John Gorena and his protege, Steve Hill have doubled down on their insistence that the City of Lewisville owes too much debt - despite plenty of evidence to the contrary, and their being corrected on what numbers to use. This is now Steve Hill's third election to assert that.
I would say that maybe they didn't teach Finance or Accounting where Gorena went to college, but he went to North Texas, and I took Finance and Accounting there. Gorena and Hill need to go talk to someone who understands finance or accounting and have them explain the time value of money.
Both of these guys are out of their league wanting to be in elected office. It's not just that they're ignorant; it's that they refuse to learn, and reject any facts that don't fit their ideology. Municipal finance (or any finance for that matter) are not overly simple topics, but you have to really try hard to screw up numbers as bad as these two, then stick by your answer and call the rest of the world crazy when they don't change accounting conventions to see it your way.
Counting the future interest payments as part of the debt is like taking out a $100,000 mortgage on your house and then saying you currently owe $193,000 on your house (when 93,000 is the total future interest.)
Interest payments are not debt, because they are incurred and paid out as you go along. And how can you possibly count interest that won't be due until 10 or 20 years in the future as debt you owe now?
Posted: 2012/4/24 9:42 Updated: 2012/4/24 9:45
Re: Beating a Debt Horse
I love how in Gorena's blog posting he cites this article, "For a city in Montgomery, staying debt-free is the norm". However, there is one part of the article that I find very interesting, "Like other municipal governments in the county, Gaithersburg does not pay for some essential — and expensive — services, including schools, fire and rescue services, mass transit or a jail.
City Manager Angel Jones says that if the city had to pay for those things, the city still wouldn’t necessarily have to take on debt, because it could issue taxes as the county currently does."
So unlike Lewisville, which does have to pay for these services, he cites a city that doesn't. And then the city manager of Gaithersburg goes on to say that if they did have to pay for these services they wouldn't have to go into debt, b/c it could issue TAXES. So is Gorena now for new taxes just so Lewisville can stay out of debt??? I would like to know the answer to that, b/c new TAXES would definitely take more out of a Lewisville family's pocket than staying at the current tax rate while managing a reasonable amount of debt.
Posted: 2012/4/24 10:15 Updated: 2012/4/24 10:16
Re: Beating a Debt Horse
As a follow up to my last comment I would like to add this:
Also, he cites two other debt free cities...one of the being Mississauga, ON, Canada (you know he's really grasping at straws when a Republican is citing anything Canadian) and the other being the very affluent Laguna Niguel, CA, which I'm sorry, but Lewisville is in no way financially comparable to Laguna Niguel. So to break it down his three examples he cites in his blog post are a city that doesn't have to pay for many of the most expensive city services, and extremely affluent city in California, and a city in Canada...yep, Mississauga, ON, Canada.
It's worth noting here that at the council retreat, when the folks from Halff Associates were trying to compare Lewisville's recreational facilities with those of other cities with different circumstances and demographics, Councilman Gorena (rightly) pointed out that you couldn't compare the two situations. It seems as though that only applies to parks, though. -BC
I think the consultants also had an issue where they were comparing Lewisville square footage per capita based on future population in Lewisville versus current square footage in other cities.
Posted: 2012/4/24 10:27 Updated: 2012/4/24 10:34
Re: Beating a Debt Horse
All Gorena and Hill need to do is use their own mortgage payments as examples. There are ways that you can change the total interest you pay over the life of the loan. For instance, if you pay just a little more on the principal, you change (lower) the total amount of interest you pay.
Regarding Lewisville's interest "debt," I believe our mayor said that we had gotten a lower interest rate and reduced the amount of interest by 10%. Consequently, our total interest "owed" changed right there. And why interest should not be included in overall debt.
Both Mr. Hill and Mr. Gorena need to listen to a much respected conservative journalist, George Will. Mr. Will stated, "We are all entitled to our opinions, but we cannot pick our own facts." Their refusal to acknowledge facts is due to the wrong headed ideology they endlessly profess, ad nauseum.