New York, August 05, 2014 --
Moody's Rating
Issue: General Obligation Bonds, Series 2014; Rating: Aa2; Sale Amount: $3,900,000; Expected Sale Date: 8/13/2014; Rating Description: General Obligation
Opinion
Moody's Investors Service has downgraded the Municipality of Mt. Lebanon, PA to Aa2 from Aa1, affecting $28 million of outstanding General Obligation debt. Concurrently, we have assigned a Aa2 rating to the municipality's $3.9 million General Obligation Bonds, Series 2014.
The bonds, including the municipality's guaranteed parking revenue and sewer revenue bonds, are secured by the municipality's general obligation, unlimited tax pledge.
Proceeds of the current issue will be used to fund seven capital projects, including improvements to municipal-owned parking garages, work on the municipal building's roof, and stormwater projects.
SUMMARY RATING RATIONALE
The downgrade to Aa2 incorporates the municipality's declining fund balance, which is now lower than average for the Aa1 rating category. The rating reflects the municipality's moderately sized and affluent tax base in suburban Pittsburgh (rated A1 stable), a favorable income tax trend, and a modest debt burden.
STRENGTHS:
Affluent tax base in strong regional economy
Favorable income tax trend
CHALLENGES:
Below average fund balance
Large overlapping debt with local school district
WHAT COULD CHANGE THE RATING - UP:
Increases in fund balance to levels more consistent with higher rating categories
WHAT COULD CHANGE THE RATING - DOWN
Further declines in the General Fund balance
Reversal of recent favorable income tax trend
42 comments:
I fully expect both the Township and School District to respond accordingly...
... by trying to float more bonds.
Imagine if we had an extra $750,000 in the general fund... oh, that's silly talk.
Hold on to your wallets people. You know they're going to raise taxes now.
--Tom the Tinker
Wait a second, the fund balance...same as unassigned funds.
Genius guys and gals. Genius.
Turf is more important than your bond rating.
Tom the Tinker,
I guess you haven't read the agenda for Tuesday's Commission meeting. The commissioners need four affirmative votes to pass this bond for $4.2 million. Dave Brumfield is introducing it.
Elaine
That strong affluent tax base won't remain a strength if the commission, school district and the muni have the attitude of "pay up or move".
By the way, the city of Pittsburgh's rating went UP!
I believe we were downgraded because of this upcoming bond issue.
Elaine
We are spending 1,000,000 for turf and none of that is included in the bond issue.
If we have $4,214,764 in a bond issue and the turf is not included there never was a surplus in the General fund.
Also there are three items in the bond issue for the General Fund Budget totaling $1,036,715 stated on the last page:
$480,000 for a Municipal Building Roof,
$200,000 for a Public Safety Center,
$356,190 for Municipal Equipment
$1,036,715 Total
The extra money for turf is a big lie and Brumfield is introducing the lie and Linfante has to sign the bond issue papers for the lie.
Steve Feller and the Managers of the Municipality went along with the lie. Items from the General Fund were put into the bond issue so we would think there was a surplus in the Budget.
It will be interesting to see which commissioners vote for the BIG LIE.
They don't care, they will just keep incurring more expensive debt and stick us with the bill.
I wonder if Aug 4th @ 9:33 that found 5:35's demographic numbers and comment so amusing will find the bond rating drop equally funny.
From 9:33...
"5:25 glad you found the numbers interesting. That wasn't my intent. I merely wanted to share actual numbers. And thank you for the comprehensive overview going all the way back to the go-go days when the Mt. Lebanon population was a whopping 35,000. I bet that was a swell Enchantment Under the Sea dance back in '60."
Yep, "happy days are here again," right 9:33?
What shall we call the 2014 dance... 'Enchantment Under the Cedar Blvd. Flood Waters?'
So the budget surplus and the population numbers were deceitful.
Hat do you expect from a commissioner that can look at the PA Dept. Of Education graph of Harrisburg's contribution to K-12 education funding and say with a straight face, "Corbett Sucks."
Harrisburg's funding to schools is at record levels.
4:33 PM, this will be a super vote, as you know, with four votes needed. Unless Linfante calls in, there will only be four commissioners voting. Brumfield will vote yes since he is introducing it. If Linfante calls in, she will certainly vote yes, since she knows what is needed to bankrupt symphonies in San Jose. Bendel's dossier on the municipal website has "Director of Community Investment for FHLBank Pittsburgh; worked with 300 banks to increase their lending to and investing in housing, community and economic development projects." He should know better than to vote yes, but then there goes his Field of Dreams.
Silverman thinks that the turf project will be an asset to Lebo's economy, so he will probably justify it through tracking Gatorade sales.
I can't read Kelly on this one. She has been pushing for unassigned funds to go toward these projects. Will she want to incur debt for these repairs? I have no idea.
Elaine
I wonder if Manager Feller alerted any of the commissioners about the downgrade, or if he was even aware of it.
Elaine
Lets see if mtl magazine has a feature article on this as they did when the Moody rating increased a few years ago. Opp's, I forgot, the mission of the house organ is to print only good news about the bubble. No fair and balanced reporting here !
The Finance Director, bond counsel, solicitor were aware of this as soon as Moody's issued the downgrade. They undoubtedly advised Feller immediately.
Elaine Gillen is an excellent example of a long-term resident who cares deeply about preserving the community that she loves. Many people may not agree with her perspectives or the operation of this website, but Elaine has never used her position or any of the resources that she developed for her personal gain.
That's not the case with many others in Mt Lebanon.
A recurring problem in many local communities has been the short-term residents who get elected and enact enormous expenditures for things like ballfields, turf, swimming pools, tennis courts, LAVISH TEACHER PAY INCREASES, etc. - and then they move after their kids were accommodated, etc. In the meantime, the community is left with the debt burden and on-going service costs of what was purchased.
Turf expenditures are an example of an expenditure that will erode future valuable hard-earned tax dollars for service and maintenance. The problem is that the existing infrastructure that needs maintained, repaired or replaced STILL needs maintained, repaired or replaced even after another burden is placed on the taxpayers for the turf.
The level of Mt Lebanon's rating isn't an immediate concern, but the direction of the rating change is a reason for concern because it's signaling a direction that will lead to problems.
Elaine, for your part, I appreciate all the hard work that you have done to illuminate many of the problems facing our community - and I enjoy reading the tales that so many don't want to tell.
I hope that as the Republican Party reassembles under new leadership they will not seek the traditional establishment candidates of "who's who" and they will find other people who are legitimately concerned with the welfare of the community. It is possible because the Democrats found Dan Miller and Kelly Fraasch. Hopefully the Republican's can find some new blood.
Thanks, John. I appreciate your kind words.
I updated this topic with a screen shot from Tuesday's agenda showing the seven projects included in the new bond issue. I hesitate to say that they WILL be used since the Rec Bond was to include money for Robb Hollow and the Golf Course, but instead, all went into the pool project.
How long does a roof last? Twenty, thirty years? It will cost less to replace than the artificial turf which is supposed to last eight years. The commission will be issuing debt for these projects, but have assigned funds which has lowered our bond rating to a project that has to be replaced eight years or so in PERPETUITY. We will never be able to improve our rating, thanks to Bendel, Brumfield, Linfante, Silverman, and the SAB.
Public hearing for this bond issue will be conducted by VP Bendel on Tuesday, during the August 12, 2014 commission meeting.
Elaine
Oh look, someone knocked down my anti-turf yard sign overnight. I wonder if it is the white SUV again.
Elaine
Admittedly I'm not much of an expert on bond ratings, but how much of a roll do the Twin Hills and McNeilly property debt play in the Moody's downgrade?
It appears to me that not only are the sports nuts soaking up undesignated funds, they are increasing our cost to borrow money for essential infrastructure maintenance.
But that turf for grass is consider our communities "Crown Jewel."
That infamous, myopic lawn sign that reads - "Let our kids play, even when it rains needs to be revised.
It should now read -
'Let our kids play, even when our rainy day funds dry up!'
It plays a big part, 11:40 AM.
11:44 AM, new sign "Let our kids play, even when it rains. Even if we are drowning in debt."
Looking at the list of projects, I see that $1.5 million is for stormwater. If the stormwater fee was being used properly, we would not have needed to incur more debt. Instead, our brilliant leaders have been using the stormwater fee for leaf collection, curbs, and street cleaning.
Elaine
Gee, I really wish the statr attorney general's office would do its job and investigate the financial shenanigans in Lebo. Oh, I forgot, it's an election year. They have to spend time and money trying to prove "Corbett sucks". Riiiiiiiiigggghhhtttt.....don't tell me it isnt a D or R issue in Harrisburg.
Leaf collection????
I thought our municipal taxes went towards leaf collection!!!!
So the stormwater fee is A TAX INCREASE after all.
The thought process is that if our curbs are in bad shape or if there are leaves in the way, the stormwater will be diverted improperly. Gotta keep those street gutters open.
Elaine
12:38 PM - the stormwater fee was advertised to be for storm sewer systems...the connivers then added (1) street curbs (they channel storm water don't you know, (2) street sweeping, only twice a year on residential streets, weekly for Uptown, and (3)leaf collection and processing - all of which were funded by taxes, and the tax millage was not reduced when reassigned to the stormwater fee.
So boys and girls, it was a back door tax increase and you let it happen because you're too busy or lazy to be aware and speak up ! This was another Gateway Engineering orchestrated farce.
Prior to the storm water fee, leaves were taken care of by our taxes. I am confused about all of this though... why did Gateway brag on their website that we have $2 million in our storm water fee that has accumulated. Why are they keeping tabs on the balance of the storm water fee if they have nothing to do with leaf collection or street cleaning?
Some sustainable communities do not provide leaf collection. They have programs that teach residents how to "leaf/mulch-in-place" which involves some work on the resident's end but nothing more than would be required by raking leaves to the street. The leaf in place programs are healthy for your (real) lawns and soil.
Leaf/mulch-in-place is not something Gateway would suggestion therefore, it must be good.
I do not like the leaf trucks, the leaves waiting in the street for pick-up, or the prospect of another Gateway engineered public works facility for leaves. Stupid is as stupid does.
Elaine, I believe that PA Act 53 (PA Municipal's Planning Code) indicates that all Capitol Improvement Projects that apply to land use, including municipal parks, are to be maintained by the municipality only. I would think that any contract with the school district for turf maintenance would violate the Code, meaning that it is illegal.
Debt Management Handbook. Anonymous.
http://hamburgpa.us/docs/BoroughDebtManagement.pdf
Did the company that handles all these bond transactions make a donation to turf or for that matter, the school district capital campaign???
9:57pm -
Your point is well made. There is a staggering increase in real estate activity once you cross the line from Allegheny Co to Washington Co.
Wsahington Co doesn't have the infrastructure, schools, hospitals or established neighborhoods that populate Allegheny Co; but people want to locate there... Why?
Clearly, our County and Municipal leadership doesn't understand what these new homeowners want. Our local and County leadership has defined what they think future homeowners want, but their list and the list of the new homeowners will be very different.
I'll just bet that one of the items at the top of the list will be taxes! Washington Co is reassessing all of their properties. The reassessment was prompted by a lawsuit brought by Union Township. The Washington Co Commissioners have collectively repeatedly stated their opposition to any tax increases and plan to continue to contest the court decisions that have prompted the reassessment.
Before any attorney's chime in and tell us all the legal reasons why Washington Co is wrong and the taxes need to increase, let me point out that it is the public commitment by the Washington Co Commissioners to maintain low taxes that is setting the foundation for economic development across Wsahington Co. (Of course, the largest energy find outside of the Emirates is also helping - but Washington Co is committed to a belief that low taxes and less government facilitate economic development, and their recipe for success has worked.)
The sports enthusiasts, particularly Mr Franklin, will remember that Commissioner Ivey almost convinced the Steelers to relocate at Southpointe.
Imagine that stadium in Wsahington Co.
I'd feel better about expenditures like a new high school or a turfed flood plain if we had performed a cost/benefit analysis that considered the net benefit for all Mt Lebanon Homeowners rather than an myopic and inwardly focused view of grass versus turf.
Wouldn't homeowners want in invest in these projects if they felt that they'd see a $10:$1 return on their tax dollars via increasing home prices? Wouldn't that type of environment prompt private homeowners to invest in improving their home or contributing to maintaining their community?
When public servants' salaries outpace the incomes of those in the private sector and the wish list exceed the communities ability to buy and maintain them, that is the start of the decline.
Then taxes start skyrocketing and the smart money gravitates to a better return on investment, like we're seeing at Southpointe and Cranberry.
It's no different that Mylan and other companies looking to move operations offshore.
Back when Dan Miller was president of the commission, he would ask people that if they wanted such and such, then where do we cut from the budget to pay for it? I have never heard those words from this commission.
12:34 PM, we will never know because all donations are a secret. No warning flags there. Nope.
Elaine
Taking $480,000 for a Municipal Building Roof out of the General Fund Budget is insulting sine we also spent $250,000 for the Municipal Building repair. Do you think Nello will donate $730,000 for turf?
Isn't that roof still under warranty? How could we already need to spend this much on a relatively new building?
I agree with 4:33pm.
If we need to now go out and BORROW money to do these projects then there was never any surplus funds to begin with! How in the hell do the commissioners think they have "surplus" funds for turf when they are going to borrow FOUR MILLION DOLLARS!
Bendel, you have a financial background. Do you not get this???? Brumfield is so far gone into his lacrosse buddies that I don't anticipate him seeing the light. Kristen, forget about it. She doesn't listen. Silverman is at least in business. He should get this as well but even his neighbors look at him and say he has no spine to stand up to these people on the commission. None of them in Ward 2 around the field want turf and Steve won't even meet with them to tell them why he voted for it. "More Gatorade sales" he will tell them!
Did they sign an agreement to get campaign funds or something? It's all too fishy for my liking.
When otherwise smart and successful people do stupid things, you have to question what is happening in the background. Bendel and Silverman are otherwise successful business men. So what gives? Is there like a secret "Dead Skulls Society" in Mt. Lebanon that I haven't been invited to join?
I'm no expert on bond ratings but, several items jump out at me in the Moody's downgrade.
They write:
The downgrade to Aa2 incorporates the municipality's declining fund balance, which is now lower than average for the Aa1 rating category. The rating reflects the municipality's moderately sized and affluent tax base in suburban Pittsburgh (rated A1 stable), a favorable income tax trend, and a modest debt burden.
STRENGTHS:
Affluent tax base in strong regional economy
Favorable income tax trend
CHALLENGES:
Below average fund balance
Large overlapping debt with local school district
WHAT COULD CHANGE THE RATING - UP:
Increases in fund balance to levels more consistent with higher rating categories
WHAT COULD CHANGE THE RATING - DOWN
Further declines in the General Fund balance
Reversal of recent favorable income tax trend
It's that focus on income trends that concerns me, coupled with those numbers from the PaRealtor study posted elsewhere on this blog.
The Realtor study showed:
So, what we're seeing is that the tradition White population with a median income of $73,480 declining by 14.51%, while the Asian and Hispanic segment with median incomes of $53,598 and $46,250 growing by 52.09% and 19.95%"
Forget race and concentrate on median income. Low to middle income families seem to be growing while the families in the upper middle class are shrinking by 14.51%.
Based on the above, is that considered a favorable income trend or are we headed for future downgrades? Coupled with the combined SD/muni debt.
As I wrote- I'm no expert.
8:02 AM, Municipal Building is across from Sesame Inn. Public Safety Building is by the cemetery. The Municipal Building is NOT a new building.
But you are spot on with everything else.
Elaine
For the newer readers, the turf project funding was based on a 3-2 vote, last November. The reason why it is going through unassigned funds is because in order to issue a bond for turf, they didn't have four votes. This was how they beat "super vote."
Fast forward, the Home Rule Charter committee would like to eliminate "super votes." Eventually, you will be seeing it on the ballot. Remember all of this when it comes time to vote yes or no. If there are only three votes required for a bond issue, you will be seeing more of this crap. Currently, they can only steal from unassigned funds until it runs out.
Elaine
Q: being one of the largest property owners in MTL, does the school district pay the storm water fee?
So in essence we get "taxed" twice by this tax disguises as a fee. Don't forget where the district gets its money.
Yeah 11;40 AM - the District pays the storm water fee; however, it is assigned to each individual building based on its footprint of impervious area.
The farce here is that each academic building gets a pass if the District requires those students to take a 2-hour lecture course in conservation or environmental subject matter or some such nonsense.
This was Gateway Engineering's idea. Surprised ?
A little off topic but...
Is it true Lake Brumfield appeared on Cedar again today?
--Tom the Tinker
Not totally off topic, Tom. Cedar Blvd. was under water today, and we are underwater in debt.
Elaine
The bond issue was passed. More debt. With the Rec bond, this bond, and wasting $800,000 on turf, our commssion has pissed away $9 million in one year. I didn't include the energy bond that is supposed to pay for itself.
Elaine
Let me guess... that 2 hour lecture course covers our overflowing landfills and that plastic grass and tire crumbs are better cor the environment than natural grass.
Q: If the churches offer lectures to their Sunday School classes do they get the same pass?
Church leaders, I'd complain that it isn't made available to your parishes.
4:02 interesting!
Now if an owwner of a high-rise apt/condo building holds a 2 hour lecture for residents on conservation do they get a pass on the stormwater fee?
Seems to me to be a violation of the PA Constitution if they don't.
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