For archival consistency we'll post the latest concerning the 2012 Ogden Water Rates re-set fiasco, as the Standard-Examiner reports this morning that The Ogden City Council last night voted to approve issuance of "$4 million in bonds to rebuild a 100-year-old water pipeline that is one of Ogden’s main suppliers of water," and that "[i]t’s also expected that $13 million in bond funds will be requested in fiscal year 2014 to pay for the design and construction of a new water treatment plant":
Beneath this morning's S-E story, the ever-savvy Dan Schroeder offers a comment which puts the Council's multi-stage borrowing/spending scheme in context, wethinks:
Borrowing money at 2.6% interest is a reasonable thing to do under the circumstances. What's not reasonable is borrowing another $13 million at 4% interest when you have more than that sitting in the bank earning less than 1% interest. The utility funds' enormous cash balances are the big secret here that nobody talks about. For that matter, it was ridiculous (but harmless) for the water fund to borrow money from the sewer fund, when the water fund has $6 million (probably more by now) of its own.Why borrow $13 mil at relatively high interest when the city already has ample cash "parked" in the bank, drawing "peanuts," we ask?
Is there no one on the Ogden City Council who is capable of operating a simple hand calculator?
6 comments:
How much does the city have sitting in the bank earning 1%?
How much will it cost(profit to company issuing bonds) to obtain these bonds? that is in additional to the cost of issuing bonds instead of using finanial reserves to pay for this projecy? Is all of the money from BDO lease revenue committed to other projects?
Good question, D. Hopefully our WCF "go to guy" DanS. will do a "drive-by" on WCF and furnish those numbers
So many questions... so few answers from Ogden City gummint.
Here are the calculations, since nobdy else seems willing to "do the math":
$13 mil in a bank account earning 1% interest over twenty years?
Final Balance: $14,348,702.38.
$13 mil loan at 4% interest over twenty years?
Cost to the Ogden City taxpayers: $18,906,586.27.
The latter figure doesn't include the costs of floating the bond, of course:
Here are the calculations, since nobody else seems willing to "do the math":
$13 mil in a bank account earning 1% interest over twenty years?
Final Balance: $14,348,702.38.
$13 mil loan at 4% interest over twenty years?
Cost to the Ogden City taxpayers: $18,906,586.27.
The latter figure doesn't include the costs of floating the bond, of course.
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