Vermont cities and towns have been borrowing money at a swift pace in the year since Tropical Storm Irene. Now, Vermont’s state treasurer is defending the increase in municipal bonds.
State Treasurer Beth Pearce says from January to August the state sold $492 million of municipal bonds. That’s five times more than the same period of last year.
But Pearce says two-thirds of those bonds were for refinancing existing debt incurred by state and municipal governments.
"The reason the state is issuing bonds is not related to Irene," Pearce said. "The reason the state is issuing bonds is to save taxpayers money through refunding of old debt."
And record-low interest rates have allowed state and local governments to save taxpayers interest costs.
Pearce’s math shows the state has only taken on $115 million new bonds this year.
"If you have a mortgage, if you have good credit you go out and you refinance," Pearce argues. "That’s precisely what the state did. That’s precisely what other agencies within the state and municipalities have done."
The state was scheduled to sell its annual bonds in October. But that was delayed until March because of the storm.
And Irene has continued to create financial challenges in towns like Rockingham, where the Bartonsville Bridge was swept away by Irene’s floodwaters. The event was captured on this video, posted online and viewed thousands of times on YouTube. It emerged as one of the most famous images of the destruction Vermont suffered during the storm.
Rockingham had a $1 million insurance policy through the Vermont League of Cities and Towns. But the replacement project is estimated to cost at least $2.4 million.
Tim Cullenen, the municipal manager for the Town of Rockingham, says the VLCT misled town officials to believe Rockingham’s insurance policy would pay for claims on a covered bridge.
"We submit the information to VLCT, and they say that their coverage is only for $230,000, which is a huge gap – a huge gap," Cullenen says. "If you have a million dollar coverage on a value on a structure, and that structure is gone I guess we wonder why we’re not getting what we’ve been paying for."
But the VLCT’s director of risk management services Ken Canning says the self-insurance program the League operates for cities and towns covers the lesser cost to replace covered bridges. And, he says, the League is willing to increase its offer by more than $500,000 dollars.
"I think that demonstrates our responsiveness to our members and the benefit of Vermont cities and towns belonging to a local organization that is owned and managed by them," says Canning.
Rockingham will hold special meetings to decide whether to borrow money to cover outstanding expenses. "We’ve not budgeted for it," Cullenen says. "Our total fund balance had been totally gutted because of Irene. That goes back to the issue of FEMA not covering a lot of the debris and hazard mitigation expenses that we incurred."
Cullenen believes Rockingham will continue to move forward with the bridge, even if it has to borrow. But he acknowledges that reconstructing the iconic bridge will put the town in a difficult financial position.