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Municipal Debt Service 101: What a robo call won't tell you

Over the past few weeks you may have had your dinner interrupted with a robo call from a few "concerned citizens of Middletown" (also known as the leadership of the Middletown Democratic Organization) claiming the sky is falling under the debt obligations the township faces.  

If you are going to be interrupted during the quality time with your family, I feel you should at least get factual information versus political propoganda. 

Let's take a look at debt services and Middletown so that you can be better informed:

There are two aspects to the municipal budget: The operating budget and the capital budget.  The operating budget is the portion that is used to run the town.  This includes the debt service payments that are bonded for under the capital budget (more on that in a second).  The capital budget is the portion that is used to pave roads, fix buildings, purchase fire trucks, parks equipment, police cars, etc ... 

Municipalities are allowed by law to borrow through bonding or notes for capital projects and improvements up to 3 percent of the township's total assessed valuation.  Based on Middletown's valuation, the township would be able to carry approximately $298 million in debt services to run the township. 

However, this is not the case.  Middletown currently carries approximately $72 million in debt service obligation or about .6 percent of the township's total valuation.  In fact, the township, through it's conservative fiscal policies, has actually retired debt faster than we are required to.

The debt service payments are already included in the proposed municipal budget for 2011.  This year's budget has been reduced by over $4.5 million or approximately 7 percent less than last year's budget and complies with the governor's new 2 percent property tax cap.

If you are a skeptic about these numbers, don't just take my word for it.  There are bond rating agencies that have to issue credit outlooks on all municipalities.  They factor revenues, payments and total debt to valuation ratios (among many other factors) to rate a municipality's borrowing costs. 

The better the rating, the lower the interest for bond holders.  Middletown has been consistently rated AA by Moody's, who rates municipalities.  AA is about the highest rating that can be achieved (cash is rated AAA in terms of safety). 

So the next time you get a recorded call from the "concerned citizens", remember the source and some of this factual data.  Based on the facts the call presented, it is no wonder why this time they decided to block their numbers from your caller ID.

MiddletownMike

10:12 am on Wednesday, May 25, 2011

How is it that Mr. Fiore knows who is responsible for these rob calls when so many (myself included) do not? It seems to me that these robo-calls have struck a nerve and seem to be factual based on his response.

And I believe the point of how much debt the town can borrow itself into is a silly one; who cares what a persons credit card limit is when it is already difficult to meet the minimum payments on the balance!

Also, Middletown hasn't had it debt rating updated in several years, It has been shown recently that credit rating agencies like Moody's and Standard & Poor aren't worth much. After the financial meltdown of the past few years, many of the investments that caused the near collapse of the economy were rated A, AA, or AAA from both of these institutions.

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Tony Fiore

5:22 pm on Wednesday, May 25, 2011

Mr. Morris if your robo calls struck a nerve I would have answered them a long time ago. You can continue to play coy with respect to who is behind these calls but we both know the answer to that. I believe you are the President of the Middletown Democratic Club are you not? However, that is not the point of this article. The point of this article is to present factual information. It's obvious to me that you can't refute the facts that I have presented. As stated before, the Middletown 2011 budget will be adopted in compliance with the Governor's 2% cap law, has been reduced by millions of dollars and almost 7% in total, and the Township remains in tremendous financial shape with it's credit rating.

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MiddletownMike

5:55 pm on Wednesday, May 25, 2011

Mr. Fiore your beliefs are wrong much like most of the half-truth information you like to sugar coat and and misrepresent as facts. For the record I am not and never have been the President of any club let alone the Middletown Democratic Club.

Pat

9:24 pm on Wednesday, May 25, 2011

Just who is being coy here?
Funny no one on the Township Committee cared about citizens having their sleep disturbed with THEIR robo-calls -sounds like they are only perturbed on the citizen's behalf when the message is critical of THEM. As a side note, the lion's share of political propaganda received in my mailbox over the years has come from Township Republicans- but it has not been in vain- the ones that show the Township members groveling at the governor's feet have actually inspired me to purchase my first paper shredder. And that has been helpful in implementing the stricter recycling rules that the sole Democrat on the Committee brought about.

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Tony Fiore

6:46 am on Thursday, May 26, 2011

Mr. M orris I would be happy to supply a variety of documents from the NJ Election Law enforcement Commission for the Middletown Democratic Club that are signed in your name and address as President.

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MiddletownMike

9:04 am on Thursday, May 26, 2011

Mr. Fiore, you obviously have never seen an NJ ELEC report in your life let alone one that states I am the President of a club in Middletown. If I'm mistaken and you have seen an ELEC report before, then you don't know how to read it.

I find it interesting that you chose to change the story and twist the focus away from a robo-call about being stressed out from the higher taxes we have been paying over the past 5 years (an increase of nearly 45%) because of borrowing and mismanagement, to an attack on me about whether or not I am the president of some democratic club, which I am not.

Stick to the subject of the original post, at lest that why you sound as if you actually know something even though you just "parrot" what others have told you to say.

Jim Grenafege

11:38 am on Thursday, May 26, 2011

Mr. Fiore,
It appears that you make a distinction between debt and debt service. You acknowledge that the Middletown Township debt service is about $72,000,000, which is about $10,000,000 more than the annual township budget. How much of this money that the taxpayer owes to lenders is principal and how much is interestinterest? As Mayor and member of the elected five person Finance Committee, I hope this number is committed to memory.
Several other questions: what is the townships overall debt liability -- how much is owed in sick time and vaction time not taken; has the township accumulated more or less than an additional $70,000,000 in deferred school taxes -- money borrowed from the Middletown Board of Education; what is the present cost of borrowing money in our current financial climate; what is the difference between a bond and a note and why has the township only recently started using notes versus bonds?
I have other questions and some comments regarding your "Municipal Debt Service 101" post, which will be part of a follow-up comment.

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Gary Junstrom

6:04 pm on Friday, May 27, 2011

If I'm not mistaken, Mr. Grenafege is a disgruntled resident who ran for office numerous times, quite unsuccessfully I might add and is a local representative of the far left socialist Democrats who worship at the feet of the unions, and a Supreme Court that has set out to destroy the taxpayers of New Jersey.

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Tom

12:07 am on Saturday, May 28, 2011

How dare Mr. Grenafege run for office! What is this, a democracy? Perhaps he is taking a page from Ronald Reagan's book - you know, keep running over and over- till you win? PS - you would be hard pressed to find any successful Democratic candidate who wasn't accused by the John Birch peanut gallery of being a "far left socialist"- it's what they do when they run out of ideas and the ability to stay on topic. Speaking of those who have run out of ideas- who needs the Supreme Court to destroy Middletown taxpayers when we have our very own all Republican township committee?

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Gary Junstrom

1:16 pm on Saturday, May 28, 2011

Hey "Tom" - what do you think of your Supreme Court's incredible decision to steal half a billion tax dollars and whiz it away in failing urban school districts? Brilliant! Don't address the sociological problems, throw more money at it! As for the Republican town council, they are the reason that Middletown is one of the top places to live in the country. Contrast that with what Democrat leadership has done in Newark, Trenton, Camden, Paterson, Elizabeth, Asbury Park, etc. Must be hard having to be on the outside looking in, right "Tom"? Btw, are you going to the union rally with your leader Jesse Jackson? Sure to be a Democratic love-in - you know, raise taxes, pay the unions, hate America.....

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Kathy

6:38 pm on Wednesday, June 1, 2011

Gary, you've been drinking too much of the koolaid. If you believe Middletown is one of the top places to live, you're as delusional as all the rest of the zombies in this town.
Comparing the Dem leadership in other towns has no relevance to Middletown. Poor leadership is poor leadership and the Republican leadership has been dismal.
Neither party can claim the rights for good governance. The problem with this town is there are no checks and balances, and the public gets skewed information just like what Fiore is posting on this blog.
Their only agenda is just get to get re elected and stay in control.

Allen

6:13 pm on Wednesday, June 1, 2011

Mr. Fiore,
Your criticism of these robo calls is rather hypocritical considering your predecessor used them to alert the public about recycling passed 10 pm. At least the information is something the public is completely ignorant of due to your desire to keep the public at large in the dark about so many issues.
The lies and misleading information displayed by you and the rest the TC especially Scharffenberger have made this life long Republican vote for 2 Dems for the first time in my life.
You can spin and sugar coat all you want, but many of us just don't believe a word you say.

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Gary Junstrom

7:00 pm on Wednesday, June 1, 2011

Wow Elaine, you really have brought the beaten down Democrats out of hiding. I guess losing so regularly has them searching for an outlet for their sorry ramblings. First, Kathy. I am just pointing out a fact about Middletown, which keeps getting rated one of the top places to live by Money Magazine - hardly a partisan interest. Also, look at the M-town website - the town gets awards for everything from their park programs, to their Green Initiative to their planning projects. Finally, wasn't Sharfenberger named public official of the year recently?The problem that you have with those facts is that they blow all of the Democrat propoganda out of the water. AND comparing Democrat towns IS relevant - it shows the end results of successful Republican leadership versus the disastrous liberal-leaning Democrat "leadership." Now for you Allen - first of all, it's "past" not "passed." Second, you are drinking the Democrat kool aid where you don't back up your claims with any facts. And to educate you (again) - as the mayor rightly said, M-town's debt is remarkably low and its finances, according to numerous respected organizations like S&P, Moody's, the League of Municipalities and every auditor for over a dozen years, are sound. Sorry to burst your bubble, but "thems is the facts."

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Sisyphus

1:24 pm on Friday, June 3, 2011

"The Township did not accurately maintain a general ledger that was reconciled to the Township's underlying records in order to properly account for and report financial transactions. The following items were specifically indentified: Significant debt transactions were not recorded in the general ledger; balance sheet accounts were not reconciled to supporting documentation and underlying records; numerous mispostings of transactions were identified; interfund activity was not properly tracked throughout the year" (Ernst and Young, 2009). This quote is from the Middletown Township auditor noted above and Resolution 11-127 passed on April 4, 2011 adddress this issue.
So when it comes to financial management the Republican majority did really poorly, or in terms of mismanagenent did really well, in 2009. For further emphasis, make sure to note: "Significant debt transactions [plural] were not recorded ... ". So your claim that "M-town's debt is remarkably low and its finances according to every auditor ... are sound" is wrong and 'thems is the facts."

Kathy

8:36 pm on Wednesday, June 1, 2011

Why doesn't Fiore mention the millions of tax payer money spent on legal fees and poor planning due to the incompetence of the leaders in this town? The Town Center, Art Center, Bamm Hollow, turf fields to name a few. We bond for everything and who do you think profits from that? Peter Carton, the bond counsel and Repulican party Chair. Our bond debt has increased by $10 mil since last year.
Of course all you are ever going to see is propaganda on the township web site and Middletown Matters. Why would they post anything else? They can and will say anything to promote their message.
Liberal and conservative views have no revelence in local polititics. Save that for the national debate.
Locally, it's all about how wisely you spend and invest the tax payer's money and maintain a good quality of life.
You can also save your arrogant partisan views for Fox news.

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Kathy

8:42 pm on Wednesday, June 1, 2011

Let me correct myself before Gary decides to focus on my grammar. I mispelled relevence.
I'm also an Independent voter, so bash the Dems all you want. It doesn't matter they haven't been in control in this town for more than 30 years.

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