pay your Visa bill?
http://progress.montgomeryadvertiser.com/article/20101018/PROGRESS01/101015034/1040/progress/City-to-consider-loan-to-pay-bond-debt-
Prattville's city council will decide this week whether or not the city will borrow up to $3.1 million to make the next scheduled payment on its bonded indebtedness in order to avoid the possibility of defaulting on the bonds.
The city council approved on Oct. 5 a $37 million budget that called for accelerated principle payments on the city's $50-million-plus long-term debt. No mention was made of the bond payment problem during a work session or public hearing prior to the vote, nor was the possibility that a problem existed brought up during the Oct. 5 council meeting.
And there may be more.
I am hearing unconfirmed rumors that Mayor Byard and at least one Council member have financial connections to River Bank & Trust, the bank that Byard wants to take the loan from. Specifically, that Byard and one or more City Councilmen are shareholders in that bank. If true, this is a massive conflict of interest, and it violates the first rule of politics: Thou shalt NOT profit from your official actions in government.
I'm looking for evidence to support or refute this assertion now, and will post what I discover when I get it.
But even without a possible conflict of interest, this is simply bad policy. The City has a $37 million budget and a $50 million debt. That's bad. They're counting on future increases in revenue to meet their financial obligations. That's REALLY bad. They're taking out short-term loans to cover interest payments on their debt. That's INCREDIBLY bad.
Ask any credit counselor... If you are using one credit card to cover the payments on another, you are in DEEP trouble.
This is something that residents of Prattville should probably be concerned about. Yes, I think so...
I would make this prediction...by 2016, Prattville will be bankrupt. For a town of 31k folks...this will end up meaning the police and fire department are cut by half, and the city runs on minimum funding for five years while they go into recovery. You get used to potholes, no city park improvements, or infrastructure changes...for a mighty long time.
ReplyDeleteIf you gaze around California...they spent four decades spiraling out of control (even at the city and county level). People running for office...were simply political figures and had no background with budget issues. I suspect City Managers will start to make a comeback...as folks dump mayors left and right over the next decade.