WPCNR MR. & MRS. & MS. WHITE PLAINS VOICE. AUGUST 10, 2005: A reader finds fault with Common Council Candidate John Carlsons' recent comment on city finances. The points he makes are:

John below are my comments in response to Mr.
Carlson's statements regarding the financial health
and well-being of the City.

Thanks again
Ian

1)    Mr. Carlson  indicates that he is running for
Common Council “to use his corporate banking
experience to help stop the decline in the City’s bond
rating.”

The City’s bond rating has remain unchanged at an AA1
since 1988.  The negative outlook is a comment and not
a rating change.

2)    “Moody’s report indicates that the City’s long term
debt is $74.5 million.  This level of debt works out
to $1,400 per resident or $3,800 per
household.” 

As per the City’s 2003-04 CAFR the City’s per capita
debt is $857. Parking and water debt are excluded from
this calculation by law, since they are
self supporting debt and not funded through tax
revenue.  In addition, the per capita debt limit does
not directly correlate into what each household
is paying since businesses pay property taxes,
however, are not included as a  “household” in the
calculation. (to continue, CLICK READ MORE)

In addition, according to the Moody’s report the City
of White Plains debt position “remains minimal given
below average overall and direct debt burdens (1.8%
and 1.0 respectively), rapid amortization and moderate
potential borrowing.”  These comments reiterate the
very low debt position of the City.

3)    “The taxpayers have to cover the interest charges
on this debt year after year.”

The City debt is paid through a variety of revenue
sources and not entirely by the taxpayers. These
include;  1) taxes received from residential and
non-residential customers, 2)  parking user charges
and fines, 3) water user charges, 4)  grants and other
forms of aid,  5)  general fund revenue,
5) debt service fund balance and 6) interest earnings
on our investments.

4)    “Furthermore, as long as the City keeps running
operating losses we are stuck with this debt because
the debt will have to be refinanced and it
is unlikely that any portion could be repaid.”

Under New York State Law the City is unable to
refinance its debt.  What it can do is refund their
debt; that is take out new debt to repay the old
debt, however, this can only be done once for each
bond issue, cannot extend the term of the borrowing,
must show debt service savings at least 1% after,
expenses, and the City must continue to make the
required annual principal and interest payment even in
the year in which the refunding takes place.

What John Carlson is proposing is prohibited under New
York State law.

In addition, the City operates within an approved
budget, adopted by the Common Council and certified to
the State Comptroller.  By law the City is 
required to budget for and pay all debt service
payments that are due in a given year.  Failure to do
so would cause a default on the City bonds and
allow the bond holders to exercise their first lien
position on the City’s money.  At that time, the City
would be required to make all bond payments
before paying any of its other expenditures. With the
City’s total General and Water Fund budgets exceeding
$137 million in 2005/06 and the City’s debt
service payments fully budgeted for at $10.5 million,
the City has more than enough money to make these
payments.

5)    “Interest rates are going up and not down”.

Although short term interest rates have been rising
recently, the City’s debt service costs are locked in
at the time of the original issue and are not affected
by these market increases.  In recent years, the City
has chosen to take advantage of the low interest rates
available to them, by bonding for many of its projects
before the rates began to rise.  This
has resulted in significant savings to the City.  In
addition, although short term rates have risen
recently, long term bond rates have been less
affected because rates are not expected to continue to
rise in the long term. 

Lastly and very importantly, the City has continued to
experience extremely favorable interest rates due to
its excellent credit and strong local economy.

6)    “The City’s debt burden has made it more difficult
for seniors to stay here and first time home buyers to
buy.”

The City’s per capita debt burden has actually
declined in recent years from $896 per capital in 2002
to $856 in 2004.

7)    “The City has run operating losses for the past 3
years. If the federal budget deficit bothers us, so
should the City’s.”

The City’s operating losses were intentional so not to
burden the taxpayer while the City was holding a
significant fund balance (which represents surplus
taxpayer money) during a period of unprecedented
growth and development .  The federal government has
operating losses of a much greater magnitude and no
fund balance in which to draw.

Comment from August 2, 2005

8) The City’s debt totals a whopping $78 million
(after approving the $1.9 million)

The City’s long term total debt as of August 8, 2005
is $66.3 million. Mr. Carlson’s comments fails to
recognize that the City has paid off $8.2
million in debt since the Moody’s report.  In
addition, none of the bonds that were recently
authorized by the Common Council are actual debt of
the City until the bonds are sold.   At that time,
the City would have also paid down additional
principal on its existing issues.