During a Special Council meeting Wednesday night the Council agreed to send restructuring of City bonding to the standing subcommittee on bonding next Wednesday evening to discuss various debt options rather than vote on Mayor Stewart’s proposed last phase of debt restructuring.
Alderman Carlo Carlozzi said the Council wanted to look at other ideas for fixing the budget before voting on the measure.
The proposed restructuring plan would have authorized the mayor to appropriate and bond $115 million to pay, fund or refund any of the city’s existing general obligation bonds. The city’s general obligation long-term net debt is $270 million.
“We knew this day was coming. In 2014 we did a debt restructuring or refinancing. We knew we had structural deficit problems with our budget. We have a lot of debt on the books we owe and we don’t have the means to make payments for things done 25-30 years ago,” said Mayor Erin Stewart prior to the meeting. “This will lower payments for the next 20 years.”
Richard Thivierge from Mesirow Financial Services made a presentation to the Council explaining why the debt restructuring was necessary.
In order to restructure that debt, the City waited for the State to pass a law to allow for municipalities to issue debt for longer than 20 years.
Restructuring lowers the city’s maximum annual debt service payment from about $40 million to about $25 million this year while adding an additional 10 years of payments.
Savings will be accomplished by restructuring the existing principal and interest payments and amortizing, or reducing, them until later years.
If the restructuring was not done, then next year cost of bonds increases to $29.188 million, The following year the city would owe $36.373 million. In 2021 the debt bill would be $39.357 million.
Mayor Stewart said those numbers are unrealistic for the City.
If the plan eventually gains approval this year the City will save $3 million on debt payments. Next year the number drops by $11 million. The following year the city saves $5 million more than the previous year and in 2021 the City will save nearly $14 million in payments due, according to Stewart.
“It’s the right thing to do,” added Stewart. “This is insuring for the next 23 years we can live within our means and have the City on a steady our path. It will not limit new projects away. It is essential to the success of the City.”
Carlozzi said the restructuring comes at a cost as it will increase the money owed by the City in the long run.
“I want to be sure the decision I make is best for the residents of the City who do not have the opportunity and have to look to see what they have to cut,” said Carlozzi. “We have a borrowing issue and we have a spending issue.”
Carlozzi emphasized that over 50 percent of properties in New Britain are non-taxable and the other half needs to pay for that half.
“Our neighbors drop all their problems on the doors of New Britain,” added Carlozzi. “I am frustrated.”
Thivierge assured Council members that there would not be debt restructuring in the future years once this is done.
If the City does not come up with another option and the plan is not approved, Mayor Stewart said as of July 1st the City could have to raise taxes, cut programs or be subject to State oversight.
Thivierge added that of bonding was approved, it needed to be done immediately because the new federal tax bill would cause market interests to rise.