Herbst: Prudent investment will benefit future generations
Over the course of the last seventeen months, Town officials and residents have discussed and deliberated on the merits of constructing a community center here in the Town of Trumbull. As part of that conversation, the community has discussed several alternatives and has offered many divergent viewpoints of what should be included in a community center. How much space do our seniors need? What types of space do our community groups need? What should we offer our youth? Should this facility include an indoor community pool for young and old alike? With the state and national economy still in limbo and with the cost of living in Connecticut squeezing many middle income families, one question I often get is, “Tim, how we can we make this happen without our taxes going up?” The answer is simple. Increased revenue through economic development + moderated levels of debt service + historically low interest rates = tax stabilization.
We have been able to make meaningful investments in our infrastructure: our schools, our parks, our roads and our municipal buildings. Since reforming our Board of Education Facilities Department in 2013, we have embarked upon an aggressive capital program for our schools these last three years where we are taking energy savings and reapplying those savings to additional capital upgrades to reduce that expense to our taxpayers. We have fixed our pension fund while reducing taxes twice in seven years and maintaining a seven year average tax increase of 1.65%. We have also upgraded Trumbull credit rating to near AAA status. The higher our credit rating, the lower our interest rate on money we borrow.
But why is 2016 an important time to consider needed capital investments that will improve our quality of life? As we consider borrowing, let us consider the BBI-20 Index, as well as the rates for ten year US Treasury Notes. In 1988, the BBI-20 stood at 9.17%, in 2010 it was just over 6% and today it is approximately 3.2%. In 1988, the US ten year was 10.32%, in 2010 it was approximately 4%, and today it is 1.76%. Rates are lower today than they were in the aftermath of the 2008 financial crisis which led to the Great Recession. This is felt not only here at home but also abroad. Around the world, other countries are seeing central bank rates hovering around 0% and other countries have even seen negative rates. In sum, the cost to borrow money in the market has never been more affordable than it is right now. The proof of these historically low interest rates is the 4.6 million dollars we have saved for Trumbull taxpayers through targeted refinancing of existing debt.
Almost a decade ago, we embarked upon a 73 million dollar like new renovation of Trumbull High School. At the time, proponents of this project, including my predecessor and my opponent in the 2015 election told us that we should support the project in large measure because of favorable interest rates that would allow Trumbull taxpayers to get more bang for their buck. At that time, the average rate was 4.5%. With an average rate of 2.5% today, as an example, if we were to borrow 14 million dollars for any capital project, we would save 3.5 million dollars in interest today versus the interest on any 14 million dollar capital project of 8 years ago.
Am I suggesting that every Town in Connecticut should start bonding to their limits? Absolutely not. Cash strapped communities with large unfunded liabilities and stagnant economic development should focus on spending reductions as a first resort. Communities with healthy economies, healthy finances and favorable credit outlooks need to make targeted investment decisions for capital upgrades. When you hold municipal budgets in check, when you reduce unfunded liabilities and when you keep taxes stable, your economy and revenue grow. As we close out 2016, Trumbull has never been in as strong a fiscal position as it is today. There is and always will be a constant friction between taking advantage of historically low rates versus the political will to incur additional debt. But like any homeowner who purchases, refinances or borrows money to make renovations or additions to their home, anyone and everyone always gives a second look when interest rates are lower. In this case, historically lower.
A friend of mine recently put this in perspective, when he said “there is one fact that no amount of political spin can counter: cities and towns don’t have the option of simply closing shop.” The people of Trumbull expect and deserve good services. Excellent schools, excellent finances and a strong infrastructure promote an enhanced and growing economy. Inherent in any strong community is excellent parks and excellent community facilities. And common sense tells us as a general rule that governments, like households should not spend beyond their means. So as the Town of Trumbull considers the construction of a community center and the appurtenances associated with its design, will the wise and financially prudent investments we make today benefit the generations of tomorrow? I believe the answer in this instance is clearly, yes.