Friday, March 1, 2013

Kenner Mayor Yenni Proposes $28.6 Million In New Borrowing To Fund “Aesthetics”

And, So It Begins…

Last July, I wrote about Kenner Mayor Mike Yenni trying to craft a new legacy for himself:
Not content with being known as “The Mayor who tried to double property taxes” (and really, who would be), Kenner Mayor Mike Yenni has a new mission: create a new legacy by borrowing and over spending on dubious projects under the guise of “Economic Development”.”

Now, instead of being the “Tax and Spend Mayor”, Yenni wants to mortgage Kenner’s future so he can become the “Borrow and Spend Mayor”.
At a press conference Thursday, Mayor Yenni unveiled his “2030 Vision”.

The Mayor’s “2030 Vision” calls for borrowing $46.4 Million and pledging the city sales tax revenue through 2033 to pay off the debt. The $46.4 Million will be used to pay off debt that is expiring in 2018 and would use $28.6 Million to finance 10 projects designed to beautify Kenner and make it more pedestrian-friendly.
The 10 projects include:

-          Rebuilding the Duncan Canal. Cost: $11 Million to be split 50/50 between the City and the State

-          Williams Blvd. Corridor from I-10 to Vintage. $11.250 Million (all City)

-          Loyola Streetscape from I-10 to Georgetown. $3.3 Million (all City)

-          Power Blvd. Beautification from West Esplanade to Vintage. $900,000 (all City)

-          The Intersection of Airline and Williams Blvd. Landscape and Beautification. $500,000 (all City)

-          Loyola Landscape and Beautification $500,000 (all City)

-          Veterans at the Airport Access Road. $500,000 (all City)

-          Erlander Bike Path, from Vintage to the lake. $866,000 (all City)

-          Vintage and Williams Box Culverts. $1.2 Million (all City)

-          Williams Blvd. from Vets to West Napoleon. $5.490 Million (all City)
 
While these are the projects that are listed, there is nothing that would dedicate the bond funding to these exact projects. The City may also get some grant money to pay for a portion of a few projects, but that funding has not been applied for or approved yet.

On the surface, many would agree that Kenner needs a facelift. But, are these projects vital and necessary to improve Kenner? Will they attract new residents, create new jobs, attract new businesses and retain existing ones?
You’re not going to stem the tide of 3 decades of population decline by putting up some trees and building bike paths. And, you're not going to create quality jobs either.

An old house with a new coat of paint is still an old house.
An even broader question is: why so many projects all at the same time?

Going back to the home analogy, if you’re remodeling your house, you make choices. You may not be able to afford a new bathroom, a revamped kitchen AND a pool all at the same time.

Similarly, Kenner cannot afford to do all of this at once either.

Mayor Yenni says that we need to take advantage of low interest rates now but, the reality is, the bonds that are expiring in 2018 carry an interest rate of 4.42% and the new bonds that will extend our debt until 2033 carry an interest rate estimated at 3.25 – 3.5%.

Kenner will save about 1% in interest but extend $14 Million in debt for another 20 years. The amount of interest paid over those additional years will more than offset the meager amount that Kenner would save by lowering their interest rate by 1% or less.

According to reports, a result of this bond refinancing and new borrowing will increase the per-capita debt from $1,361 to $1,805 per Kenner resident. While less than other Louisiana cities (I thought Mayor Yenni didn’t like comparisons between Kenner and other cities), it is still a 32% increase.

Also, the recurring cost of maintaining all this beautification is also not quantified. That is another cost to the City and another cost that will deprive the City from funding other projects.

In addition, Kenner has other, significant and more pressing needs.

While Kenner purchased 2 new fire trucks last year, we still have an aging fire equipment fleet. The KFD still does not meet the national standard for having 4-men-on-a-truck and needs updated equipment to continue operating.

The Kenner Police Department also has vehicle and equipment needs.

The City will need to spend heavily to market both Rivertown and Laketown to make them viable.

The City pays enormous amounts of money to outsource work like street resurfacing that was formerly done in-house.

And the City has dozens of other, more immediate needs.

You also need to take the City’s economic future into consideration as well.

What would happen to the City of Kenner if the Esplanade Mall continues to decline? The Mall is the primary sales tax driver for the City and $3.2 Million in sales tax dollars will be used every year to pay the bonds off. The Mayor's current plan does not call for any refurbishing of the area around the Mall.

What would happen to the City if the Treasure Chest were to decline or, worse, move? The Treasure Chest currently provides revenue for the City’s Capital Projects Budget.

What would happen if the economy declines again and sales tax revenue is wiped out or if the Governor’s plan to increase the state sales tax results in a drastic curbing of personal spending?

What happens if there's another hurricane?

The point is, no one can predict Kenner’s economic future or viability 20 years from now. 20 years is a long time. No one on the current City Council or the Mayor will still be involved in City Government while the residents of Kenner will continue paying this bill.

In fact, the Mayor is up for re-election next year, the 2 At-Large councilmembers are term-limited as are 3 District councilmembers. While it is possible that 2 of the 3 current District councilmembers may be elected to the At-Large slots, there will still be significant turnover in the council next year.

Why not wait and let the new council, and possibly, a new Mayor, decide Kenner's future? Why hamstring them, and a generation to come, because this Mayor wants to mortgage Kenner's future now?

Cities and counties across America are going bankrupt because they’ve taken on too much debt for too long a period.

In October, HuffingtonPost.com, ran an article about fragile municipal budgets.

“In some cases, governments severely mismanaged their debt: they borrowed based on unrealistic projections of expenses. In other cases, the economic downturn hit particularly hard, weakening revenue. For some local governments, it was a combination of factors.

A weak economy with a fragile or shrinking tax base is one of the worst problems a local government trying to balance its budget can face”
 
So, the four primary questions are:
-          Why now?

-          Why these projects?

-          Why all at once?

-          And, why take on more debt?

While I agree Kenner needs a facelift, those four issues are where Mayor Yenni and I differ.

At a time when government at every level is trying to reduce their debt, and households everywhere are slashing their debt, why is this Mayor proposing even more?

Isn't there a better way to fund these projects without taking on even more debt and mortgaging Kenner's future?
Why isn’t it more prudent to pay off our existing debt, cut the city budget in some other ways, and begin tackling one or two projects per year? Consumers everywhere are making those choices, why can't Kenner government?

The Mayor just gave his political appointees a salary increase disguised as an “Auto and Cell Phone Allowance” that costs the City almost $200,000 per year. The City still over-subsidizes SMG for its management of the Pontchartrain Center by $400,000 – 600,000 per year. Those two items alone are enough to finance one of the Mayor’s projects per year until the current bonds are retired in 2018. Then, the Mayor could use the $3.2 Million currently spent annually on that debt to tackle more and bigger projects.
Why doesn't Mayor Yenni propose that avenue instead of mortgaging Kenner’s future? Why is Yenni proposing a "2030 Vision" when he won't be around to pick up the pieces?

One final question: After the Property Tax Debacle, do the people of Kenner have any faith in this Mayor's "Vision"?

Here's a link to the Mayor's plan.

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