Thursday, September 21, 2006

ditech calling

The city budget is out and deserves a tome of commentary, but we will start with just one blog-post. I am bandwidth challenged at the moment so I can't read any new budget documents.. are they online? But overall I worry that someone reading the news that there will be (maybe) $30-$40 million in the bank at the end of the year will misconstrue that to mean the city had turned a financial corner?

Well... there is this little matter that the city borrowed $50 million a few months ago and that is included in the projected cash reserve. It's a little hard to claim you have a structurally sound budget if you are only staying above water by significant borrowing, but it's a little worse than that.

When you think about it more, you have to also account for the fact that the city had an indeterminate surplus (somewhere between 10-20mil depending on how you look at the budget) from last year that rolled into this years balances. So the city has burned through that as well by end of this year. Also rememeber, the city refinanced $200 million in debt at the same time they borrowed that $50mil. Part of that deal restructured the city's debt payments in such a way that a significant amount (~$12mil) of 2006 debt payments were pushed into future years. Good for this years cash accounts but bad for the long term. Taken together it's a little like refinancing your house for a larger mortgage, which gives you some immediate chunk of cash, but then also taking an option to make no mortgage payments in the first year. Together it compounds your future payments that much more.

more later...

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