After reasoning that the city can’t delay a stepped up road repair program, and urging the mayor to set aside $1.2 million for the work, the City Council turned down the administration’s proposal …
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After reasoning that the city can’t delay a stepped up road repair program, and urging the mayor to set aside $1.2 million for the work, the City Council turned down the administration’s proposal to refinance $26 million in bonds for a projected savings of $2 million.
The resolution to refinance three bonds failed on a 3-3 vote with one abstention. Two council members, Thomas Chadronet (D-Ward 2) and Joseph Gallucci (D-Ward 8), were not present.
The vote followed an interrogation of City Finance Director Ernest Zmyslinski by Joseph Solomon (D-Ward 4) that at times became so confusing that City Council President Donna Travis reminded the two not to speak at the same time.
But Solomon wasn’t alone in his reservations. Steve Merolla (D-Ward 9) said that the terms of the refinancing documents left terms of the bonds open to Zmyslinski and the mayor.
Noting that funds are tight, and the city could face a financial squeeze, Merolla said the terms of the bonds could be changed even though Zmyslinski said the repayment schedule would not be extended.
“The terms are left to your and the mayor’s discretion and that’s disconcerting to me. That may not be the intention [to alter the terms] but it’s tempting,” he said.
Solomon focused on what he felt was a lack of information, at one point accusing Zmyslinski of “insulting” the council because he had not considered it important enough to present the information.
In an email yesterday, Mayor Scott Avedisian said, “I hope that the members of the City Council will reconsider this legislation. With the potential of saving up to $2 million, there is a lot of positive benefit to approving this proposal.”
On Monday night, Zmyslinski appeared stunned, saying that the administration was looking to save taxpayers some of the cost of carrying the debt. Solomon said he wants to save the taxpayers money, too.
While the precise savings of refinancing the bonds could not be calculated until they were sold, Zmyslinski projected savings at $1.8 million to $2 million over the remaining life of the 20-year bonds, which vary from nine to 12 years. Further, he pointed out, what Warwick proposes to do is not out of the ordinary and that a number of Rhode Island municipalities have taken similar measures to refinance debt and reduce debt-carrying costs.
“This is going to save the city a tremendous amount of money over the years,” insisted Zmyslinski.
But Solomon questioned how the city was going to come up with a projected 2.9 percent reduction in the interest rate and whether it would be facing a balloon payment at some point.
“We don’t know what the rate will be until we go to the market,” said Zmyslinski.
He said the interest and principal payments on the bonds would be “leveled” so that there would be equal payments annually with no balloon payments.
Zmyslinski suggested if Solomon wasn’t happy with refinancing that he vote against it.
That didn’t make Solomon happy.
“You didn’t calculate those figures,” accused Solomon. “You haven’t given us the breakdown on the coupons.”
Interviewed in his office Tuesday afternoon, Zmyslinski said the city shouldn’t consider refinancing until it has a good idea of what it could save. Based on the market, and the rates gained by other municipalities, Zmyslinski feels this is the appropriate time and that his projections are realistic.
“It’s [the savings] a function of interest rates, which fluctuates and is very desirable now,” he said. “At the end of the day, I’m not going to authorize something that is not in the best interests of the city.”
With a 3-3 vote and the abstention of Merolla, it’s unclear whether the resolution can be reconsidered. Under council rules, the winning side must bring up the matter for reconsideration, but in this case the parties are tied.
Conceivably, the mayor could restart the process with another resolution, although that couldn’t be introduced until next month and would then be docketed for consideration.
Zmyslinski couldn’t say whether the delay, assuming council approval, would have lost the opportunity to garner the savings.
Solomon thought that the resolution could be reconsidered as soon as the next council meeting.
“It’s not dead,” he said Tuesday.
He said all he wants is an amortization schedule of the existing bonds and what that schedule would look like with reduced interest rates.
“If the figures are accurate and there is a savings, then I’m all for it,” he said.
He said he has asked Council Auditor Catherine Avila to prepare a schedule and “then I’ll make a decision with the knowledge that it’s going to benefit the taxpayer.”
Avedisian expressed his bewilderment at the council’s action.
“In the last few weeks, there has been considerable discussion about paving roads. If nothing more, this legislation would provide a funding mechanism to allow the city to increase the paving budget by a million dollars,” he said.
As a $5 million road repair bond won’t appear on the November ballot, council members urged the mayor to come up with funds out of the operating budget to supplement the $450,000 already earmarked for roads. Waiting for the bond to be on the ballot, it was reasoned, could take another two years and, assuming voter approval, the money would not become available until 2017.
In addition to Solomon, those voting against refinancing the bonds were Ed Ladouceur (D-Ward 5) and Camille Vella-Wilkinson (D-Ward 3). Those voting to refinance were Council President Donna Travis, Charles Donovan Jr. (D-Ward 7) and Steven Colantuono (R-Ward 1).
6 comments on this item Please log in to comment by clicking here
RoyDempsey
What's this?? We have had historically low interest rates for 5 years now and we are just now considering refinancing bonds? Please tell taxpayers that this issue has previously been looked at and actions taken to lower debt costs. If not, Avedisian should explain why not.
Thursday, September 18, 2014 Report this
allent
Fleeting sightings of paving crews in RI have been reported but not yet confirmed.
A request for their upgrade from the "nearly extinct" to "critically endangered" list will be denied at this time.
Thursday, September 18, 2014 Report this
patientman
Zmyslinski should have come prepared to the meeting with what has happened to other municipalities with similar credit ratings. It is more of the paternalistic "we know best" attitude of the administration. Because he's lazy the city may not find the savings because rates are going to go up. Get it done.
Thursday, September 18, 2014 Report this
Unionthug
You three (Roy/mommy basement/not patient) are the smartest guys in the room. I wish you all could run for government positions then all our problems would be solved. Hepdog is my hero. Could there be a more jealous person in the world. Keep studying one day you might be able to pass a basic civil service test...
Thursday, September 18, 2014 Report this
RoyDempsey
@SteveD. In reading the comments, I believe I can tell you for sure that this type of refinancing would have been part of a detailed plan presented to the council long ago as part of an effort to lower debt costs. The way this was pulled indicates fiscal problems in this city and also problems with Avedisian's fiscal stewardship.
Friday, September 19, 2014 Report this
patientman
SteveD, Is there something wrong with expecting people to come to meetings prepared?
Tuesday, September 23, 2014 Report this