Wednesday, April 18, 2007

Politicians Don't Understand Why City's Bond Rating Downgraded

Moody's Investors Services downgraded the City of Indianapolis' bond rating this week from the highest Aaa rating to the next level down, Aa1. The bond rating agency evaluates the city's revenues, cash on hand, expenditures, and current and long-term indebtedness to determine its ability to repay any debt it incurs to arrive at its rating. According to the Star, "The Moody's report said the city's general fund has dwindled from $200 million in 2002 to $91 million at the end of 2005, bringing into question the city's ability to raise revenue fast enough to deal with widening budget gaps. In other words, the city has been spending money faster than the rate it has been coming in.

The politicians have a much different take on the matter. Here's what Mayor Peterson has to say:

The downgrade is "an automatic cost to taxpayers in the future," Peterson said. "I'm not trying to point blame, but the report points out how vital it is that we get legislation passed so that we can fix our finances."

Peterson wants authority to collect taxes other than ones on property. The city is seeking legislative authority to raise new taxes -- other than from property taxes -- to generate $85 million a year to plug a pension-related budget deficit and pay for new crime-fighting initiatives.

If you look closely at what Mayor Peterson says, you'll realize nothing he proposes addresses the fundamental problem of over-spending by he and the city-county council the last several years. He wants new tax increases to pay old debt obligations and fund new spending initiatives. But unless you fail to address the city's spending habits in the past, particularly the overly generous public subsidies it gives to businesses and sports franchises, the city is still going to be faced with the same problem.

Peterson isn't alone. House Republican Brian Bosma doesn't get it either. Bosma told the Star the bond rating is the latest evidence that the legislature needs "to take decisive action on property-tax relief and property-tax reform." "Comprehensive reform, he said, should include not only tax relief, but also broader taxing flexibility for local governments -- as long as local governments are held accountable."

"Held accountable?" Isn't that how we found ourselves in this problem? And aren't Marion County taxpayers the ones who are ultimately going to be held accountable by having to cough up more of their hard-earned taxpayers to fund city government? It seems to me Mayor Peterson and others are blaming us for the problems he and other city leaders, past and present, created.

6 comments:

Anonymous said...

You raise a good point, Gary, but here's another point: lack of backbone.

In 1973, when the legislature passed the currently-used property tax "reform" system, we raised the state sales tax. To 4%. The extra money was divided between one fund whose name I cannot remember, and the Property Tax Replacement Fund. Which aritficially "lowered" your property tax bill. With money form an increased sales tax. I'm not making this up.

Goofy-assed 1973 legislators demanded that Conty Treasurers include on their tax bills, the "savings" they'd given property taxpayers by this innovative tax shift.

In 1997 (I may be off a year) Tax Court Judge Fisher ruled the entire system unconstitutional. He gave the legislature a timeframe in which to correct it. They waited until the last freaking minute to try, and they failed miserably. Hence, trending, taxes based on real property value, etc. Which may be OK but we'll never know because the water is so tainted it takes a genius to figure it all out. In case you haven't noticed, our legislature is void of genius material.

The whole system is a mess, and it's because no one has the guts to admit it. Except Sen. Kenley. He has proposed some sweeping changes that actuall ymakes long term sense.

And I am a Democrat.

Who is seriously looking for legislative courage, whatever the consequence. There has been NONE since 1973, when Bowen's stupid tax plan was rolled out.

Poof be gone Brian Bosma. You're part of the problem. Get on board any train that turns this system upside down and makes it right.

Courage is a sorryful commidity, and scarce. Bond ratings will continue to suffer until we get this figured out right.

Melyssa said...

When the Mayor came after me in December 2005 with a press conference and a lawsuit in order to get some face time on TV, I began to wonder how else is the Mayor wasting citizen money to further his own political agenda.

I have no idea what the city has spent so far trying to prosecute me over a zoning violation, however I'm sure AI's readers can do the math. The case has been in litigation for 18 months.

I'm also curious why mainstream media is not holding the Mayor accountable for the vast amount of thoughtless spending that happens in city government. We all know there is plenty of waste and little to no belt tightening.

See my linked website for details about my particular case which clearly shows frivilous spending authorized by Mayor Peterson.

Anonymous said...

The biggest finanacial problem facing Indianapolis is a huge unfunded pension obligation. This is a problem that previous administrations decided not to touch. The problem has gotten bigger. It is a time bomb that keeps on ticking. Peterson is proposing a way to get a handle on the problem. If you don't like Bart's approach, I would love to hear other suggestions for dealing with the unfunded pensions?

Wilson46201 said...

Another part of the pension financing problem is a national change in accounting procedures. All local government entities with pension obligations have been hit hard everywhere -- it's just not Indianapolis although it's been aggravated by years of "No new taxes!" self-hypnosis by the GOP.

SOS said...

Two words - misplaced priorities.

Anonymous said...

Well if people were living in, and paying taxes on, the abandoned homes in Marion County it would help. The state getting a handle on predatory lending would also help. A mayor with fiscal responsibility would also help.

Am I asking too much?

And yes SOS, you are right...the priorities of the City, State and Country are misplaced, misguided and wasting money.