Posted at: 10/01/2012 6:28 PM
Updated at: 10/15/2012 5:11 PM
By: Beth Wurtmann
SCHENECTADY - Schenectady City Councilman Vince Riggi says a $20 million building complex built several years ago is not only too costly, it's also going to saddle taxpayers with more debt they never bargained for.
"When you have use for a garage it doesn't have to be built like the Taj Majal," said Riggi.
The Bureau of Services building, with office space for General Services, a garage and body shop, was financed with a short-term loan called a Bond Anticipation Note. With a low interest rate of around one percent, that's a draw for a lot of municipalities. After five years, the BAN is converted to a bond with a slightly higher rate of 4.5 percent.
But because the city couldn't afford to substantially pay down the principal, Riggi said taxpayers will be hit with more interest topping $800,000 a year.
Schenectady Mayor Gary McCarthy said construction of the building had to be financed for environmental and safety reasons at the site.
"You might have done something different, but you wouldn't have had much difference in the numbers there. It's one thing that you just had to do," McCarthy said.
In North Greenbush, it's a different story. The town has been able to pay down it's short-term note on projects like a water tower, saving taxpayers short-term over $300,000 a year now. By regularly paying down the loan's principle, Town Councilman Lou Desso said they'll save much more in the long run.
"Rather than kicking the debt to another administration some day, we feel it's our obligation to decrease the debt as much as possible," he said, adding that this kind of fiscal discipline has also avoided tax hikes and allowed the Town to build a healthy reserve fund.
Riggi said Schenectady should have made it a fiscal necessity to pay more against its building loan so taxpayers wouldn't have to face sky rocketing interest.
"When you don't hardly pay the principle down for five years, it comes time to pay the piper. Now it's time to pay the piper coming up in 2013," he said.
Last week, Moody's Investors Service announced Schenectady has a deteriorating financial outlook, downgrading the city's bond rating. City Finance Commissioner Ismat Alam told NewsChannel 13 that this may force the city to bond that building loan at a five percent interest rate next year instead of 4.5-percent, costing taxpayers even more.
Alam also defended the city's loan practices, saying the City has regularly paid interest and principle on the BAN loan, according to advice from financial advisors. She said the city has realized short-term savings from the BAN.