The contracted purchase price: $209,773.04.
The total cost to city taxpayers: ??
The Backstory
There is no doubt that the city’s rescue squad vehicles are a worthwhile and well-used investment of taxpayer dollars. It is important to provide emergency rescue services to residents, and the service that the Highland Heights fire department provides is top notch. Last May 19th, the department was named “2010 State of Ohio Emergency Medical Service Provider of the Year” by the EMS Division of the Ohio Department of Public Safety.
http://blog.cleveland.com/sunmessenger/2010/05/highland_heights_fire_departme_1.html
What many residents probably don’t know is that the rescue squad vehicles are also money-makers for the city. Residents’ private insurance companies are billed (and pay) for emergency medical transportation provided by the fire department. In 2010, the city recouped $179,003 in revenue in connection with fire department’s rescue squad runs.
Fire Chief Bill Turner put replacing the oldest of the city’s two RSVs on the radar several years ago. He has been waiting patiently since then for his request to move to the top of the capital improvement fund priority list. It finally reached that position this year.
The Brewing Controversy: How to Pay For the New RSV
The city started 2011 with over $5 million in its general reserve fund and over $800,000 in its capital improvement fund---more than enough to cover the $209,773.04 purchase price of the new RSV.
Yet Mayor Scott Coleman earmarked only $45,000 in the budget for the RSV.
What gives, you might ask?
A parenthetical note attached to the $45,000 appropriation reads: “5 yr. Lease @ $45,000 per year”. It appears that the mayor’s plan is not to pay for the RSV outright, but to buy it using a five year lease-to-own arrangement instead. Such an arrangement naturally involves paying interest and taking on new city debt.
Finance Director Anthony Ianiro has played coy so far when discussing the proposed lease-to-own deal; he has yet to provide any hard numbers showing what the total projected cost of buying the RSV this way would be. He did tell Council, however, that interest rates are currently running in the 3 to 3.1 % range.
I did the calculations using an online compound interest calculator. Based on what Ianiro said, it would cost city taxpayers an additional $33,405.04 to $34,587.61 to buy the RSV using a five year rent-to-own arrangement, rather than buying it outright.
http://math.about.com/library/blcompoundinterest.htm
Why would Mayor Scott Coleman want to go into debt and burden city taxpayers with interest costs when the city has a healthy $5 million sitting in its reserve fund? I have two words for you:
Election Year.
Despite the rosy picture that the starting fund balances project, the reality is that Mayor Scott Coleman’s overall 2011 budget is--on paper at least--a deficit-spending budget. We’re not talking about a slight deficit spending situation here; the budget projects almost ¾ of a million dollars ($772,283) in deficit spending by the city.
By including only $45,000 of the new RSV’s cost in this year’s budget, the mayor managed to keep the projected deficit-spending under $1 million---an important psychological barrier for many voters.
Of course doing that comes at a price: (1) The city will take on new debt; (2) future budgets will be encumbered to cover the remaining cost of the new RSV; and (3) city taxpayers will be saddled with significant interest expenses.
The question becomes: did the mayor choose to go the $45,000 per year rent-to-own route for sound financial reasons or for political ones?
Deficit spending is a real problem for any mayor seeking re-election. It’s a particular problem for Mayor Scott Coleman, who has made financial stewardship a keystone in both his campaigns and in his formal communications with residents.
In the Fall 2010 edition of Highland Highlights, Mayor Coleman wrote:
“ I am pleased to report that as of August 31, the City finds itself in a very stable financial position.…The General Fund expenses are running about even with our annual estimate of $10.5 million while the total of all expenses for all funds is projected to be below our annual budget of $15.1million. In other words we are spending less than what we originally planned at the beginning of the year…http://www.highlandhts.com/docs/newsletter/2010_Fall_Highland_Heights_newsletter.pdf
In addition, since I’ve been Mayor over the past seven years, the city has not incurred any additional interest bearing debt. In these trying economic times, we are proud to be able to make that claim…"
That was last year.
Looking at the 2011 budget, Mayor Coleman might just have to swallow his words.
Council gave Fire Chief Turner the green light to order the new RSV without deciding whether or not to go along with Mayor Coleman’s rent-to-own plan. The arm-wrestling over that financial decision should begin in a few months, when the new RSV is built and ready for delivery.
Update: Steamrollers and the Park Barn Pavillion
If you’re trying to steamroll someone, it’s always a good idea to make sure that all your ducks are lined up neatly in a row before firing up the engine.
Although Park & Recreation Director Dave Ianiro’s request to spend $1,500 to hire Richard A. Beck & Associates of Willoughby Hills to prepare drawings and specifications for a park “Barn Pavillion” appeared as Item # 1 on the agenda of the May 10th Council meeting, Service Director Thom Evans ended up asking Council to pull that item.
According to Evans there were “outstanding issues” with regard to Mr. Beck, including bonding and insurance issues. Evans also stated that Mr. Beck was “very senior” and thus no longer had a current resume that he could provide to Council.
