Mayor Miro Weinberger Response to Steve Goodkind's Inaccurate Claim of "Pretty Good" Financial Management During his Time at DPW
FOR IMMEDIATE RELEASE
Mayor Miro Weinberger Response to Steve Goodkind’s Inaccurate Claim of “Pretty Good” Financial Management during his Time at DPW
Goodkind’s DPW Financial Mismanagement
Contributed to City’s Three-Step Credit Rating Downgrade
Burlington – This morning during the first mayoral debate on WVMT’s “Charlie, Ernie, and Lisa Show,” former Burlington Department of Public Works (DPW) Director Steve Goodkind addressed his financial management abilities by saying: “I think we ran a pretty good Department over the years, and we tried to balance our budget.”
Goodkind demonstrated no recognition that his mismanagement of DPW’s enterprise funds was identified by Moody’s Investors Service as a major factor in the City’s dramatic three-step credit rating downgrade to the edge of “junk bond” status.
A review of Goodkind’s record as DPW Director shows that his Department was plagued by numerous, serious financial problems when Mayor Miro Weinberger took office.
“Steve’s mismanagement as Public Works Director directly contributed to the fiscal challenges facing our City,” said Mayor Weinberger. “The City of Burlington already suffered through six years of fiscal mismanagement during the Kiss Administration, in which Steve was both a Department Head and a close advisor to the Mayor. We simply cannot afford to return to the fiscal mistakes of the past that plagued the City.”
Enterprise funds managed by Goodkind were running multi-million dollar deficits pre-2012 and putting the City “at risk”
The FY11 audit (released in March 2012, just before Mayor Weinberger took office) documented that the Sewer Fund and Water Fund – both overseen by the DPW Director – were in deficit to the General Fund by $2.5 million and $2 million respectively, and no written plan existed to address the deficits. These deficits comprised $4.5 million of the $25 million owed to the City’s General Fund at the end of FY11, and these two deficits were the largest fund deficits other than Burlington Telecom (BT). The fourth largest deficit was also a DPW deficit – $1.2 million in unreimbursed Champlain Parkway expenses (see below for more).
The auditor expressed alarm at these deficits stating, identifying the deficits as the #1 Financial Challenge facing the City and writing, “Over the years, these funds ‘borrowed’ cash from the general fund to pay applicable operating and capital expenses, resulting in… a depleted cash balance in the general fund. This places the City at risk, as it is overly reliant on borrowing from financial institutions to provide overall City short-term cash requirements.” (Emphasis added.)
Weinberger Administration response: Mayor Weinberger and his financial team took action immediately upon taking office to raise revenues and control expenses and eliminated the deficits by the end of FY13. In the FY13 audit, the finding regarding General Fund deficits was removed entirely from the management letter.
Goodkind mismanaged Champlain Parkway reimbursement process, creating $1.2 million deficit
The FY11 audit also found that the Champlain Parkway project owed the General Fund more than $1.2 million as a result of uncollected reimbursements that the City had no plan or timeline for securing.
Weinberger Administration response: Mayor Weinberger and his financial team directed DPW to focus on securing reimbursements. Approximately $900k in reimbursements has been secured, and DPW is continuing to work on securing reimbursement for the remaining, pre-2010 expenses.
Goodkind’s deficits were a significant factor in Moody’s 3-step downgrade in June 2012
The Goodkind deficits and the pressure they were placing on the City to pursue risky short-term borrowing was a significant factor in the costly Moody’s three-step downgrade of the City’s credit rating to the edge of junk bond status in June 2012. On June 20, 2012 Moody’s wrote, “The downgrade of Burlington’s general obligation rating to Baa3 from A3 reflects the additional strains on the city’s pooled cash from non-self-supporting enterprise funds, compounding the prior year draws used for the expansion of Burlington Telecom.” (Emphasis added.)
This downgrade has impacted the interest rates the City has paid on all borrowing since June 2012 and will continue to cost Burlington taxpayers higher interest rate payments until the credit rating is restored.
Weinberger Administration response: The long process of restoring the City’s credit rating has been the top focus of Mayor Weinberger and his financial team. Moody’s noted the progress the City had made in the Water and Sewer Funds on April 14, 2014, when it stabilized the City’s credit rating outlook, stating, “The stable outlook reflects the recent stabilization of General Fund operations and management's commitment to addressing the negative unassigned fund balance in the General Fund and non major governmental (enterprise) funds over the near term.” (Parenthetical added.) In addition, on January 8, 2015 Moody’s issued a report indicating that the completion of the Burlington Telecom Settlement Agreement was a credit positive.
Goodkind left garages with millions of dollars of deferred maintenance and no financial ability to repair them
The City began FY15 with its Traffic fund – the fund that manages the City’s parking garages and meters – projecting a deficit for the first time in many years if the City did not raise rates. In addition, a structural engineering investigation completed in late 2014 found more than $7 million in urgent garage repairs needed within three years as a result of deferred maintenance under Goodkind’s tenure.
Weinberger Administration response: Then new DPW Director Chapin Spencer identified garage reinvestment as an urgent issue and has focused on securing support for a reinvestment effort over the last 18 months. After a Parking Summit and numerous other consensus-building efforts, the DPW Commission and City Council made policy changes in 2014 that dramatically have increased Traffic Fund revenues. In 2015, DPW is planning to use TIF funds (which will be on the 2015 Town Meeting Day ballot) and other bonding to address the deferred maintenance challenges in the garages.
Goodkind failed to set up a sinking fund for $14 million wastewater bond, putting City in precarious position when balloon payment became due in 2013
In 1992, the City upgraded and improved upon its three sewage treatment facilities at the cost of approximately $50 million. One of the sources of financing was a $14 million loan with a balloon payment due at the end of 2013. As the deadline for the balloon payment loomed closer, Goodkind made no provisions to create a sinking fund or take any other action to prepare for the balloon payment at the time of the initial financing or at any point thereafter, putting the City in a risky and precarious position.
Weinberger Administration response: At the beginning of 2014, after taking important corrective steps before it was too late, the City was able to secure a refinancing on favorable terms from the Vermont Municipal Bond Bank that will save Burlingtonians $5 million in reduced financing costs through the term of the loan. When the refinancing was announced, State Treasurer Beth Pearce, indicating that she was “very impressed” with recent Burlington financial management improvements, said: “As a member of the Vermont Municipal Bond Bank’s Board, I am pleased to assist with this type of financing that will reduce costs for Burlington’s residents and businesses. Burlington is making use of a proactive and prudent financing approach that adds value to the community.”
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