NEW BRITAIN - After a lengthy discussion Wednesday night, the Common Council forwarded a resolution restructuring the city’s debt back to the Standing Bonding Subcommittee.
The restructuring plan would authorize the mayor to appropriate and bond $115 million to pay, fund or refund any of the city’s existing general obligation bonds.
According to an executive summary of the plan, composed by John Healey and Richard Thivierge from Mesirow Financial, the restructuring would lower the city’s maximum annual debt service payment from about $40 million to about $26 million while adding three more years of debt payments.
According to the presentation, the savings will be accomplished by refunding and restructuring existing principal and interest payments and amortizing, or reducing, them in later years.
The effort to restructure the city’s debt goes back to the city’s $30 million deficit from the 2012-2013 budget, the year Mayor Erin Stewart took office.
Earlier this week, Stewart told The Herald the goal of the restructuring was to make the city’s annual bond payments more level and manageable.
New Britain’s scheduled debt payment this year would be about $24 million without the restructuring, but about $21 million afterg the restructuring. Without restructuring, the city’s debt payment in 2021 would be about $39 million. Restructuring would lower that payment to a little more than $25 million.
When speaking to the council, Thivierge said current low interest rates make it an opportune time to restructure. Federal 10-year treasury rates are going up, so Thivierge said it would be wise to restructure sooner rather than later.
“The whole idea is, at this point interest rates are low. They’re flat but they appear to be starting to go up so the reason to do this now is to take advantage of this interest rate environment … every indicator at this point is the Fed (federal government) is going to increase interest rates,” Thivierge said.
But critics of the debt restructuring plan say the city should not borrow more to pay off what it already owes.
Referencing a resident’s comments in public participation, Democratic Alderman Carlo Carlozzi expressed distaste for the idea that the city could restructure its debt rather than making more fiscally responsible decisions. Carlozzi and fellow Democrat Manny Sanchez said they would like to hear other potential options to address the city’s debt problems.
“I would say thousands upon thousands of taxpayers and residents in the city of New Britain don’t have that opportunity,” Carlozzi said of the restructuring. “They have to actually look to see what they have to cut in their expenses. When our budget goes from $228 million to $241 million, we’re not cutting. We have a borrowing issue and we have a spending issue.”
A restructuring of this magnitude was not possible until last year. Until recent legislation, there has been a statutory prohibition by the state of Connecticut on issuing debt beyond 20 years.
Before now, municipalities could not restructure debt beyond its original final maturity date.
In public participation before the meeting, two people spoke in favor and three spoke against the restructuring resolution.
The Common Council will hold a special meeting next Wednesday to further discuss plans for restructuring the city’s debt.
Skyler Frazer can be reached at 860-801-5087 or by email at email@example.com.