Why I Have not Approved the Issuance of Bonds for Scottrade Renovations
S&P cautioned we not issue more nonessential debt without increasing revenues; financing Scottrade renovations would increase our high debt burden.
This article is 6 years old. It was published on October 16, 2017.
Note: The following article authored by Comptroller Darlene Green appeared in the St. Louis American on October 10, 2017.
As comptroller of the City of St. Louis, my office does four main things for you: pays the city’s bills, conducts the city’s accounting and auditing, issues bonds, and protects the city’s credit.
I began serving as your comptroller in 1995 and have had the privilege of serving as watchdog for taxpayer dollars for more than 20 years and through four mayoral administrations. St. Louis has seen many ups and downs over this time; in good times and bad, I have taken safeguarding the responsible use of your tax dollars and protecting the city’s credit as my most solemn responsibilities.
In January of this year, I wrote to the finance team of Scottrade Center in response to an all-too familiar question about balancing the budget. At the time, the process was underway to develop the city’s fiscal year 2018 budget, and the Board of Aldermen was considering several requests for development incentives and subsidies. In the normal course of our work, my management team diligently reviewed each request.
This request came on the heels of a tough credit surveillance cycle. In 2015, Moody’s and Fitch downgraded the city’s credit, and in 2016 and March 2017 Moody's did so again. Looking at the downgrades shows a common theme: the city's high debt level, inflexible revenues and inadequate reserves.
A city’s credit rating is one of its most valuable tools. A good credit rating tells investors that investing in a city’s bonds is safe, and it saves taxpayers millions of dollars when the city borrows money.
During my tenure in office, I have led the city to several year-end surpluses and multiple credit rating upgrades. And in 2008 during the country's economic downturn the City of St. Louis received an A+ credit rating from S&P – something the city had not received in 35 years. Through my leadership, the city of St. Louis has not issued any derivative or variable rate debt like many other cities and corporate entities, and these strong fiscal policies saved taxpayers millions of dollars as we avoided the derivative debt crisis that plagued cities and corporations alike.
But fiscal management can only be sound when leaders make decisions that support financial responsibility. This brings us back to 2017 and the request to fund Scottrade Center renovations.
Our financial advisor weighed in with a cautionary warning about possible further negative impacts to the city’s credit rating should the city finance the renovations. Believing that we needed to be proactive, I wrote to the Scottrade Center finance team to get the urgent message across concerning the credit of the city. I believed that understanding the city’s financial limitations, they would seek a financing structure that would not draw upon the city’s already vulnerable credit and financial condition.
The Scottrade team decided not to ease the burden on the taxpayers. Their bill passed the Board of Alderman and was approved at the Board of Estimate and Apportionment, over my objection – all while our 2018 city budget had to be reduced by $17 million for essential services.
Today, we are struggling to protect the city's credit. We still maintain an A+ credit rating with S&P, but we have been cautioned by the rating agency to not issue more debt for nonessential services without increasing revenues. In its August 2017 review, S&P warned it may lower our credit rating should budgetary performance and flexibility worsen, and it mentioned the financing of Scottrade Center renovations would increase our already high debt burden. This is why I have not approved the issuance of bonds for the renovations.
Yet considering all of this, I am hopeful we can reach an equitable solution. An alternative financing structure has been proposed, which would add a small attendance fee, and other possibilities exist, including increasing parking rates at events. A fair and equitable solution that does not bargain on the city’s credit or take money away from essential city services is possible. I am here to do my part, and I ask that other city leaders come together and work as a team for the common good.