To the Editor:
As we have campaigned in favor of bringing sound financial discipline back to Greenwich’s finance board, we’ve heard skepticism about our support for fixing our children’s crumbling schools. Some assume that property taxes will soar.
The truth is, any impact on property taxes would be negligible.
Why? The short answer is, the mill rate mostly goes up and down based on the town’s operating budget – money spent to pay salaries of town employees, teachers, fire, police, etc., and for pension, health and similar costs.
But capital projects (buildings, renovations and other one-time purchases) are mostly funded by the municipal bonds we issue, and the town’s long term capital plan shows a year-over-year decrease of $200 million. This has not received enough attention.
Greenwich could pencil in the $110 million cost to build a new Central Middle School, and the $42.5 million cost to renovate Old Greenwich School, with little change to the mill rate, which only fluctuates based on the cost of servicing the total aggregate town debt. Since our total town debt isn’t changing much, the mill rate won’t either.
We can commence work on both desperately in-need schools, and you won’t see any material effect from that in your property taxes.
The fine print
No doubt some of you want to see the details of this analysis, so here’s the long answer:
Town operating expenses are covered 100% from annual tax receipts – primarily property tax. All things being equal, higher operating expenses do translate directly into higher property taxes.
The bulk of capital costs are funded by borrowing – that is the issuance of municipal bonds. A portion of property taxes is allocated to cover servicing of interest and principal on the town’s aggregate debt.
As the aggregate amount of the town’s capital needs change, so does the amount of debt that is issued to cover such expenditures, and so does the amount of property taxes needed to cover servicing the interest and principal on those loans.
Here’s the key detail: The town’s FY’24 15-year capital budget shows a decrease (vs. the FY’23 15-year budget) of more than $200 million in projected capital needs for the town. This is chiefly due to a reassessment by Greenwich Public Schools and the Department of Public Works of expected capital costs.
We applied the updated numbers to the town’s capital planning spreadsheet and can report the following:
Adding to the existing 15-year capital plan to take into account a $110 million cost for Central Middle School and a $42.5 million cost for Old Greenwich School, results in the following:
1. The established debt service ratios, designed to preserve our AAA credit rating, would all remain positive (that’s a good thing)
2. Our existing pattern of using property taxes to fund servicing of interest and principal would be sufficient, subject to the caveats below:
• The BET will need to fund predictable amounts to the portion of property taxes used to cover capital costs. In years past this contribution increased by $3 million per year, but under recent Republican stewardship, this consistent funding was sacrificed to achieve short term mill rate reductions. For example:
○ in FY’21 the capital contribution decreased by $2.8 million
○ in FY’22 it did not increase at all and
○ in FY’23 it increased by less than $1.0 million.
In other words, the Republican majority on the BET robbed Peter to pay Paul.
In FY’21 the mill rate declined by 0.79% and in FY’22 there was a zero percent mill rate increase. These mill rate miracles were not achieved by good financial management, but by fiscally unsound underfunding of the capital component of our property taxes. Such tinkering with our capital funding needs to stop.
• The town’s capital plan is shown before inflation. More work is needed to stress test, challenge and otherwise verify the capital project data included in the capital plan. This should be the heart and soul of the BET’s work.
• With proper leadership, the BET, in conjunction with a revived Capital Improvement Program Committee led by the First Selectman, needs to evaluate and verify capital plan numbers. This work is far more beneficial than the current obsessive micromanagement of every school building committee decision and every educational specification. That more appropriately belongs within the domain of the Board of Education.
Vote for all six Democratic candidates for the Greenwich Board of Estimate and Taxation, Row A on your Nov. 7 election ballot, and we will bring fiscal discipline back to Greenwich, along with safe schools for our children.
Moriarty and Weisbrod are members of the Greenwich Board of Estimate and Taxation, and Democratic candidates for reelection.