City’s bond rating could be jeopardized if changes not made
The city manager’s most recent weekly newsletter to the Oshkosh Common Council, dated Feb. 16, 2007, offers a warning that some of us have been talking about for years.
It has to do with the city’s bond rating, which is directly tied to the amount of interest we pay on the money we borrow – whether it is for our own capital projects or for developing the infrastructure in TIF districts for developers.
In his newsletter, Richard Wollangk says “As I spoke about at last Tuesday evening's Council Meeting, the first item I'm enclosing with today's Newsletter is a copy of the bond rating that we received from Moody's Investors Services for the bond issue that was approved at last Tuesday evening's Council Meeting. I've highlighted their concern about our fund balance and their feelings that we need to try to get that fund balance up to its previous levels in order to maintain our AA3 rating. It appears that Moody's is all right with the use of the reserves for capital projects, however, they would like to see it grow to where it had previously been to using it for that purpose. If we continue the downward trend in that fund balance, they will be concerned.”
You can read the entire newsletter by going here, but that item was one of the more significant ones to me.
I appreciate what Mr. Wollangk says about Moody’s being “all right” with the use of reserves for capital projects, but wonder if Moody’s is aware of just what some of those capital projects have been and the manner in which they’ve been handled.
One that immediately springs to mind that was, in my opinion, both irresponsible and a misuse of reserve funds, was the use of several hundred thousand dollars (originally about $675,000, but that was eventually whittled down to about $500,000, I believe) for bathrooms and the concession area at the Leach Amphitheater. I will also remind people that not only was the money pulled from reserves for that project, but the construction contract on the project was awarded without a bid process being conducted (something the attorney general’s office later said was illegal). The Oshkosh Common Council awarded the contract to C.R. Meyer upon the recommendation of city staff, though if memory serves me correctly, the amount was reduced somewhat after Mayor Bill Castle had a golf course discussion with his friend from C.R. Meyer, Phil Martini. I believe that was how we ended up with a total cost of around a half a million or so.
But whether a half million or $675,000, the fact is the process is flawed and we should not be spending reserves intended for emergencies on bathrooms and a concession area, especially without a formal and legal bid process.
The second issue for the city and Oshkosh Common Council is two-fold: Why haven’t they replenished what they’ve borrowed to date (if they had, such a warning from Moody’s might not have been necessary)? And secondly, where will they get the money from to replenish the reserve fund now that we’ve been told we need to, or else? I don’t think the solution will be quite as simple as I expect we’ll be told. After all, common sense would suggest that if it was that easy to get the money there would be no reason to pull it from reserves in the first place.
Bottom line: City staff and the Common Council need to be more responsible and choosy in what it spends reserve funds on and, in doing so, weigh the issue of “wants” versus “needs” more carefully.
It has to do with the city’s bond rating, which is directly tied to the amount of interest we pay on the money we borrow – whether it is for our own capital projects or for developing the infrastructure in TIF districts for developers.
In his newsletter, Richard Wollangk says “As I spoke about at last Tuesday evening's Council Meeting, the first item I'm enclosing with today's Newsletter is a copy of the bond rating that we received from Moody's Investors Services for the bond issue that was approved at last Tuesday evening's Council Meeting. I've highlighted their concern about our fund balance and their feelings that we need to try to get that fund balance up to its previous levels in order to maintain our AA3 rating. It appears that Moody's is all right with the use of the reserves for capital projects, however, they would like to see it grow to where it had previously been to using it for that purpose. If we continue the downward trend in that fund balance, they will be concerned.”
You can read the entire newsletter by going here, but that item was one of the more significant ones to me.
I appreciate what Mr. Wollangk says about Moody’s being “all right” with the use of reserves for capital projects, but wonder if Moody’s is aware of just what some of those capital projects have been and the manner in which they’ve been handled.
One that immediately springs to mind that was, in my opinion, both irresponsible and a misuse of reserve funds, was the use of several hundred thousand dollars (originally about $675,000, but that was eventually whittled down to about $500,000, I believe) for bathrooms and the concession area at the Leach Amphitheater. I will also remind people that not only was the money pulled from reserves for that project, but the construction contract on the project was awarded without a bid process being conducted (something the attorney general’s office later said was illegal). The Oshkosh Common Council awarded the contract to C.R. Meyer upon the recommendation of city staff, though if memory serves me correctly, the amount was reduced somewhat after Mayor Bill Castle had a golf course discussion with his friend from C.R. Meyer, Phil Martini. I believe that was how we ended up with a total cost of around a half a million or so.
But whether a half million or $675,000, the fact is the process is flawed and we should not be spending reserves intended for emergencies on bathrooms and a concession area, especially without a formal and legal bid process.
The second issue for the city and Oshkosh Common Council is two-fold: Why haven’t they replenished what they’ve borrowed to date (if they had, such a warning from Moody’s might not have been necessary)? And secondly, where will they get the money from to replenish the reserve fund now that we’ve been told we need to, or else? I don’t think the solution will be quite as simple as I expect we’ll be told. After all, common sense would suggest that if it was that easy to get the money there would be no reason to pull it from reserves in the first place.
Bottom line: City staff and the Common Council need to be more responsible and choosy in what it spends reserve funds on and, in doing so, weigh the issue of “wants” versus “needs” more carefully.
posted by Cheryl Hentz at 10:54 AM
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