In his library story Sunday, the Strib's Steve Brandt referenced a letter from Wally Swan, an elected official with the Board of Estimate and Taxation, opposing the referendum. Here's the text (all typos mine)... -- David Brauer, List manager, Minneapolis-issues Letter Regarding the Minneapolis Library Referendum on November 7... I serve on the Minneapolis Board of Estimate and Taxation ( a city-wide office responsible for city auditing, handling much of our municipal bonding, and setting the maximum tax levy for the city), but I am not speaking for the Board in this letter, although I am currently Board President. I have also taught public policy and finance at Metro State and St. Thomas. One of the basic foundations for everything that a city accomplishes is its financial health, very much as it is for individuals. People typically use their paycheck for bills, but take out loans for larger investments (such as houses and cars). When an individual uses loans or credit cards too much, they begin to dedicate an overly large amount of their paycheck to covering bills for credit card companies, banks and mortgage companies. Cities are somewhat analogous because they use their revenues for operating purposes ( e.g. employee salaries, as well as other expenses), but they are also somewhat different because they use municipal bonds (the equivalent of long-term loans) to purchase those items that are too expensive to acquire in a single year (e.g. sewer systems, streets, buildings). Like individuals, cities sometimes get into serious trouble when they decide to bond for anything which looks attractive at the time- rather than postponing things until they can afford them. Some cities (e.g. New York) have spiraled down to extreme financial problems by continuing to bond beyond their means. Other cities ( such as Indianapolis) have been warned by rating agencies when they do not provide sufficient revenues to cover expenses. If cities charge too much to bonding, they limit the amount of revenue available to support basic needs in their operating budget, and their debt payments can become overly large in proportion to the remainder of the budget. Minneapolis currently is one of the two cities in the country which has rock-solid AAA credit rating from all three rating agencies (Fitch, Standard and Poor's as well as Moody's). I want to keep it this way. The value of this is that when we go out to buy things, the interest rate we pay is quite low compared to most other cities. To maintain this preferred rate, we have to exercise some restraint on our "credit card" (bond) purchases, or we will lose our preferred rate. If we bond well beyond our means, we can even lose our financial credibility with rating agencies. The people who support the Library Referendum are well aware of the problems of the Central Library and the community libraries, as am I ( since I use the Central Library regularly and have visited most of the community libraries). But our problem is that we as the City of Minneapolis (with a debt load of $1,249,003,187 on December 31st, 2000 after all Year 2000 bond sales), are like the person who has a lot of debt who is close to the credit limit, but who still wants to go out and charge for something realty attractive and useful but quite expensive. By contrast I think that it is financially imperative that we defer the Library Referendum until we can pay down some of our debt. It is for this reason that I recommend the following: (1) Vote No on the $140 million Library Referendum (but Vote Yes on the much smaller School Referendum --- which is simply an extension of an existing bonding stream). (2) We also need to advise our city council to develop a systematic plan to severely limit our credit card & bonding efforts by dramatically limiting the use of development and tax increment and all other forms of bonds; (3) We reed to focus on our basic municipal needs by having the city council be& this year to put money into the 2001 budget for basic infrastructure and internal service fundsTo do otherwise will risk the financial health of our city. Let's keep our rock-solid AAA credit rating, and make the right decisions on November 7th to protect our city's future! Wallace Swan, City-wide member of the Mpls. Board of Estimate and Taxation.
