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Letters to the Editor
Orchard Park Downsizing: Negative Impact on Town Bond Rating is “Doctor Politico Spinico”
By Jane C. Shumaker and Ronald D. Stadelmaier
Sep 11, 2009, 15:03
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As Town and Village citizens of Orchard Park examine and consider the pros and cons of downsizing the Town Board, it is critical that we NOT include misleading and incorrect information in the process.
We would like to address the issue of the purported impact of downsizing on our Town’s bond rating.
In his recent Buffalo News op-ed article, “The Downside to Downsizing,” Mr. Remy Orffeo, Town Planning Coordinator and OP Conservative Party Chairman stated that downsizing our Board may have a negative impact on our Town’s bond rating, and specifically, that the Town's bond rating "potentially could be affected adversely by downsizing.”
Mr. Orffeo may have an educational teaching background in business, however, a co-author of this piece will trump that with over three decades of financial services industry expertise working for a Member Firm.
Simply put, Mr. Orffeo’s statement is misleading and incorrect.
His statement is a Doctor Politico Spinico statement clearly based on “status quo” political posture versus critical investment theory or expertise.
And here’s why:
Bonds are the primary source of long term debt for local governments. They are commonly two types that circulate. GO Bonds (meaning General Obligation), and Revenue Bonds. They are backed by the full faith and credit of the issuer - and that is us - the citizens and taxpayers of the Town - not the Town Board “us.”
Bonds are rated by independent assessment agencies such as Fitch, Moody’s or Standard and Poors. The purpose of a bond rating is to place some measurement of the issuer’s ability to repay the debt on the bond. The rating itself is used in association with the purchase and holding of a particular bond.
First and foremost, the bond rating assesses the relative credit risk and serves as a tool in securing financing for town projects - in other words, who will lend money to the Town is based on the rating.
Secondly, along with other factors, it helps determine how much interest the Town will have to pay in order to receive the funding. A low rating means you will likely pay a higher interest rate, and a high rating means you will likely pay a lower interest rate.
Equally important is the impact the rating has on the bond’s ability to trade in the open market. This simply means that bonds with a higher rating attract certain investors, while lower rated bonds may be more attractive to yield buyers. Many of your high paying bond mutual funds include both higher rated bonds for the principal protection and lower rated bonds as they deliver the yield. High, medium and low rated bonds all trade efficiently in the market place.
In short - a bond rating is much like a Town’s personal credit score.
Many factors go into the rating process. The most critical factor is the financial condition and fiscal responsibility of the issuer - the Town of Orchard Park - then the economy, current interest rates, the debt structure of the Town, i.e., how much debt does the Town already have, demographics, i.e., is it a productive working town or an area under some economic pressure, and, yes, the management practices of the governing body - the Town Board.
This is where Mr.. Orffeo is “Doctor Politico Spinico” and would like to place fear in our Town citizens by saying that a smaller town board would be a significant negative to our bond rating. It is simply unfounded. That factor would only be considered if there was gross incompetence and complete collapse of management.
Financial condition is the critical mass. Any cost savings such as a less expensive government would likely be considered a plus not a minus. Also spun into that is an implication that as voters we, as Town citizens, would allow such a collapse of management - equally absurd.
In summary, the Town of Orchard Park has a favorable credit rating because of its citizens - we are a productive Town, and we are fiscally responsible.
In other words, we are good for our taxes - and they can count on us paying.
Clearly we must give credit where it is due, and in Orchard Park , our Town officials have kept our fiscal responsibility in check up until now. What spin doctors like Mr. Orffeo and others should consider in this downsizing debate is that pressure on fiscal responsibility and budgets will be far more critical to our bond rating than the implication of discord.
Citizens of Orchard Park, cast your vote whichever way you choose, but do so without this politically-injected fear.
“Status Quo Mr. Orffeo” is completely incorrect.
We, as Town citizens, have a serious decision to make on September 23rd - and it behooves our Town citizens and our Town Board to dismiss all the Doctor Politico Spinicos and make a factually based decision.
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