Monday, December 11, 2006

The recent bond rating warning is a wake call and we can’t afford to hit the snooze button. Wall Street is saying to Dover, get your house in order or pay a price. Unfortunately, Wall Street rightly sees the mismanagement of the electric fund as a sign of potential risk. This is why they are considering changing the city to a greater risk for investors who buy our debt. How do you miss hundreds of thousands of dollars in miscalculated rates more than one month? Why are we dealing with a structural deficit next year in electric fund that we never noticed? How are we off almost 10% of the funds budget? If we do not act decisively, we will be paying higher interest (read taxes, fees, or cuts in services) for years to come. The professionals are telling us we have lost our way, not just me.

I wonder will this affect the merit raises. In the private sector, miscalculations of this magnitude would not be tolerated. We deserve to see a plan of action now that is based on financial responsibility. One such plan was presented earlier this year, the tax and electric rate payer relief plan (TERP). Our solution was:
Form a capital sunset committee to take a year to review every project which has been pending for more than one year.
2. an independent performance audit of city programs and finances.
3. reject massive new projects such as the $13.4 million city hall expansion.
4 fiscal restraint by (1) Cut spending $3M, (2) No new projects, without offsetting spending, (3) Give the people back their $4.8M from the Rate Stabilization Fund to offset the electric increases, (4) Cut carry forward $5.2M, apply to rate stabilization and tax relief, (5) Return $2 M to the people by rescinding last year’s increases in fees, taxes, and rates, (6) Cut customer service charge and return $600,000 to the people, and (7) Use excess contingencies and reserves to balance any budget proposal to Council this year.
Obviously, there would be revisions to the plan because much of the money was spent in a record 130 million dollar budget.

Whenever, there is a tough financial choice, it is the habit of tax and spenders to say we need to cut services, layoff workers for Christmas, or raise taxes and fees. We then have to swallow massive increases. Well, no. We need to stop most new spending. Yes, we will have to raise electric rates, but will it be 3 or 4 million or 7 or 8 million dollars? Should we just say Merry Christmas and set out a stocking for city hall containing your checkbook?

We were told earlier this year that if we raise fees and keep the tax increase, we could spend millions on new projects. We were told that local analysis of city finances were wrong and political scare tactics. Wall Street is showing us who were playing politics with the number. The critics were not harsh enough. We are not funding our long term liabilities properly which makes the picture even worse.

Our city has a tradition of being extraordinarily well run. Our bond rating over the years has recognized it. We have strong multiple sources of income and a relatively low debt ratio. Our management has been top notch and our council responsible. Let's get back to that tradition before it’s too late.

David Anderson

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