Continuing a tradition of fiscal stewardship that dates back to the tenure of Mayor Tom Ryan, a respected financial watchdog has once again awarded the city of Rochester with a top credit rating.
In this case, it was Moody’s Investors Services’ Feb. 23 assignment of the MIG 1 rating for $18.3 million in Bond Anticipation Notes and affirmation of our Aa3 long-term borrowing rating. Other services, including Fitch Ratings and Standard and Poor’s, also have assigned Rochester with top-tier, A+ level credit ratings.
These ratings have the immediate benefit of lowering the interest rates on our debt, which saves taxpayers hundreds of thousands of dollars each year. But just as importantly, they are report cards on the financial management of the city. This is a cause for celebration—and a chance to remember why we practice these conservative policies.
Like all large municipalities, the city of Rochester relies on debt to spread certain costs over time. Water lines, roads, fire trucks, parking garages and other big-ticket capital items have life cycles that can span several decades. So it makes sense—and it is only fair—to distribute the payments on those items over several budgets.
The taxpayers and the rate payers of the future will yield the benefit of these purchases, the logic holds, so they should help pay for them. If we simply paid cash for everything we buy, money would be diverted from the operating budget, leading to cuts in programs and services that help us create safe neighborhoods, more jobs and better schools.
You can see how it might be tempting for politicians to maximize the opportunity of debt. It would free up money to spend on programs that offer immediate benefits to citizens and attract the praise of voters.
This is more than a temptation. It is a reality in municipalities across America—many of which are confronting bankruptcy and have credit ratings that border on junk status.
Since the days of our first strong mayor, Rochester has followed conservative borrowing practices that are about as close to pay-as-you-go as possible.
For example, New York State allows municipalities to extend the length of a debt over the entire life of the purchased item. If a fire truck is expected to last 20 years, the payments on the debt can be spread over 20 years.
Rochester does not take full advantage of this law. Instead, we make it a practice to pay down our debt within the half-life of the asset. A fire truck that will be in operation for 20 years will be paid off in 10 years.
Similarly, when we authorize debt that will be re-paid with taxes (rather than charges and fees) from the General Fund, we never authorize more than we retire in the same year, a practice that would require City Council authority to amend. This year, we retire $16.9 million in new General Fund debt. This year, we will authorize no more than $16.9 million in new General Fund debt.
As a result of these practices, over 90 percent of Rochester’s debt is paid within 10 years.
Rochester also keeps an aggressive pay-as-you-go schedule through cash capital. Items like police cars and computers, which have relatively short life expectancies, are purchased with cash. This year, our total new debt will be roughly $25 million, while our total spending with cash-capital is $28 million.
Could we relax these practices and free up more cash? Yes.
The benefits are obvious. Borrowing more money would give us funds to create more recreation programs or hire more librarians. If we paid our debt more slowly, we could accelerate our construction schedule and create more jobs in the building trades.
But this would be a quick-fix solution, and we know these bills would come due eventually. Over time, the burden of the payments would take a larger and larger share of the operating budget and drastic cuts would be made. The work force would be reduced. Programs would be slashed. Maintenance on crumbling infrastructure would be deferred.
Again, these are not hypothetical scenarios. They are the unfortunate reality in cities, counties, towns and villages across the state and nation that opted for the quick fix of debt.
So, I ask again: Could we in Rochester relax the conservative borrowing practices of Tom Ryan and every mayor who followed him? Could we ask City Council for the authority to borrow more money?
Not on this mayor’s watch.
Lovely A. Warren is the mayor of the city of Rochester.
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