UEP solution must start from the top
To the editor:
A Seven-Point Plan to address the proposed UEP initiative:
1. Place a moratorium on all non-essential capital spending, including the proposed UEP initiatives. Instead, focus on getting our financial house in order in direct response to the continuing ratings downgrades and increasing fiscal concerns that have been issued as recently as last week by the major bond rating agencies. This action will minimize the impending financial stress on thousands of citizens and our ominous foreclosure rates.
2. Address all pending utility debt obligations (most notably the $140 million Kismet water plant), using a five-year amortized payment plan, similar to one suggested by former Mayor Kempe. By sharing the premature cost of that serious planning mistake among the 56,000 properties in North 1-8, we can cover that obligation without adding those additional costs to the existing rate payers, while also deferring a massive burden of $198 million on the backs of our citizens for a currently unneeded distribution infrastructure. For example, the $140 million could be recovered via an annual installment payment of just $594 at 6 percent interest. As Council Member Brandt, Mayor Kempe and others have suggested, if a Capital Reservation Fee (aka impact fee) meets the test of “fee for benefit provided,” then this approach can meet it, as well. If we included the 52,000 existing rate payers and 6,000 SW 6/7 owners, then each City “stakeholder” in the plant would pay only $292 for the next five years.
3. Rather than use the bond markets and their significant advisory and administrative costs, we can float a five-year note at 6 percent, or even less, to a consortium of local and regional banks for a modest packaging fee. Our borrowing costs would be reduced and we would be returning income to our regional banking community a win-win for us all.
4. Direct city administration to aggressively pursue Build America Bonds for all pending bond initiatives. These taxable bonds are in much greater demand by investors and will provide the city with a 35 percent credit directly against the interest rate, effectively reducing our cost to borrow, as part of the Federal Stimulus Program.
5. Direct the city administration to abandon initiatives to implement new taxes via “revenue diversification” and instead, focus on general budget reductions that will lead to lower ad valorem taxes. Those reductions can help offset the stakeholders’ $292 payments for the five-year amortization plan and reduce the overall impact of all fees and taxes to our citizens’ wallets (the cost to live here). Lee County’s intent to leave millage rates unchanged will help to lessen that impact, as well.
6. Direct city administration to provide the council and the Financial Advisory Committee with an itemized spreadsheet that identifies each cost element and planning assumption that constitutes the utility rate forecast. Direct the FAC to complete a comprehensive analysis and then submit its findings and financial recommendations to Council and city administration for review and ratification. This initiative will replace the current speculation and mistrust surrounding the drivers of the rate increase forecast with facts and a prudent financial plan.
7. Commence a Utilities Planning Initiative that updates the Master Plan with realistic growth rates and incorporates design/bid/build and P3 (Public-Private Partnership) management approaches to both capital expansion initiatives and operations that will identify and exploit the most cost-efficient strategy going forward, when the economy and our city return to sustainable growth.
Gary King
Cape Coral