Dear Editor:
We should all applaud City Manager Al Childress and the city commission for proposing the bond financing that will appear on Key West voters’ November ballot. As a 20-year resident, I have never been more excited about the city’s future.
The bond financing will allow Key West to invest in infrastructure that will benefit residents and visitors for several generations. This financing spreads the cost over time so current and future property owners will all share in the costs of maintaining our city.
Concerns & Questions
- Fire Station 3 preliminary plans, Key West Police station renovation and several projects within the four categories have been criticized for being “wants” instead of “needs.”
I agree. The best part of the bond financing is that it is preapproved, but not obligated to be used. All borrowings under the bond will be for specific individual projects with planning, refined cost estimates, subject to a public input process and a vote by our elected representatives.
- Several items in the bond description detail appear to have a useful life shorter than 30 years.
I agree. Most of the funds will be used to finance long-term capital assets with a 30-year useful life. If funds are used to finance assets with shorter lives, then financing for these projects will be repaid over the useful life of the related long-term asset being funded.
- Why is the city not pursuing other forms of funding for these projects? Will approving this financing cause the city to not vigorously pursue other financing such as cash reserves (pay as you go), TDC funding and federal/state grants?
The city intends to fund these long-term projects with multiple sources including cash reserves, TDC funding, grants and this bond financing. It is up to us as engaged citizens to hold our
elected representatives and city staff accountable for pursuing all funding sources for all projects.
- Does the city need $300 million in debt?
Not necessarily. The funding will be used by the city if necessary to fund long-term capital needs. Each project’s funding will be subject to a public input process and vote of our elected representatives. The timing of specific projects will be spread over many years and limited by availability of city staff and volume of projects that the staff can effectively manage. It is a common finance principle that long-term capital projects are funded by a combination of debt and equity (net position in a municipal entity). The city has $415 million in capital assets and less than $7 million in long-term debt. Other similarly sized local organizations such as Key West Housing Authority, Keys Energy, FKAA and Monroe County have long-term debt ranging from $60 million to $605 million.
- Why approve $300 million of bond financing all at once?
For the same reason homeowners obtain pre-approved mortgages before shopping for a house. Accessing the capital markets is a time-consuming process requiring approval by the voters and costs of financial advisers, underwriters, attorneys, etc. Why not incur those costs once with benefits realized for many years into the future?
- Will the city be paying on these 30-year bonds for as long as 45 years?
Maybe. It is possible the repayment period will extend beyond 30 years depending on when the
funds are borrowed and the useful life of the assets being financed.
- Why is the city funding maintenance as part of this bond funding?
The city has no intention of funding maintenance with this bond funding. The city endeavors to fund routine maintenance every year to extend the lives of long-term capital assets. The city has been unable to fund routine maintenance of its long-term capital assets in the past. This lack of funds for maintenance can be attributed to the city’s failure to raise property taxes equal to the rate of increase in its costs and expenses, coupled with a lack of other revenue sources such as impact fees, a social services tax or other tax alternatives and the city’s “pay as you go” cash approach to funding long-term capital assets.
- Why is the city perpetually behind in maintaining its road system?
Two reasons: Because the city does not have adequate revenue sources to maintain its road system and because other entities and utilities are constantly damaging our roads. In the past, the city has not held these partners accountable to pay their fair share of road repair costs.
- Is it true $40 million allocated from this bond funding for roads will only pave 15 miles of the city’s 60 miles of roads?
Yes. Road repair here is very expensive, partially attributable to our remote location and the lack of sufficient annual spending to attract multiple vendors in a competitive bidding process.
- What happens if voters fail to vote in favor of the bond referendums?
It will be a sad day for the future of Key West. The city will continue its legacy “pay as you go” approach with city infrastructure continuing to fall into disrepair. The city will not have sufficient capital to undertake many of the large projects identified in our most recent strategic plan prioritized by the public such as Bayview Park renovation, MLK Pool rebuild, Fire Station #3 replacement, Coffee Butler Amphitheater enhancements and Mallory Square renovation, to name a few.
Please join me and vote yes in November to the four bond referendum questions to provide our city the tools necessary to make needed capital improvements that will enhance our quality of life and the Key West experience for our visitors.
Sincerely,
Roger McVeigh
Key West
