Ald. Ayalon Says $115 Million Borrowing Plan and Other Decisions Should Not be Rushed

Democratic Ald. Aram Ayalon (D-3) says the Democrats on the City Council are doing the job the people elected them to do by taking a close look at the city’s finances to make the right budget choices for the city’s future. He says that taking the time to do so is the right thing to do.

His comments were made in response to an article and editorial published in the February 22, 2018 edition of the Republican-allied New Britain City Journal. In the article entitled, “Is the Democratic City Council Holding up City Business?”, the Republicans suggest that the time Democrats are taking to examine Stewart’s controversial plan to borrow $115 million and the planned Beehive Bridge may mean the Democrats are, “halting City business under Mayor Erin Stewart.”  “I believe it to be true,” the City Journal quoted the Republican Council leader, Ald. Robert Smedley (R-4), as saying. The City Journal quoted Ald. Daniel Salerno (R-AL) as saying that, “the bridge is an example that anything good for city raised by administration they will counter.”

Ayalon responded Democrats are taking time to consider these proposals for good reasons. “I, as a member of the Democratic caucus of New Britain City Council, am deeply concerned about the accumulating debt that would put future generations of New Britain residents in ever mounting debt due to the reckless ‘borrow and spend’ practices of this City administration.”

Graphic shows New Britain’s escalating debt payments from previous refinancing. (Source: Municipal Budget Book)

Even before Stewart’s most recent controversial proposal to borrow $115 million to push city debt into the future, she has come under intense criticism for having already pushed millions of dollars of debt into the future to artificially lower costs during her administration at the expense of higher future debt payments for city taxpayers.

Last year, a graph from the city was obtained that showed that this “debt restructuring,” has resulted in a reduction in short-term debt payments, while pushing that debt into a spike in taxpayer debt payments hitting the city budget in upcoming years. Stewart’s opponent in the 2017 Mayoral election, Merrill Gay, had highlighted concerns about the effect of Stewart’s refinancing policies on the city’s future.

That appeared to be confirmed by John Healey, Stewart’s former Chief of Staff and a current Managing Director for the city’s debt underwriter, Mesirow Financial, in a presentation before the City Council on December 11, 2017, in which he admitted that, “A lot of what was said over the course of the campaign, as far as, you know, the city’s restructuring and the debt that, the debt spikes that are out there – that was absolutely true.”

Under Stewart’s new debt plan, city taxpayers would be making smaller payments on existing city debt in the current year and next eight years, with the largest saving being in the three years following the current year. After the year 2026, however, taxpayer payments on existing city debt would increase, becoming dramatically higher over the course of twenty-one years. The plan would add an additional ten years to the taxpayer’s payments on existing city debt, and, according to City Council members, would add over $69 million to city debt service and increase the city’s total debt obligation from $380 million to $449 million.

Stewart’s recent plan to borrow $115 million to push city debt into the future. From the city’s debt underwriter, Mesirow Financial.

Gay, commented on Facebook on January 10th that, “For the 3rd time in three years, Mayor Stewart is proposing to refinance the city’s debt. Each time, it has been for one purpose, to get her through the next budget without a tax increase or major cuts.”

“What the mayor has done is the equivalent of paying the MasterCard with the Visa,” Gay commented. “When you can’t pay the debt you owe, the answer is not to borrow more money,” adding that Stewart, “borrows the money from our kids to spend it now.”

“The ‘holding up of city business’ is not for creating hardship to the current administration,” says Ayalon, “but it’s aimed at bringing the city back to sensible fiscal responsibility and ensuring that the city lives by its means and is able to thrive in the future.”

Ald. Aram Ayalon (D-3). Frank Gerratana photo.

Many are calling Stewart’s tactics to pressure City Council Democrats into a quick approval of her plan heavy-handed. Stewart has repeatedly issued warrants for the Council to vote on her debt plan, rebuffing Democratic Council members’ calls for action to be delayed in order to consider options other than her $115 million borrowing plan.

“The mayor’s office and the Republican side of the City Council have been trying to rush us through various fiscal decisions that require much more research and consultation,” said Ayalon. “We, therefore, sent many of these decisions back to committees for further research and consultations – that’s what we were elected to do and that’s what we will continue doing.”

Editor’s Note (3/31/2018): The article was corrected to note that Mesirow Financial is the city’s debt underwriter.