Editorial by Roger McVeigh in Support of the City of Key West Bond Financing Plans

The City of Key West

Key West Bond Proposal: “Say YES for Residents!”

We should all applaud Al Childress and City Commissioners for proposing this bond financing.  As a 20-year resident of Key West, I have never been more excited about the City’s future.

The bond financing will allow Key West to invest in infrastructure that will benefit residents and visitors alike for several generations.  This financing spreads the cost over time so that current and future property owners all share in the costs of maintaining our City.

Concerns and Questions:

Fire Station 3 preliminary plans, KWPD Renovation, and several of the projects within the four categories have been criticized for being “wants” instead of “needs.”

Agree! The best part of the financing is that it is preapproved but not obligated to be used.  All borrowings under the bond facility will be specific individual projects with planning, refined cost estimates and subject to an public input process and a vote by our elected representatives.

Several items in the bond description detail appear to have a useful life shorter than 30 years.

Agree!  Most of the funds will be used to finance long-term capital assets with a 30-year useful life.  If funds are used to finance assets with shorter lives, then financing for these projects will be repaid over the useful life of the related long-term asset being funded.

Why is the City not pursuing other forms of funding these projects?  Will approving this financing cause the City to not vigorously pursue other financing such as cash reserves (pay as you go), TDC funding and Federal/State Grants?

The City intends to fund these long-term projects with multiple sources including cash reserves, TDC funding, Federal/State Grants and this bond financing.  It is up to us as engaged citizens to hold our elected representatives and City Staff accountable for pursuing all funding sources for all projects.

Does the City need $300 million in debt?

Not necessarily.  The funding will be used by the City if necessary to fund  long-term capital needs.  Each funding will be subject to a public input process and vote of our elected representatives. The timing of specific projects will be spread over many years and limited by availability of City staff and volume of projects that City Staff can effectively manage.  It is a common finance principal that long-term capital projects are funded by a combination of debt and equity (net position in a municipal entity).  The City has $415 million in capital assets and less than $7 million in long-term debt.  For example, other similar size local organizations such as Key West Housing Authority, Keys Energy, FKAA and Monroe County have long-term debt ranging from $60 million to $605 million.

Why approve $300 million all at once?

The same reason homeowners obtain preapproved mortgages before shopping for a house.  Accessing the capital markets is a time-consuming process requiring approval by the voters and costs of financial advisors, underwriters, and attorneys, etc.  Why not incur those costs once with benefits realized for many years into the future?

Will the City be paying on these 30-year bonds for as long as 45 years?

Maybe.  It is possible that the repayment period will extend beyond 30 years depending on when the funds are borrowed and useful life of the assets being financed.

Why is the City funding maintenance as part of this bond funding?

The City has no intention of funding maintenance from this bond funding.  The City endeavors to fund routine maintenance every year to extend the lives of long-term capital assets.  The City has been unable to fund routine maintenance of its long-term capital assets in the past.  This lack of funds for maintenance can be attributed to the City’s failure to raise property taxes equal to the rate of increase in its costs and expenses, coupled with a lack of other revenue sources such as impact fees, a social services tax, or other tax alternatives and the City’s “pay as you go” cash approach to funding long-term capital assets.

Why is the City perpetually behind in maintaining its road system? 

Two reasons:  Because the City does not have adequate sources of revenue to maintain its road system and because other entities and utilities are constantly damaging our City’s roads.  In the past, the City has not held these partners accountable to pay their fair share of road repair costs.

Is it true $40 million allocated from this bond funding for roads will only pave 15 miles of the City’s 60 miles of roads?

Yes.   Road repair in our City is very expensive partially attributable to our remote location and the lack of large enough annual spending to attract multiple vendors in a competitive bidding process.

What happens if the bond referendum fails?

It will be a sad day for the future of Key West.  The City will continue the legacy “pay as you go” approach with City infrastructure continuing to fall into disrepair.  The City will not have sufficient capital to undertake many of the large projects identified in our most recent strategic plan prioritized by the public such as Bayview Park Renovation, MLK Pool rebuild, Fire Station #3, Truman Waterfront Amphitheater enhancements, and Mallory Square Renovation, to name a few.

Please join me and vote YES to the four bond referendum questions to provide our City the tools necessary to make needed capital improvements that will enhance our quality of life and the Key West experience for our visitors.

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