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Schroeder Lowers City’s Capital Project Borrowing Cap

Mark Schroeder, Buffalo’s comptroller, has lowered the city’s borrowing cap for capital project for the coming fiscal year. Schroeder note in his charter-mandated August 1 report on the city’s finances that a great deal of money the city has borrowed for capital projects in the past has gone unspent, the projects incomplete, never started, or over-budgeted. Schroeder reckon that there are  “[m]ore than $56 million in unspent funds, some of which were borrowed more than a decade ago.”

The report continues:

During fiscal year 2010-2011, there were 44 capital projects funded with bond sales.  A year
later there are still 12 of those projects that have not yet started.  Those 12 projects represent $4
million in funding that sits idle in bank accounts while interest costs are being incurred.  Looking
back to fiscal year 2009-2010, there were 33 capital projects funded with bond sales, and two
years later, 9 of those projects have not yet started, which represents another $2.2 million of debt
incurring interest cost and not being utilized.
 
Upon closer inspection of capital projects, at June 30, 2012 it was noted that there were 123
projects still open from bond sales occurring in fiscal year 2009-2010 and prior.  Of those
projects, there were 92, or 74%, that have had no expenditures in over a year.  This represents
$22 million sitting in bank accounts, not being utilized.   
 
These circumstances raise the following questions: Are we establishing accurate estimates prior
to obtaining funding?  Are we obtaining funding too early? Are the projects complete and should
funds be rescinded? Are these projects still awaiting completion?
 
Fiscal responsibility would suggest that issuance of debt should align with an immediate need for
funds and, in the absence of that immediate need, we should err on the side of conservatism.  
Therefore this office will be utilizing its understanding of past capital project finances when
developing its calculation of debt funding limits for capital projects over the next five years.  
The approved debt limit will be reduced by 15%, or approximately $3.3 million, in 2013.  
This reduction appears reasonable when looking at projects which have not yet started after a
number of years, as well as in reviewing projects that have started but seem to have stalled.  If
need for additional funding becomes necessary during the year, we will revisit this issue at that
time.

Here’s the whole report. We’ll look more closely at this later.