Thursday, April 22, 2010

Leggett Recommends Public Debt for Private Capital Projects

County Executive Ike Leggett is recommending that the County Council use money from current revenue and General Obligation bonds to fund a group of private capital projects. This came at the same time that he has endorsed a proposal by Council Member Roger Berliner to restructure the government to prevent future deficits.

Two staff memos to the County Council’s Health and Human Services Committee list a set of private projects for which the Executive would like to spend public money. They are:

CHI Centers Facility Renovation in MacDonald Knolls, Silver Spring
Publicly-owned former school, privately leased
Supplies multiple programs for children and developmentally disabled
Total Project Cost: $1.5-2.5 million
County Funding Request: $200,000 from bonds

Girl Scouts Camp Brighton Woods Facility Renovation, Ashton
Used as camp
Total Project Cost: $1.5 million
County Funding Request: $100,000 from current revenue

Ivymount School Renovation/Expansion, Rockville
Publicly-owned former school, leased by private school
Non-profit special education school
Total Project Cost: $1.2 million
County Funding Request: $100,000 from bonds

Jewish Foundation for Group Homes Repairs/Renovations/Equipment Purchases
Transition program for individuals with developmental disabilities
Total Project Cost: $200,000
County Funding Request: $50,000 from current revenue

Olney Theatre Grant
County Funding Request: $500,000 from bonds

Unspecified Arts Facility Financing
Owners Unknown
Facilities Unknown
County Funding Request: $400,000 from bonds

Six Project Total
Four projects privately-owned, two projects privately leased
Bond Funding Requested: $1.2 million
Current Revenue Requested: $150,000

These may be worthy projects on their merits, but we are living in unusual times. Here are a few points we submit for consideration by the County Council in deciding on this request.

1. The county is running a deficit that is approaching a BILLION DOLLARS next year. The Executive is proposing eliminating hundreds of positions and furloughs. At least a half-dozen departments will be taking cuts exceeding twenty percent each. The school system will be increasing average class size by one student. And yet we have money to fund private projects? Isn’t the $4 million subsidy for Costco enough?

2. The bond rating agencies are watching MoCo like circling vultures, a fact known very well by the Executive branch. What will they think of the county taking on debt to pay for private projects? In the case of the Olney Theatre, the council staff memo does not even mention a specific capital project to be financed by the bond money. The issue was discussed in closed session and the theatre’s managing director says only that the money will be used “to help us meet our obligations with EagleBank.” County governments do not issue bonds to finance their own operating expenses. Will MoCo be issuing bonds to finance a private organization’s operating expenses? If these outlays are so important, why not finance them with current revenue and cut something else to pay for them?

3. The council staff believes that use of county bonds to pay for private capital projects may be illegal. They point out that Section 21-14 of the County Code only allows General Obligation bonds to be used to build public school buildings, transportation projects, county government buildings, transit projects, public or low-income housing projects and water and sewage facilities. The County Council would actually have to change the law to allow the county to borrow to fund private projects (as the state does through bond bills).

4. The last “project” is the worst of all of them since it proposes that the county issue $400,000 in bonds to pay for “unspecified arts facility financing.” Who gets to specify who gets the money? Would the Executive get sole discretion over it?

We are told over and over again that the budget situation is dire. Services are in danger, big cuts are coming and the county will be devastated. And yet, we see millions thrown at Costco and the “very profitable” Westfield mall (at least according to Steve Silverman), $1.6 million more per year requested for police helicopters (including raises for their pilots), bloated pay for county managers (even if it’s less than MCGEO says) and now slush funds for “unspecified” private projects paid with public money.

Is this a financial crisis or a leadership crisis?