Schenectady weighs adding to pile of debt
City now carries $59.9M in short-term notes, will vote on $6.9M more
By Lauren Stanforth
Published 10:37 pm, Tuesday, March 5, 2013


SCHENECTADY — While Moody's Investors Service recently downgraded the city's bond rating in part because of its "above-average debt burden," Schenectady will likely add to its tab by borrowing another $6.9 million this spring for water and sewer projects.

Finance Commissioner Deborah DeGenova presented the plan Monday night to the City Council, a financial move that includes rolling over the city's current $59.9 million in bond anticipation notes, known as BANs, for another year. The action will avoid bond interest payments of 2 to 3 percent that would result from sending the money to long-term borrowing. Interest on BANs is only about 1 percent.

Many other urban areas across the state also are facing the same financial crunch as pension and employee benefit costs go up while tax collections and property values go down.

The city says it cannot afford this year to roll its debt into long-term borrowing with higher interest rates. The state requires that BANs can be held for only five years, and $26.1 million of the BANs will time out next year, DeGenova said. The $59.9 million includes $20 million that was borrowed to build the Foster Avenue public works garage, which was completed in 2010. But it doesn't include another about $39 million in bonds the city still carries from projects that date back decades.

Eyebrows rose two weeks ago when DeGenova revealed that a bank rejected the city's application to lease 10 police vehicles at a cost of $330,000 because of the Moody's downgrade and that "the city carries debt well above the median for New York municipalities," according to an email written by Municipal Leasing Consultants, the company working out the lease deal for the fleet of police vehicles. Municipal Leasing said it has another bank that is probably willing to sign off on the vehicles.

The September Moody's report, which assigned Schenectady a "negative outlook," said the city's bond rating could go back up if it decreases its debt burden.

Mayor Gary McCarthy said the water and sewer borrowing is different from the debt Moody's criticized. The rating was based on general fund borrowing, not from the water and sewer funds, which he says are flush with cash.

The $6.9 million in water and sewer projects that the council will likely approve next week are for a range of capital improvements, like renovations to the Stockade's North Ferry Street pump station and the purchasing of backup generators for the water department.

"We pay consultants and analysts to review the market, and it's a balancing act between providing a level of service and being able to pay for it," McCarthy said.

The city ended last year $4.8 million in debt. An audit by the state comptroller's office that was released in November agreed with Moody's concerns but gave a thumbs-up to the city's efforts to generate new revenue, like working to place foreclosed properties in a tax-sheltered land bank.

But auditors also predicted that in 2016 the city will have a $12.9 million budget gap and there will be almost no fund balance to plug the hole.

McCarthy has said there will be a slight surplus shown for 2012 once an internal audit is released in May, money that the mayor says was brought in by threatening foreclosure on hundreds of delinquent taxpayers and by cutting costs in various departments. But McCarthy would not specific numbers.

lstanforth@timesunion.com • 518-454-5697

Read more: http://www.timesunion.com/loca.....54.php#ixzz2MlYVkFhV

I didn't see the expense for the new nursing home listed.

Quoted Text

Schenectady will likely add to its tab by borrowing another $6.9 million this spring for water and sewer projects.

...

Mayor Gary McCarthy said the water and sewer borrowing is different from the debt Moody's criticized. The rating was based on general fund borrowing, not from the water and sewer funds, which he says are flush with cash.

If that is true, why borrow to pay for projects


If that is true, why won't McCheesy lower the sky high fees for these funds?????????


If my bank account was flush with cash, I certainly would not borrow money to put int a new septic system or install a new well.



He's lying

Quoted from Shadow

I didn't see the expense for the new nursing home listed.

The above is city.   Nursing home is county.  Two different taxing entities.

May 2012 TU about Schenectady and the water treatment plant....

SCHENECTADY — The city Wednesday announced completion of a project that turns gas emitted by sewage into energy to power its wastewater treatment plant.

Schenectady put $7 million of upgrades into the plan along the Mohawk River, with much of the money used on what is called a combined heat and power system that turns waste from the sewer system into methane gas. That gas is then fed into an engine that creates electricity and heat for the plant.

Mayor Gary McCarthy said the city expects to save $29,000 a month in electricity and heating costs — a much needed revenue stream as the city struggles with a $5 million deficit carried over from 2011. The plant can now generate an estimated 1,800 megawatt-hours of electricity per year, which is enough to power more than 275 private homes for a year.

The city borrowed about $5.5 million to pay for the project, with $1.5 million coming from grants — the largest supplied by NYSERDA.

The state Energy Research and Development Authority has funded 30 such projects since 1998, many of them also at farms where manure is converted to energy. Schenectady is the first wastewater treatment plant in the immediate Capital Region to use such a system. The other closest facility is in the Gloversville-Johnstown area.

NYSERDA CEO Francis J. Murray Jr. said according to the American Biogas Council, there about 3,000 wastewater treatment plants across the U.S., but only about 250 that use gas for energy.

The Schenectady plant improvements included putting a new cap and dome on the concrete buildings that house the waste and the gas.

The methane is created by applying what is called anaerobic digestion, a process that breaks down biological materials. The gas is then pumped underground to a nearby building where a large engine turns the gas into electricity.

Previously, 50 percent of the gas was burned off on a large flame outside — meaning the new system also reduces the amount of gases that could be entering the atmosphere, said Vincent Apa, the project's engineer.




Why is everyone so surprised??!!!! McCheesy spent $5.5 million on this project when the City was $5 million in debt back in 2012.

Total fiscal incompetence bordering on criminal....how many years do you get for bouncing a $5 million dollar check?????

Nice way to generate revenue.  

Quoted Text

McCarthy has said there will be a slight surplus shown for 2012 once an internal audit is released in May, money that the mayor says was brought in by threatening foreclosure on hundreds of delinquent taxpayers and by cutting costs in various departments. But McCarthy would not specific numbers.

The city is gambling here big time.  The city waiting to lock in the short term debt to long term debt is much like a person taking the adjustable rate mortgage to save a few dollars.  If the city waits to lock these BANs in and Moodys downgrades us again then the lock in to long term rates will cost us thousands if not millions more than they would if we locked in today.  ......but since the city cant ock in today they wont and will pay dearly for it later.  Moodys isnt messing around anymore.  

He was counting "expected" savings as a "revenue stream", but they borrowed to get those savings. It's like when homeowners take out a loan againsttheir house to install energy efficient windows to save on heating costs.
I would also like to point out that BS and the city council raised taxes nearly 25% (new revenue) to get a better Moody's rating. On top of that, there were windfall taxes collected due to gas prices going up, and also the reval at the peak of that real estate bubble. That is not "cash-strapped". That is having people who only know a little bit about finance making these tricky decisions. Lots of people started thinking they too were financial wizards anddid some really dumb things with money, individuals as well as municipalities. The difference is Schenectady is still doing the dumb things. TIB is right,it is gambling big time, but it is with other people's money.
This is why I voted for Roger Hull. He was involved with the bad Schenectady 2000 stuff, but he would never, ever be this willfully stupid about budgetmatters.