Capital punishment: Who's to blame for late bond sales?

About a week and a half ago, Mayor Byron Brown was spitting screws because, he said, outgoing Comptroller Andy SanFilippo had blown a chance that the city’s control board would go soft this year by failing to sell some bonds for last year’s capital projects until after the new fiscal year had started in July.

Brown was very clear: SanFilippo had screwed up, no one else, and the mistake was “unconscionable.”

SanFilippo later dismissed the mayor’s accusations, saying Brown was talking about financial matters he did not understand. From where we sit, it seems that all branches of government share some blame for the late date at which bonds are sold to finance the city’s capital budget.

The original sin belongs with the administration, which has perpetuated a lousy practice inherited from previous administrations. Namely, the capital budget the mayor submits to the Common Council is basically a list of invented project titles and invented costs. The mayor may say, on behalf of public works, that the city needs (and, in the spirit of things, I’m inventing this number) $600,000 for bridge repairs, but that number is just a guess, a placeholder: No specific bridge repairs, examined and appraised, are represented in that request. The blanks are filled in later, after the capital budget has been approved by Council.

So the seeds of delay are planted from the outset: If the lines in the capital budget were more precise—one might go so far as to say more reflective of the reality of how the money will be spent—then there would be less work to be done after the Council has approved it. The comptroller could get right to work on figuring out how best to bond the projects. But that won’t happen, because this administration, like all administrations before it, prefers to keep the capital budgets flexible, even if it means that the initial capital budgets they submit to Council come close to being works of fiction.

In any case, the Council adds to that original sin a venal sin of its own: Councilmembers tend to take their sweet time approving the capital budget, holding the mayor’s favored projects hostage in order to promote their own, and arguing over equitable division of infrastructure improvements citywide—an argument that is really about the power of the mayor to control the disbursal of capital funds and projects based on his priorities, which may have to do equally with planning and with politics. In recent years, this argument has been prolonged, thanks to bitter feelings between the Council majority and the mayor’s office. The squabble was especially protracted in 2009, when it was March 23 before the two sides made a deal.

Once the Council and the mayor have reached some sort of compromise, whether by negotiation or default, the administration must fill in the blanks in the capital budget so that the comptroller’s office is able to tell potential bondholders exactly what they’re financing. Once the comptroller’s staff has written the bonds, they must be submitted to Council for approval, before they’re taken to market.

At this point, the process is already behind schedule, so the comptroller and the mayor sign messages of necessity for each bond. The city charter mandates that bond sales must mature for at least one meeting of the Council; in that two weeks, it is imagined, citizens can lobby for or against these expenditures. Messages of necessity allow the Council to vote immediately on a funding issue, skirting the charter mandate. These messages of necessity are meant to be used to fund emergency measures only, but their use has become a matter of course.

Ostensibly a time-saving measure, messages of necessity can create delays, too, however: Last year, for example, the mayor’s office held up the bulk of the messages of necessity until messages two projects favored by the mayor could be included among them. That hold-up added some weeks to the process.

Finally, the comptroller’s staff can sell the bonds. But the bond markets are changeable, and sometimes it pays to wait for a better rate. Does the comptroller sell bonds at a higher interest rate in order to help the mayor shrug off the oversight of the control board? Or does he get the best deal he can for each bond, even if that means waiting a few extra weeks to complete a deal?