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Comments Made at Trenton City Council, June 5, 2018

NOTE: I delivered the comments below at Trenton’s City Council yesterday evening, after voting took place to approve, 4-1 (Phyllis Holly-Ward in opposition to all the measures, and George Muschal absent), 3 Bond Ordinances that would authorize borrowing almost $27 Million  – in the final month of this Council and Administration – on a long list of capital spending projects for the City in general (almost $7.7 Million) and the Trenton Water Works ($18.7 Million).

Copies of the draft Ordinances were available at the meeting. I scanned two of the three. Here’s a link to the text of the general City bill; here’s the one for the Water Works.

I know what you’re thinking. You’re saying to yourself, “Hey, are any or all of the items on the TWW ordinance required as part of the new Administrative Consent Order in force with the NJ Department of Community Affairs?” Good question! I read no reference to that in the Ordinance. And the subject didn’t come up during last night’s discussions. So that’s still a mystery.

Before Council’s vote, a lawyer from the city’s Bond Counsel since 2016, Everett Johnson of the firm  Wilentz, Goldman and Spitzer, made a brief oral presentation about the proposed bills, and provided some of the context I asked for in my remarks.

In this state, local communities are allowed to take on long-term debt obligations up to a maximum ceiling, defined as 3.5% of the Net Taxable Valuation of the town’s property. In Trenton’s case, as of 2017 the total value of Trenton’s property is $2,395,945,829. According to the State’s formula, 3.5% of that number would be $83,858,000.

Last night, Mr. Johnson estimated the total debt load for the City as currently in excess of $152 Million, almost double what State law says it should be. Mr. Johnson explained that Trenton has been well over the statutory maximum for over 20 years. This is primarily due, he explained, to the fact that – relative to its population – so much of Trenton’s property is exempt from taxes.

He did not provide, nor did anyone at Council’s meeting ask for, any information about how Trenton’s debt load has gone up or down over the last several years.

What we can say is that, if these three Bond Ordinances worth $27 Million Dollars are passed for final approval, the City’s debt burden would immediately jump 18%. That’s a mammoth increase to push through at any one time, let alone in the final weeks of a lame duck Council and Administration.

Pushing this through does, in fact, appear to be the plan. West Ward Council Member and current Council President explained that the measures were on the docket for first reading last night, unusually in a Council Conference session, so that they could be sent to the NJ Department of Community Affairs Local Finance Board – which must approve them – so they can come back to Council for further action.

And that further action, according to Mr. Chester, will be taken at the Council’s final working session on June 21. Public hearings for these three measures will be held at that time, as well as the final vote to approve.

These are big bills, worth a lot of money, for a long laundry list of items – both for the City and the Water Works – that as of this morning, we don’t know if we really need. In normal times, in this town, these wouldn’t get the attention and the clarity they deserve. In these final weeks, these measures look like the Administration is emptying the cupboard of all its wish list items, leaving the new Mayor and Council – and our poor taxpayers – a huge brand-new debt burden without any kind of thorough review or attempt to explain to the public what these items are and why they are all needed now.

I don’t like the way this is being done. If you live in Trenton and pay taxes, or if you live outside of Trenton and pay a Trenton Water bill, I think you shouldn’t like this either.

June 21, 5:30 at City Council looks to be the only chance left to say or do anything about this.

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Mr. President and Members of Council -

Last week, at your West Ward Town Meeting, Mr. President, you were asked what was going on with the Trenton Water Works. What with several new contractors on board, a newly-inked Administrative Consent Order with NJ DEP, new RFP’s and large multi-year contracts listed on the City website, and with several transactions on Council docket, it has been obvious for several months that there is a lot going on. But there has been no attempt by this Administration and Council to put all of these changes in some kind of meaningful context. There has been no attempt to let Trenton’s citizens and other TWW customers know what all this means for the immediate and long-range future of the utility that provides drinking water to much of Mercer County.

At your meeting, you said that there would be a status report given about the Water Works at the last meeting of this body, as presently constituted, later this month. That was welcome news.

In the spirit of that openness, Mr. President and Council Members, tonight I ask for more information about and question the immediate need for the three Bond Ordinances on your Agenda tonight, #’s 18-27, 18-30 and 18-31. Collectively, if all Ordinances are passed tonight, these would collectively add almost $27 Million to this City’s long-term debt obligation. And we have no way in which to understand what that means to the City’s underlying financial health.

From the only information available for review prior to this evening’s meeting, it appears that each of these measures represents new obligations and initiatives, not the re-financing of existing debt.

As such, I think it is appropriate to ask for statements from the Administration asking for how these measures impact our finances.  Any consolidated statement or pro forma Balance Sheet, showing the City’s total long-term debt obligations and how these new ordinances would add to that load, would be essential to our understanding.

Any statements showing how an additional $18.7 Million adds to the debt burden of the Trenton Water Works, would be essential to our understanding.

From Mr. Johnson’s presentation this evening, we know that all of these Ordinances would, if approved, balloon Trenton’s total debt load by nearly 18% in one blow. That’s a huge increase on top of what Mr. Johnson tells us is already a total debt load in excess of the State-mandated maximum.

How does the City and the Utility intend to service these obligations? Are these intended as General Obligation instruments, or are there dedicated revenue streams attached?

What will these do to the City’s overall debt rating? At the time of the last issuance of $40.6 Million in General Obligation Bonds, in November of last year, Moody’s bond rating service noted the City of Trenton’s low underlying rating of Baa1, and stated “The rating further reflects the city’s very high fixed costs, and outsized debt burden while also incorporating improved finances.”

Council members, the City was criticized for its “outsized debt burden” in November. Tonight you seek to increase that burden by nearly $27 Million Dollars. What will this do to the City’s underlying ratings, and how will that ripple through to likely large increases to the City’s costs of borrowing?

I mention the TWW ordinance because it is the largest and the one that affects more people and rate-payers throughout the County. But I also want to find out about the $7 Million plus for “Capital Acquisitions and Improvements for the City in general. What’s up with that?

Are you absolutely certain all of this is necessary, at this present time? Are these actions by a lame-duck Administration and Council required now, tonight?

If so, it is the obligation of you on Council to explain to the public, and to require the Administration and its Bond Counsel to explain why that is the case.

I look forward to the release of more information and analysis before the final reading and adoption of these Ordinances.

It’s a lot of money, it’s late in the day, and very late in your term. We need to know more about this.

Thank you.

2 comments to Comments Made at Trenton City Council, June 5, 2018

  • While we are headquartered in Cherry Hill, we have a distribution site in Trenton and many, many clients. We are concerned about the Trenton Water Works and its inability to provide clean water for either bathing and drinking which impacts our clients and particularly, their children. You raise very valid points and would be interested in learning more about how the TWW intends to correct all its problems.

  • Kevin

    Thanks, Ann. The June 21 Council meeting seems to be the venue at which we’ll all find out more about the situation at the Water Works.