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Why Did Moody's Downgrade New Rochelle's Debt?

Robert Cox's picture
Submitted by Robert Cox on Sun, 12/05/2010 - 14:27
Broader economic downturn.
13% (2 votes)
Bad policy choices.
60% (9 votes)
A bit of both.
20% (3 votes)
What's a downgrade?
7% (1 vote)
Total votes: 15

There are 6 Comments

There is no question that bad policy choices concerning major development, [tax abatements], has made New Rochelle's economic situation much worse than the surrounding communities. One must look past the proposed 4% tax increase and realize that next year's budget has a one-time revenue infusion of $4.5 million dollars. The finance commissioner has preached for over a decade that one-time revenue should never be used to balance our budget. This will leave a $4.5 million dollar hole in the 2012 budget which must be closed with spending reductions, personnel layoffs, new revenue sources or a combination of the aforementioned. This is clearly an attempt to shift tough budget choices to non-election years. Granting reckless tax-abatements, delaying tough budget choices combined with no future vision is the mindset that got us here and is the blueprint for future disaster.

It is no secret that municipalities budget planning is a reactive rather than a proactive process, thus New Rochelles downgrade by Moodys is not indicative of the current economic conditions, its merely a lagging indicator of last years progress and the presence of a deficit. Tax abatements are one of the very few options that the city had in there power to stimulate growth of the city and its future tax base back in 1999. If the city was able to become "empire zoned", then more tax incentives would be available to business owners and developers and perhaps we would be in a better situation financially. Everyone I know that owns a home or commercial property complains about the high property taxes, but cannot think of any solutions other than firing everyone and cutting social services...but there are other PROACTIVE solutions...one of the solutions to lowering future property taxes or slowing the rate of increase is increased density in the downtown by building up. Other solutions are attracting businesses, manufacturing and retail, but you need to offer incentives..why would they choose new rochelle over anywhere else?? tax abatements? higher skilled work force? utilities abatements? location? you see, you need to give to get. new rochelle needs to be sold as an attractive place to move a business or open a new business, but without incentives, were dead in the water, just another small suburban city.

You cant simply say that these where bad policy choices, these where pure and simple smart business decisions in good faith based on what you, me and every other american out there knew that was buying a home, and investing in the market. this was purely bad timing.. but who saw this coming? I didn't, did you? If I did, I would have shorted AIG and would have been a very wealthy person!! give em a break!

Very well said!

Sorry, we tried that and it didn't work especially when we abate the properties for years to come. Higher density's only going to lead to bigger schools, less cops to go around and even higher taxes to pay for it all.

I suppose you support another go around w/Cappelli on the LeCount Square project? I think that would be a waste of time as the project will never be built. Just look next door at the mostly empty Trump building and you'll know why.

New Rochelle's been making bad policy choices for years by the simple fact that the budgets weren't balanced and they should've been. The unbalanced budgets slowly ate away the reserves until our leaders abandoned the tax cap and put in a library tax. The city needed to cut back then and didn't and we need to cut now and they won't. I hope Bramson isn't asking Suzi, Jeff, Amy & George to put in an income tax.

Yes sir, growth is part of a long term solution to slowing and/or lowering the already high property tax rates. Cutting services is not only a piker mentality, but only a short term band aid, don't get me wrong, there is nothing wrong with running a lean business model with a balanced budget, but without growth, revenue sources are limited and perhaps a city income tax would level the playing field considering the high percentage of residential renters within the city and would help offset the school tax burden put on homeowners.

I never said I support cappelli in any venture, but I do support growth. I am well aware of the status of trump project which again is a prime example for bad timing for both the city and the developer, if that building had been completed 2 years earlier the situation would not be the same.

Robert Cox's picture

Growth for growth's sake is not a "solution" any more than doing nothing or cutting City payroll is not a solution.

If you read the OSC audit of the IDA you will find that the IDA has never (not once, not never) done a cost-benefit analysis of the projects they have funded nor have they ever done anything other than accept at face-value the claims of developer (before,during and after). This is the DEMOCRATIC State Comptroller publishing this audit not the Republicans on City Council.

Is that not troubling?

If by you mean growth the drops to the City's bottom line then fine and thus lowers the tax burden for everyone else count me in -- but that is not the growth we have had or even planned for. Set aside poor performing projects like Trump or dead projects like LeCount, look at projects like New Roc City or Avalon and ignore the "if we had not given the abatements there woud just be a hole in the ground".

In the case of Avalon I, you have a deal where the City gets a fixed amount in the form of a PILOT payment. The Mayor has ascribed a certain amount of economic activity that results from the tenants. You can argue over the numbers but whatever that "revenue" is for the City, there are also costs including emergency services, DPW, county sewer, etc. In addition to the costs to the City there is the major cost of the kids form Avalon in the New Rochelle public schools. When you add them all together, the taxpayer is LOSING money on the deal and will continue to lose money for a very long time, basically throughout the useful life of the building. This is not theoretical money (what the City could be getting in taxes v. what they are getting) but actual cash flow. The catch is that the City ignores the cost of putting all those kids in Avalon I because they do not hit the City's bottom line. The taxpayer does not have that luxury, they have to pay school tax and city tax and sewer tax and so on.

If you look at the total all-in cost, Avalon I is a net loss to the tune of millions of dollars. The same can be said for Avalon II. Not sure about Trump. New Roc is probably a net plus but has brought with it increased crime and none of the big sales tax generators the City was promised. It would be nice if we could debate some real, hard numbers but the IDA never bothered to collect any of the data so we just have to take the Mayor's word that these deals have been good for New Rochelle. I, for one, am not prepared to take any politicians word for anything and, love him or hate, Noam is a politician not some sort of citizen-legislator.

In the case of the Avalon I and II projects, there is enough data to show that they are on overall net loser for the City due to the cost of educating the kids that were supposedly not going to live there.

There is also quality of life issues to consider. People in the South End are dealing with backed up sewers flooding their streets and coming into their homes. Parking has become a major headache, especially for those live on the periphery of the downtown as high-rise residents seek out "free" parking. The schools in the South End, especially schools like Trinity are very crowded.

Who could blame South End residents from feeling that the three North Enders along with the always willing dupes from District 3 who vote with them straight down the line are conspiring to jam them with all of the "growth" at their expense while seeking to lower taxes in the North End -- the same North End clique that is constantly jacking up the school budget which is actually the source of the vast majority of taxes paid in New Rochelle. It is easy to support "growth" when all the "growth" is occurring in someone else's backyard, isn't it? Especially when the growth comes with over-crowded classrooms, lower property values, increased crime and lower quality of life.

What you really have here is the tyranny of the minority -- a smaller group people (but better organized) -- jamming everyone else with their self-serving and poorly executed "strategies" all while trying to portray anyone who questions their wisdom as being small-minded, "no knowing", anti-growth luddites.

The only small-minded people I see in New Rochelle are those in power like the Mayor and his pals on the City Council or the people on the school board who think being a good citizen is looking the other way and not asking any questions.

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