By: Diane Benjamin
There are great teachers, I’m not sure Karyn Smith qualifies.
I watched part of the budget discussion last night that was continued from last week. Smith decided to inform viewers about bonds. She claimed paying interest for decades is what they are designed to do. The principal will be paid at the end. She claimed investors want that income stream.
Evidently she thinks tossing money out the window for interest is fiscally responsible. She is also wrong in the case of Normal.
I direct Ms. Smith’s attention to PDF page 177: https://normal.org/DocumentCenter/View/17188/CAFR20-FINAL-DOC
That page is from the 3/31/2020 financial statements and begins details of all the bonds Normal is holding.
On PDF page 179 is a bond where only interest is paid. PDF pages 184 – 186 show bonds with interest only for part of the term. PDF page 188 has another one. In between are other bonds the Town is paying principal and interest on. Obviously all bonds aren’t created equal. Karyn: Citizens see what the Town has done as throwing away MILLIONS of dollars for what the Town’s vision was – not what was NEEDED. Those millions of dollars could have been spent on NEEDS. The bonds were merely structured so the Town could make payments regardless of the total cost.
I know some people buy cars based on the payment, even if it means paying for 7 years. The cost of the vehicle is much higher when the payback period is extended. People who don’t care about the total cost and just want a fancy new car are willing to take the hit.
Alternatively, lots of people do 15 year mortgages which cost a little more every month but pays the house off in half the time. That does save tens of thousands of dollars over the life of the loan. Being fiscally responsible means reducing interest expense whenever possible.
If Karyn’s intent was to justify only paying interest and prove the Town had no alternative, she failed. I wonder if she teaches ISU kids that debt is good. I wonder if she pays interest only on her house. Is it too difficult for government to handle debt responsibly like adults do in their lives? Debt must be used at times, it is Normal’s excessive debt that is the problem.
Karyn claimed the debt is coming down. Last year the Town reduced it by a whooping $2,337,706 according to the Comptroller’s website: http://tinyurl.com/xq6ylcb1
Total debt was still: $85,752,874
See her comment at 2:24:30. Chemberly Cummings is nodding her head in agreement the whole time.
See one more thing to see about 10 minutes later. Kathleen Lorenz did a good job describing future problems: Ever increasing Salaries, Benefits, and Pension expense. She asked if the Town can afford the government they have in the future. At 2:37:25 Lorenz asks if the Town is spending more on road repairs in this budget as disputed by Stan Nord. Pam Reece doesn’t give a dollar number just a cursory “yes”, she had planned to deflect that question to the Finance Director Andrew Huhn. He was never given the opportunity to answer because Reece kept talking. Looks like we know the answer.