Monday, January 16, 2017

The Gospel Truth

By Roger McCredie

This is a continuing series discussing the City of Asheville’s Capital Improvement Program and its tax burden upon citizens.  Click here to read the first story: How did Asheville become so indebted?

RADTIP, the CIP and Asheville’s Bond Money: Connecting the Dots

In the Beginning There Was RADTIP.

That’s the now-familiar acronym for River Arts District Transportation Improvement Project, the transportation grant the City applied for in January, 2013.  That was only a few years after the city took note of some property revitalization that was going on down by the river and decided there could be real development potential there. 

And sure enough it came to pass in those days that New Belgium Brewing, after lots of studying on the matter since 2010, chose Asheville and the French Broad River (on the property formerly known as the Asheville Stockyards) for the site of its east coast production in April 2012. The city offered the brewery $3.5 million worth of incentives on the record (off the record it’s more like $11.2 million in tax abatements), including just-for-you touches in the RADTIP plans, and New Belgium saw that it was good and came to town.

And so the city decreed that the backbone of RADTIP should be a 2.2-mile stretch of Riverside Drive, which would be straightened and fixed up and outfitted for multimodal transportation, with bike lanes and greenways.

The city’s application in January, 2013, paid off in September, 2014 when it was awarded a $14.6 million federal TIGER VI grant to help fund RADTIP, and with that money available to kick start its plans, the city began its RADTIP work in earnest.

The Coming of the CIP

Now in latter days (2014) the city created something called the Capital Improvement Management Division “to provide and facilitate design, planning, project management, and inspection services for capital infrastructure projects within City maintained right-of-way and City owned property.  The City always had a capital improvement plan but with the significant increase in additional projects, decided to create its own division.  Additionally, the division provides general engineering support, surveying, contract administration, and right-of-way acquisition support.”  This division monitors and implements the city’s Capital Improvement Project (CIP) and reports to Assistant City Manager Cathy Ball. This division is about to undergo more significant growth (as it was recently reported in the January 11, 2017 edition of Mountain Xpress, that the City will be “staffing up” that division.)  

The CIP’s projected spending over the five fiscal years from 2016 to 2020 is currently estimated at $149 million.  That’s up $7 million from last year’s estimate and as reported in a previous article, a 148% since 2013.

And the problem, according to Asheville Unreported’s number-crunching, is that over the same period of time that the City plans on spending about $53 million, the city will only have $27 million worth of annual operating budget funds to set against that number.

That leaves a shortfall – a big one.

Debt is the solution

In April, 2016, the city quietly issued $46 million worth of limited obligation bonds which it will plans to refinance with long-term bonds in 2017.  But setting those proceeds against the subtotal still leaves a net shortfall of about $64 million.

To be offset … how?

Behold the Bond Money - $74 million, to be exact

It was in the summer of 2016 that the city began floating the idea of issuing $74 million worth of general obligation bonds — $32 million earmarked for “transportation,” $25 million for “affordable housing” and $17 million for “parks and recreation.”

City council formally approved the bond referendum by resolution on August 9, and the city, the chamber of commerce, the local media establishment and several sponsoring corporations all participated in a massive public relations effort to get the bonds approved on Election Day.  The bond market was attractive, the proponents said.  In fact, they said, it would actually be good for Asheville’s credit rating for it to borrow some money.  And Asheville’s per capita debt figure was a mere $247, one of the lowest in the state. We later reported and another media source confirmed, that this was a mistake.  The debt ratio was actually $947.

Opponents noted that the bond market had been favorable for more than five years; why, they asked, had the subject not been brought up before?  Also, they demonstrated, the issue of the $46 million bonds in April had in fact tripled the $247 per capita debt – to $947 -- and servicing the $74 million package would more than quintuple it, giving Asheville the fourth largest taxpayer debt in the state.

More tellingly, perhaps, the city’s own website mentioned that the CIP was already operating “at capacity” and could finance no new projects until 2023.  

“Why?” asked the bond objectors, who said that sounded suspiciously like the city had poured all its ready cash into the RADTIP and now needed more money, not only for the riverfront project but also to do basic caretaking work it should have been doing all along.

But the opposition was too little and too late, and the objections were brushed aside by the “GOBonds” juggernaut.  On Election Day the pro-bond forces prevailed handsomely, approving all three bonds by a lopsided margin of 70% – 30%.

And the city now has access to $74 million, which would be enough to plug its projected $54 million shortfall, with some left over.

The Devil in the Details

For behold, the bond questions had been constructed in such a way that the city was not obligated to use the moneys for any of the 61 different projects it had so carefully spelled out.

But rather, the city could actually use the funds for any job at all, so long as the description thereof could be made to fit under the categories “Transportation,” or “Affordable Housing,” or “Parks and Recreation.”

And long before the voting the city’s Chief Financial Officer, Barbara Whitehorn, said the city should make sure that “when we write the bond question, the question is written in such a way that it leaves the option open for Council to add or remove particular projects.”

And Mayor Manheimer warned, “… there are expectations from the community… Because we do have community trust that we will spend the money on what we say we will spend the money on, it’s important that we stick to that plan.

But then she said “There are other big ticket items not in this bond [package] that will need some creative planning.”

And two private citizens witnessed and told the city and the public that the bond language was actually open-ended, and that moreover the word “may” was going to be substituted for “shall” on the ballots, to describe the city’s intent for using the funds.  But they were heeded not.

And after these things had come to pass and the voters had voted, the two citizens filed a lawsuit against the city, asking that the bond vote be vacated so that the questions could be reworded and the citizens could re-vote on the true questions.

But the city attorney sent a letter saying, “If ye persist in this foolishness, we will be all over thee like white on rice, and will seek sanctions against thy attorney and make thee pay court costs.”

But the citizens relented not and the suit goeth forward.

Here endeth the lesson.
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