Having passed the first reading, the Council could then schedule the legally required public hearing and any other meetings or information sessions necessary to discuss a rate increase, leaving the remainder of the month to make a final decision before the SRF refinancing deadline. It was also pointed out that, with two more rate increase readings remaining, no one can force the Council to do anything they wouldn’t vote to do. Two hours later, after some of the most asinine Coffey/Price/Schmidt commentary I’ve ever heard--and yes I mean even in relation to other Council meetings, they decided to do just that.
Unfortunately, the major issue at hand wasn’t discussed in those two hours. It’s the issue I brought up yesterday in the comments section of NAC. It’s the issue I mentioned to the Mayor, City Controller Garry, one of the financial consultants and anyone else that would listen to me at the meeting last night. It’s the issue the financial consultants alluded to when they presented a chart showing that inserting over $5 million of EDIT funds into the sewer coffers would only reduce the average monthly sewer bill by a little over a dollar as the concept zoomed over CM's heads. What issue is that? The issue is which plan to pay the sewer bond is the least expensive for citizens.
That’s right. Despite all the grandstanding about saving the poor citizens money, not a single person actually asked which payment strategy cost the least per person. The big picture take is that the Council often doesn’t get good information because they don’t ask good questions. The reality of the situation is much simpler than that.
Economic Development Income Tax (EDIT) funds are just that—taxes paid by those who live and work in New Albany to be used for economic development. While the Council seems to assume that it’s somehow free money, it’s real dollars coming from the same pockets that pay sewer bills. The Council has repeatedly called for calculations showing how much the sewer rate increase could be reduced per monthly bill if certain amounts of EDIT funds were applied to the situation. What they’ve failed to ask is how much, per person, the EDIT expenditure would cost.
So…I asked.
--------------------
The average monthly sewer bill is currently $31.15
The proposed sewer rate increase is 19%, to be phased in over three years.
When the rate increase is fully realized in year three, the average sewer bill increase will be $5.92 monthly, $71.04 per year.
As explained by the financial consultants, the rate increase would be reduced by one percentage point for every $1.5 million of EDIT funds applied.
It’s difficult to determine exactly how many people pay into the EDIT fund at a given time. As of the 2000 census, there were 29,263 citizens over the age of 16 in New Albany. The best-case scenario would be to assume that every one of them is employed and sharing the EDIT burden. That’s clearly not the case since the same 2000 census showed only a little over 18,000 people were employed. I used the larger number, though, to ensure calculations were conservative.
The true cost of a sewer increase to citizens includes not only the percentage increase that appears on the monthly sewer bill but the initial, upfront cost of any EDIT expenditure applied to the bond payments as well.
--------------------
With no EDIT expenditure, the cost per citizen is $71.04 per year as mentioned above. If we apply $1.5 million in EDIT, the rate increase is reduced to 18%. That would result in an average monthly increase of $5.61 on each bill. That amount is $0.31 less than if we apply no EDIT. Each citizen would save $3.72 per year. However, the cost of the EDIT investment must be included. $1.5 million in EDIT, divided by the 29,263 possible taxpayers, amounts to $51.26 dollars per person. In short, each person would spend $51.26 up front to save $3.72 per year. It would take 13.8 years to realize enough in annual sewer bill savings to break even, let alone to justify the initial EDIT investment as a savings tool. Even that only remains true if the sewer rate doesn’t increase at all for the entire 13.8-year period. Given the realities of our economy, that’s not a realistic assumption. If the sewer rate is increased even one percent during that time, the break even point will take even longer to reach.
Below is a chart showing how the application of various amounts of EDIT funds would affect the situation. You’ll see the amount of EDIT pledged, the resulting sewer rate increase, the average increase per bill, the amount of monthly and yearly savings generated, the cost of the EDIT investment per person, and the number of years necessary to recoup the EDIT cost before any real savings would actually occur. It’s not pretty.
Unfortunately, for many households, the situation would be even worse. Those households with dual incomes and a single sewer connection would effectively see their EDIT investment double while their savings amount would remain the same. The chart below shows the doubled EDIT cost and the doubled amount of time necessary to justify that cost.
____________________
It’s clear that when the Council members say “I don’t want to be responsible for a sewer rate increase”, what they're actually saying is that “I haven’t thought this through well enough to realize that, in my zeal to keep voters from associating my name with a rate increase, I haven’t realized that I’m actually advocating that citizens pay much more than necessary for the same result”.
I may decide to donate to someone’s political campaign in the future, but I hope to do so voluntarily. Ask better questions, Council, before being saved is worse than the alternative.
Your rationale is valid, but what is not being said is that there are many households with sewer hookups and who not paying into EDIT because of disability, retirements, no jobs etc.
ReplyDeleteBy using the EDIT money, it becomes the typical democratic philosophy of taking money from those working to offset those who don't, can't or choose not to work.
If our city leaders have not maintained the sewer system over the years, sooner or later, it has to be paid for. Trying to divert fixing the problem only creates more problems.
The sewer system needs more money. Those who use it needs to pay. Pretty simple. No one said it would be popular.
HB,
ReplyDeleteYou're essentially making the same argument that I did when I approached the Council last month to dissuade them from using the then proposed $3.3 million in EDIT for sewer bond payments. I, however, focused not on retirees and the disabled but on those who live outside the city limits but use our sewers.
It's one thing to let senior citizens and legitimately disabled folks off the hook. It's quite another to let wealthy suburbanites off, especially given that they don't pay EDIT taxes to the city, either, and that inner city residents already subsidize their lifestyle in many ways through sprawl induced strain on roads, emergency services, and schools.
It's especially disturbing to do that when inner city residents are, whether purposefully or not, making much more conscientious use of pre-existing infrastructure and allowing the city to operate more efficiently. It's simply cheaper to provide most city services in a smaller geographic area than a larger one. It's really not even "free market" fair that I pay the same sewer rate downtown as someone who lives on the city's fringes.
I don't agree with your general assessment of Dems versus Rs, either. Both use tax money to subsidize various interests. It just a different set of interests. My share of the current federal deficit, advocated and approved by Republicans, is much larger than any sewer bill increase. And, no, I don't feel safer.
Also, you may be interested to know that a part of my conversation with Democratic Mayor Garner last night included his concern that the Council, including Republican Mark Seabrook who is an advocate of using tax money for sewers, not make the sewer utility a tax supported entity rather than a user supported one.
You're giving some of the people on the Council way too much credit. They're not arguing over differences in political philosophy. They're struggling just to understand the financial concepts in front of them.
As I mentioned, they were presented a chart showing that an over $5 miilion EDIT investment would only lower the monthly rate by a little over a dollar. The whole idea of comparing the savings to the cost didn't even occur to them. Even if they really want to help, they don't seem to know how.
sdamons, you got to the heart of it. It's NOT about how much of a rate increase it's going to be... it's that they have the gall to ask for a rate increase to pay for bonds to do things the citizens have already paid for!
ReplyDeleteWHERE IS THE MONEY???????/
THEY CAN'T TELL US!!!
So, pp's of this blog, you've got it all wrong. It's not about how much EDIT might "offset" a rate increase. Garner should be forced to use EDIT to replace the citizen's money that was MIS-SPENT.
The outrage is about the fact that money specifically put aside for the use of bond payments and repair work is MISSING.
Not "hell no we won't pay", but "Hell no we won't pay again and again".
Garner should be forced to use EDIT to replace the citizen's money that was MIS-SPENT.
ReplyDeleteThat's the gist of it. I'm so angry that I'm going to insist that we choose an option that costs me more than the rate increase.
EDIT is the same citizens' money. You'll be paying either way. EDIT is the more expensive route. Why is that so difficult to understand?
If you will, I'd like to try and answer this gentleman's questions about EDIT. There is a learning curve about your income taxes, city and county, and what they are used for and what they can be used for. REAL learning curve.
ReplyDeleteEDIT is the topic you want to know about, right? Here goes, the best I know how after dealing with it a few years. Let's take it bit by bit, okay?
Your first question is "BTW.. What exactly does the EDIT money fund? Specifics.. not just 'economic development'. Past and future examples would be appreciated."
EDIT came into being when the County wanted to build a new jail. County officials promised this EDIT tax would come off our backs once the jail was paid for. (Got to admit, some of us were jaded at that time whether this was truthful, or not).
To me, the County has now been "trapped" with maybe keeping EDIT on all of the County because of the City backing up the "new City Parking Garage" that was to bring back downtown and really be paid for by TIF (Tax Increment Financing, don't even ask).
There wasn't enough TIF to pay for those bonds, so the City used EDIT and is still using EDIT to pay for this parking garage to the tune of $615,000.00 per year, plus have and still are paying the utilities, and have and still are paying for maintenance -- it has an elevator, you see?
The Parking Garage will be paid for by our EDIT in 2008. $615,000.00 plus utilities plus maintenance for a parking garage that was "suppose" to bring back downtown. Go figure.
That's how the City got "trapped" into using the EDIT, because they were told by the same people doing this project that our EDIT money wouldn't be needed. Enough TIF money would come in to pay for it. Is any of this starting to sound familiar? Didn't someone keep saying (who sits on the Redevelopment Commission) that we shouldn't use EDIT on sewers, we shouldn't use EDIT on sewers. Gee, things are starting to make sense now.
Your other comment "Just wondering if this is one of those programs that sound good but really are not. If have no idea so I am not making any judgement at this point.
6:05 PM "
Hope that helps somewhat. We now have CADGIT, too, but that's another story. Take care. It's YOUR money and MY money and I'm not bashful in explaining how they use it so wastefully -- at least in my eyes.
People are going to fire at me, but I hope you'll call your County Rep and they'll tell you what you want to know, also. It is a heck of a learning curve. Take care.
P.S. New Albanian, I am learning about links. Hopefully, I may link to all some day soon. Thanks.
Well, I hate to go that far in whether it can help some cities or not. EDIT was pledged towards our Sewer Bonds and the inner-city Maintenance Plan with the Consent Decree and that money is missing and the Mayor doesn't know how to pay it back.
ReplyDeleteWe're really trying hard to find something EDIT has been used for.
EDIT was to come off this year, but the City has it pledged out for about 20 years. The County says they can go ahead and take EDIT off; the City would simply have to reapply for it.
We don't think it's necessary now what with CADGIT, but that would only be my opinion.
It does bother me the City ignored what County politicians promised to their citizens, but, not a whole lot we can do about that one now. Thanks for asking.
I think it's worth noting here that the County voted to support the Scribner Place project with full knowledge that the city intended to use EDIT funds for its portion.
ReplyDeleteOne of the reasons that EDIT hasn't been used more successfully for economic development is because it's been viewed as a way to prop up other projects and services--at times to avoid rate increases-- much like what is being proposed right now with the sewers.
While it may make sense at times to use limited EDIT funds for specific capital improvement projects (including sewers), to pledge large EDIT amounts to a utility that's supposed to be self-supporting is just exacerbating the problem, not solving it.
I personally think EDIT should be kept in place but used to the extent possible to invest in the development of locally owned small business. Doing so helps us leverage the investment we've already committed to Scribner Place and encourages the creation of a locally controlled economy that's ultimately more beneficial and sustainable in the long term.
Because those new things, if handled correctly, will in future help us avoid the type of situation we're in now.
ReplyDeleteIt's my argument that putting the sewer utility on firm functional and financial footing based on user fees rather than tax subsidies is not only more helpful in allowing us to pursue economic development activities that will ultimately increase the tax base and more effectively spread the financial burden but is actually cheaper right now.
As I mentioned, I agree that using limited EDIT funds for sewer related capital projects is justified. However, simply using large sums of them as a temporary band aid to cover long-term revenue deficiencies is poor fiscal management, particularly if doing so is more expensive than other available alternatives.
sdamons,
ReplyDeleteWelcome to the discussion, but please be aware that NAC has a policy of identity disclosure. Although I suspect I know who you are, please verify by writing me at the e-mail address included at my profile. If you wish your identity to remain confidential, I'll gladly honor the request so long as I know who you are.
Roger
It is time to stop giving them more money that they did not earn just so they can blow it and come back and ask for more.
ReplyDeleteWhat you're saying here and what your asking the Council to do are contradictory.
By asking the Council to use EDIT funds for the sewer bond, you're asking them to use more of citizens' money than necessary to fix the sewers. I don't think that's what you really want to do.
If my calculations are anywhere near correct, it's cheaper to not use EDIT funds to payoff the sewer bond than to use them.
Damon, that's fine. Welcome to New Albany's reality-based blog community.
ReplyDeleteDamon,
ReplyDeleteFirst, no one is talking about a new tax. EDIT is already in effect and has been for years.
Second, there's no way to return the money from the past. The money is not "there".
Third, for every $1.5 million injected into the sewers, the increase of 19% will be lowered by one point.
19 points x $1.5 million = $28.5 million.
That's about twice the city's annual general fund.
Even if the entire $5 million you've quoted were available, we'd still need $23.5 million.
What you're suggesting just isn't possible.
May I beg to disagree, Bluegill?
ReplyDeleteFirst, he said taxes and fees - the fees would be the sewer rate hikes. I feel you ignored that statement.
Secondly, I am glad you finally agree "the money is not there" Will you kindly tell us where the hey it went? It was suppose to be there. It was pledged through resolutions and bond documents. Can you tell us what happened to the money? And if not, why not?
We can't accept your line that the repayment of those missing moneys is just not possible. I know I'm not going to buy it. Thanks for the discussion's sake.
he said taxes and fees - the fees would be the sewer rate hikes. I feel you ignored that statement.
ReplyDeleteI addressed the taxes that Damon mentioned as it was the first time in our conversation that he brought up the idea of a "new" tax. To my knowledge, no one has suggested an additional tax to rectify the situation, only pledging EDIT taxes that are already collected. I've addressed the sewer rate hike, and the effect an EDIT tax pledge would have on it, numerous times.
I am glad you finally agree "the money is not there" Will you kindly tell us where the hey it went?
As Damon mentioned, some sewer money has been used to augment the finances of other departments.
Another part of the problem is that the initial rate hike wasn't as large as it needed to be. The financial consultants who did calculations for the original bond advised that a rate increase of 65% percent would be necessary if their projections held out.
Government officials at the time only passed a 49% increase. That problem was/is exacerbated by the fact that the original projection of additonal revenue producing customers was overstated. The result is that we have fewer customers than was projected paying a lower rate than was advised.
If you simplify the math to show the concept, it looks something like this:
Expected:
150 customers X $2.00 per bill = $300 in revenue
Actual:
125 customers x $1.50 per bill = $187.50 in rev
$300 - $187.50 = a $112.5 shortage per month
Unfortunately, the real dollar figures are in the millions and the shortage has been in effect for several years since the initial bond issuance and rate increase.
In addition to all that, some citizens have made claims that criminal activity has negatively affected sewer finances. Those claims are currently being investigated. If there is any truth to them, there's no guarantee that prosecution or guilty verdicts will return any money to the sewer budget. If they aren't true, there are several people who owe the whole city a major apology.
Even if one assumes that the criminal allegations are true, there's no way to predict how long it will take to resolve criminal proceedings. Our opportunity to refinance the bond at a well below market rate of between three to four percent interest is now. Refinancing will not only provide temporary relief by allowing us to postpone the approximately $1 million bond payment due September 1 but will also save us almost $500K per year in interest.
We can't accept your line that the repayment of those missing moneys is just not possible. I know I'm not going to buy it.
You seem to be saying that you don't know "where the money is" but that you're sure that it can be paid back. If money has been illegally appropriated it's unfortunate and those responsible should be held accountable. It's still been spent, though. The amount of approximately $5 million dollars that's been tossed around will, unfortunately, make little difference to the rate increase even if replaced, saving only about a dollar per month on the average bill.
It's not realistic to think that the city can find $5 million in the general fund to "pay back" to the sewers. That would require a reduction in operating expenses of over 30%. Which services are you willing to give up to save yourself a dollar a month? The return of a few vehicles and cell phones, even if critics who call for such are to be considered correct, aren't going to do it.
If other service rates and fees like sanitation are increased to make up the $5 million (again only saving us a dollar a month in sewer bills), then most of the same people will end up paying anyway and probably more, because the sewer system has more customers than other services to share the expense. We could easily end up in a situation in which a lot of us were paying two dollars a month to save one.
I don't want to pay more for sewer service, either, but if we don't act now and take the refinance deal to get a better interest rate, the sewer increase will swell from 19% to 26% to meet the covenants of the bond agreement that state we must generate enough revenue to make the payments plus 25%.
If we use EDIT money to offset the rate increase as some Council Members are suggesting, my calculations show that it's highly probable that each citizen will end up spending more money on the sewers than they would by paying the full 19% rate increase, not to mention the cost of losing the opportunity to use those EDIT millions in otherways. That's at least worth considering and I've asked that it be calculated and presented to the Council in much the same way that I've presented it since most members don't seem able to grasp the concept and do the math on their own.
Believe it or not, that's about all I have to say. We'll see what happens.
Thanks for the discussion's sake.
You're welcome.
You guys may want to check out the minutes from the Nov. 1, 2001 Redevelopment meeting when the decision was made to repay EDIT $3,696,350 that had been spent on the parking garage.
ReplyDeleteThe garage was supposed to be paid from downtown TIF funds, but since downtown wasn't generating new TIF dollars they had to use EDIT money.
That money is owed BACK and it is in those minutes.
Another thing I find relevant is the fact that Ruckman has already installed our new sewer line coming down from Hwy. 150 that will has already brought on Highlander Point, and will be adding a whole bunch of new rate payers (at 1.5 X city rate)as soon as the next bunch of sewer credits are released.
Therefore, the argument about the number of customers being "overstated" only holds so much validity.
It was Garner's bright idea to cut off Georgetown for the initial release of 150,000 credits thus loosing those rate-payers and doing exactly what we predicited he would do:
Turn to City rate-payers to pick up what we lost from Georgetown.
Also, I would like to know where you came up with the number of $28.5 million as what is needed.
I showed the math earlier. Each $1.5 million applied to sewers reduces the rate increase needed by 1 percentage point.
ReplyDelete19 points x $1.5 million = $28.5 million
Price asked the financial consultants the same question Monday night and got the same answer. Unfortunately, he didn't put two and two together and start figuring out how much per person the $28.5 million would cost.
I don't think any New Albany mayor has the authority to decide if Georgetown will build its own sewer plant. Their government does have that authority, though, and did decide to build their own sewer plant.
If there is TIF money owed back to the EDIT fund, it has nothing to do with sewers. Besides, it's more expensive for citizens to use EDIT money on sewers than it is to pay the full rate increase.
Also, can you tell me with any certainty how many new customers the line out Hwy. 150 will create and how much revenue each new customer will generate and when exactly they'll be hooking up?
No, you can't. I can't either. That's why bond issuers won't allow unproven potential new customers to be counted as revenue towards the 125% needed to meet covenant requirements.
This is like beating a dead horse. Of course the bond people won't count "projected" future customers.
ReplyDeleteIt would be like when Farm Credit Banks were making loans saying this pig would have this many little piggies and they would go on and have this many piggies, etc. The Judge ruled saying for all that Bank knew, that first pig could have been stolen.
We have put Ruckman's line in. We've been making major payments to him out of tap-in fees (which, BTW, is a non-reverting fund set up by Council to only be used as inner-City Maintenance).
Can't agree with your logic it's more expensive to "use" EDIT, than raising our rates. If they would pay back the EDIT they owe to the sewers, we wouldn't be having this conversation.
We still do not feel like paying for the Robert E. Lift, which was to be fixed in 1997. It was testified to in Indy that Lift didn't need any work for Ruckman's line to come in.......get my drift?
If it wasn't fixed in 1997 under the Agreed Order (and we have already gotten credits for work we didn't do), then don't you feel it should have been included in the PLAN? Now they need to fix it -- nah. Been going to those meetings for too long to think that way.
Have to stop chattering with you though, Bluegill. If you are able to get numbers and make presentations to the Council, you may be more involved in the legalities than I was aware of.
As there is a big Federal investigation ongoing in New Albany, and seeing I hear you are a lawyer, and seeing I would be one of the people "they" came to see (twice), you may be representing the very people "they" wish to talk to, so, I have decided there really isn't anything more I can add to the discussion. I hope the gentleman which asked the questions received his answers about EDIT, and if not, call your County Representative. Thanks.
Correction: Gee,
ReplyDeleteIt should read the first pig could have been "sterile", not stolen. Sorry.
A Demo,
ReplyDeleteGet your abacus out and figure it yourself.
As there is a big Federal investigation ongoing in New Albany, and seeing I hear you are a lawyer, and seeing I would be one of the people "they" came to see (twice), you may be representing the very people "they" wish to talk to, so, I have decided there really isn't anything more I can add to the discussion.
ReplyDeleteWhich anonymous poster on SOLNA told that whopper about Bluegill being a lawyer?
He's not a mounthpiece ... maybe he's a double agent for the North Korean regime.
Such a great fact checking group! Much easier to spread rumors, innuendo, half truths...
ReplyDeleteWatch what happens next.
Roger, it had to be Erik telling that about Bluegill. Poof, I am a college professor of political science. Poof, you are a lawyer. Poof you are good councilman.
ReplyDeleteDo you believe in magic?
There are a lot of folks in this City who think these questions asked by SdamonS are very critical to the situation we are in right now.
ReplyDeleteSince they've been left hanging here, unanswered, for almost a week, we figured we would rescue them for a re-post on SOLNA and try to get some answers.
Check there for more.
Speak Out Loud NA
Note that EastdistEnded is permitted to advertise her own blog without my censoring the post.
ReplyDeleteI'm just a nice guy. Wonder how many of my posts at SOLNA in the same vein have been axed over the past year?