One of the most despised complex financial instruments prevalent in Erie is called Metro District taxes, where, in effect, immediate spending is funded by decades of future obligations thrust upon current and future residents. Unfortunately, Erie’s current leadership is on an expedited course to thrust a similar complex financial instrument onto Erie residents, called “Certificates of Participation” (COPs), and like Metro Districts, there is no escaping this burden.
Let’s start with the bottom line up front:
COPs, similar to Metro Districts or mortgages, require committing future revenues/taxes to pay back a lump sum used for immediate spending. It is a “Spend now, figure out how to pay it for later” strategy.
COPs are a clever way to avoid asking voters to approve new funding. Make no mistake, Erie residents will still pay for every penny of funds acquired through COPs; we just don’t get the opportunity to vote on it.
COPs carry higher risk to investors, so they come with higher interest rates than voter-approved bonds.
The motivation of the current leadership to introduce COPs is that the Erie Police need and deserve more space as Erie grows. Sadly, available funding from development impact fees simply is not enough for a $35M+ expansion and the ~$2.5M/year expense. Why remains an open question.
Asking the voters to approve guaranteed bonds is the most transparent and safest way to finance the facility. This was last used to fund the building of the current police station in 2014.
Our current leadership plans to circumvent the voters by intentionally avoiding asking residents to pay for the new police station expansion, fearing it will not pass.
Bonds | COPs | |
Requires Voter Approval | YES | NO |
Lower Interest Rates | YES | NO |
Includes Dedicated Funding Source | YES | NO |
Without new leadership and a fiscally responsible compass, projects with broad community support, like an outdoor pool/community center, will not be realized for decades due to high debt loads.
------ The gist of the topic is above but if you want more the details please read on! --------
The Town of Erie has been spending on numerous capital projects without a sustainable funding source. This includes the new town hall (which voters rejected strongly in 2018) and tax subsidies for the Cheesman government housing project. The current leadership eliminated the $7.5M rainy day fund and spent the money on these and other non-emergency projects.
This has left Erie with the inability to fund the new police station without a bond or huge mortgage using Certificate of Participation (COPs).
With our current leaders recently committing ~$2M to design the police station, it is only a matter of time before they will commit to the full ~$35M. With the intended path of using COPs, at higher interest rates than voter-approved bonds, Erie will be strapped with yet more debt and no funding source.
Large student loans are similar to COPs in that they require the commitment of future revenues that preclude using that money on other, more important needs. Projects with broad community support, like an outdoor pool/community center, will not be realized for decades due to high debt loads. Erie is on the brink of committing so much future revenue to projects that our fiscal future is in jeopardy.
I understand that every decision has tradeoffs and that short-term thinking (spend now, pay later) creates long-term problems (crippling tax burdens to pay for pet projects today).
As I did in my first stretch as Mayor, I vow to be fully transparent with you when decisions are made, especially the tough ones, so you understand the rationale and the path forward.
Andrew Moore
Ensure Erie’s Future - Moore in 2024!
Comments