NEW BRITAIN – The Common Council voted to de-authorize unused bond funding on completed capital projects and use a portion of the money to restructure the city’s debt.
In a special meeting Wednesday, the Council made the decision after accepting a report of the Standing Bonding Subcommittee of the Common Council Committee on Administration, Finance and Law, which recommended closing out completed projects. The committee met March 16 to discuss the reallocation of funding from projects which have already been completed and no longer need the surplus of funds.
Mayor Erin Stewart spoke about the special meeting in a Facebook Live prior to Wednesday night’s meeting.
“These are old bonds that still have money in them but the project that they were spent on and the money they were spent on and can only be spent on are completed,” Stewart said. “So this money is sitting there, the city is paying on this and we don’t need to be doing that. We need to save every dime we can so we’re defunding these projects. ”
Alderman Robert Smedley said the report sent to the council by the Standing Bonding Subcommittee outlines the completed capital projects and the remainder of the funding. According to the report, the projects included are the City Wide Facility project, New Britain High School remodel project (from 2007) and repairs to Badolato & Szczesny parking garages. The unused bonds de-authorized came out to $ 1,157,813 in total. The council was required to de-authorize the funds before they could reallocate because of how the original resolutions were written, which outlined the funding could only be spent on these specific projects.
According to the report submitted to the Council, the Bonding Subcommittee recommended the sum of 49,500,000 to be appropriated for the purpose of paying the city’s outstanding General Obligation Bonds and to pay related costs with such bonds from now through March 1, 2025. Additionally, the committee recommended funding could also be used to fund one or more escrow accounts to meet said appropriation and in lieu of a tax. The committee recommended the Council authorize the mayor and city treasurer to enter into agreements on behalf of the city that they deem reasonable or necessary to provide credit enhancement and liquidity to the bonds.
John Healey, managing director for New England market at Mesirow Public Finance, gave a presentation to the council outlining the proposed allocation of funds to pay the city’s debt. Healey, who once served as chief of staff under Stewart, said the resolution would allow the city to use the funding to manage city debt.
“Over the past eight and a half years, what the city has been doing is engaging in a strategy of active debt management as just one of many components to help the city deal with some of its budgetary and long term legacy liability problem,” Healey said.
Taking into consideration the various policy changes the Council might implement in the course of the coming years, Healey said the change would allow city revenues to catch up with the level of expenditures that are occurring without forcing massive tax increases. He said the city’s current debt profile would need to be restructured and the council would authorize the refund of $ 49.5 million, which would help make room for the roughly $ 25 million of new money projects.
“What we didn’t want to do is issue an additional $ 25 million of new debt on top of this because obviously that is going to create instant budgetary pressure for the city at a time when really the city poised to continue down this path of what. is fiscal health and resurgence, ”Healey said.
Later that night, the Council voted on a resolution regarding a $ 26,950,000 Appropriation and Bond Authorization for Various Capital Improvements for the City of New Britain. On a present value basis, Healey said the net cost of restructuring is a little more than 5 million. Healey said the proposed change would take advantage of the current rate system to allow the city to take on new projects.
Alderman Aram Ayalon said he was in support of using the recently de-authorized bonds to fund the new projects presented, but disagreed when it came to the proposal that part of the money be used to refinance the city’s debt. Ayalon voted against the resolution.
“After looking at the numbers and listening to it, I just think that for the amount we are borrowing and for it I don’t think it’s really worthwhile,” Ayalon said. “It looks like we are simply going much further in debt over the next 30 years for a rather meager return.”
Alderwoman Desiree Acosta questioned what would be the consequence of not restructuring the city’s debt. Healy said the restructuring could add to the debt overall, but would help the city to have extra funding from year to year to the general city budget. He believes the $ 25 million that will be invested into the new projects will be net revenue generators.
“What we’re trying to do is be able to feather that new debt in with the least amount of impact to current debt service while at the same time taking advantage of the relatively low rate environment,” Healey said.
The resolution to reallocate the sum of 49,500,000 to the city’s outstanding General Obligation Bonds passed with a 12 to 2 vote.
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