It's rare that anything happening out in Mt. Lebanon, PA warrants attention in the broader Pittsburgh Burgh-o-sphere, but recent happenings are just that odd.
Earlier this week, the Mt. Lebanon Commission voted 4-1 to authorize a $2 million general obligation bond issue, with a 20-year maturity, to pay for street and sidewalk maintenance. Apparently, Mt. Lebanon's regular budget just doesn't have the funds to pay to maintain all of its streets.
Over at Blog-Lebo, which stands watch over things Mt. Lebanon, the commenters thoughtfully point out that this deal is even more bizarre than it might seem initially. Most of the interest on the bonds gets paid toward the end of the bond, but it accrues throughout. Translation: the interest here is huge -- but deferred.
Why mention this here? Because I wonder whether Mt. Lebanon might be a canary in Pittsburgh's economic coal mine. I don't know why the Commissioners decided not to live within the town's ordinary budgetary means. To the best of my knowledge, none of the streets or sidewalks in question is dangerous or in need of repair that is so urgent that we can't wait to pay for repairs in the ordinary course. The fact that Mt. Lebanon decided to put the bill on the taxpayers' proverbial credit card suggests that tax revenue may have fallen to the point that Mt. Lebanon can't afford to pay all of its ordinary municipal bills without going further into debt -- and high interest credit-card style debt at that. (Too bad Mt. Lebanon couldn't really put the tab on a rewards-earning card!) If Mt. Lebanon is struggling to pay its bills -- Mt. Lebanon, which much of Pittsburgh loves to sneer at for its high living -- then there may not be a lot of cheering about the prosperity of the region as a whole by the time the G20 rolls around in September. If I'm right, then undoubtedly there will be local Schadenfreude to spare. But Mt. Lebanon won't be alone.
Of course, I may be completely wrong. Instead of being cash-poor, Mt. Lebanon may have gotten advice about how to fund municipal operations from the same folks who brought us the overheated, overleveraged housing-and-CDO market. Or the Commissioners voting for the bond issue thought that the taxpayers of Mt. Lebanon are paying just enough attention to see "street repair" and "no upfront cost to the taxpayer" in the same equation and think that nothing is amiss (or worse - that things are fine!) -- while hundreds of thousands of dollars in needless interest expense goes flying out the door over the life of the bonds. Maybe this is just the usual we-get-the-lousy-local-government-we-pay-for that Pittsburghers have gotten accustomed to. Or maybe Mt. Lebanon's tax revenue is declining - but other areas of Allegheny County haven't or won't see comparable declines.
If you're keeping score at home, you might be aware of the fact that the Mt. Lebanon School Board is finalizing a project to replace the aging Mt. Lebanon high school facility. The construction budget (that is, the tab for the taxpayers)? Whatever the amount of money that the Board is legally authorized to spend without asking the taxpayers to actually vote thumbs up or thumbs down on the project -- which is to say, somewhere in the neighborhood of $110 to $115 million. The School Board has to be thinking that if they put that project to a vote, the taxpayers of Mt. Lebanon would vote it down; that's another big bill for the government credit card. The Municipality of Mt. Lebanon and the School District are separate entities, but the bloody taxes get squeezed out of the same human stones.
I know that lots of Post-Gazette staff (even continuing Post-Gazette staff) live in Mt. Lebanon and I know that a lot of them (including the Mt. Lebanon residents) read this blog. Here's a story idea: Test the hypothesis. How are municipal economies doing around Southwest PA? Is Mt. Lebanon an outlier, a canary in the coal mine, or neither?
[Update Wednesday June 24: A resident went to the videotape, as Warner Wolf might say. The mystery in Mt. Lebanon thickens.]
5 comments:
For the streets, I think the answer might be stimulus money. Maybe Mt Lebanon has the inside track to some chunk of stimulus money, but it needs a public works project to spend (or have spent) it on. That way, if Mt Lebanon gets, say, a million in stimulus (or even G-20) money, it can pay down the debt and greatly reduce the total since the payment would go to principal.
Also it seems possible that municipal quantities of asphalt and concrete might be getting a bit more expensive, in anticipation of
As for the high school project, this might be an example of careful planning or just good luck. Besides also perhaps being in line for a quantity of stimulus money, it is very likely that the Mt Lebanon school board is going to see at least a five percent increase in revenues, when reassessment hits. I say 5% because supposedly that is all taxes/revenues can increase by, a state law (the school board is supposed to adjust the millage downwards … I chuckle just thinking of a government body reducing a tax rate). I suspect Pittsburgh (the City) will try to squeeze more out, perhaps asking the Act 47 people to intervene on its behalf. It is possible Mt Lebanon might ask for a similar dispensation. Anyway, no harm in setting up the plans to renovate the high school. They can be put on hold for a short while, while Onorato tries to wriggle out of, or at least delay, reassessment. But reassessment in the near future seems inevitable.
Or the Mt Lebanon government(s) could just be dumb-asses. But I think the bird in Pittsburgh’s fiscal coal mine is Pittsburgh itself, looking more like a dodo than anything else.
"The stimulus made me do it" is a fair hypothesis, but there's no evidence that this motivated the Commission. Increased tax revenues from reassessment will help the School Board, but only in the sense that the extra income may enable the Board to spend more, without a referendum, than it might have spent otherwise.
I'm still scratching my head.
I was always taught that bonds are one of the worst possible ways to fund projects due to the long-term interest payments.
What are the connections between the people loaning the money and the people running Mt. Leb?
I assume that the bonds will be sold into the market. I don't know who is advising Mt. Lebanon, however, so I don't know whether there are fees or commissions being paid to them (presumably there are), to whom, and in what amounts.
Mike,
Long time first time...
In your comment regarding how the PG should do a report. Its already been done but Pittsburgh Today in 2008
http://www.post-gazette.com/pg/08059/861180-100.stm
http://pittsburghtoday.typepad.com/pittsburghtoday/2008/02/the-enormous-pr.html
Post a Comment