Posts Tagged ‘frisco Texas’

On the Poor Timing of the ACC.

5. January 2011

It’s really a sad thing that we still have to be talking about this, but there are still people in Frisco and the surrounding communities that believe that the ACC is a valid use of increasingly scarce municipal funds. In addition to the multitudes of other reasons why it’s a bad idea, I’ve found a new one.

Municipal bonds (muni bonds or munis hereafter) used to be a rather predictable market. They were always considered a safe bet, almost as safe as treasuries, because the municipalities had the power to raise taxes to get money to pay for the bonds of necessary. The bonds would pay a slightly lower yield than Treasurys, but it was okay, because the income was tax exempt.

Recently, however, a flood of munis has hit the market. Perceived risk has increased, driving muni yields up. For instance, today, the 30-year muni rate is 4.9%. The 30-year Treasury rate is 4.25%. This goes against everything that is ever taught in a class about bonds. The perceived risk of the two securities are almost exactly the same, but their tax-exempt status makes munis more attractive, drives up demand and drives down yields.

However, there has been a series of uncertainties in the continuation of the tax-exempt status of the muni bond and the municipalities’ ability to pay, driving yields up. Which is great if you’re an investor. Not so great if you’re the borrower. The President’s deficit reduction panel came out with a plan that called for the removal of the tax-exemption of the muni bond, throwing expectations off and ridding the market of stability.

Because of the increase in interest rates, it is a bad time to sell the bonds for the ACC. It’s simply more expensive to finance any project, but it is especially outrageous to attempt to justify selling these bonds at these rates for an unnecessary project like the ACC.

Obviously, it is just as expensive to finance the ACC as it is to finance a project like Fire Station 7. However, as most members of the Frisco City Council and the fire chief expressed last night, that is a necessary project. It is crucial for keeping the city’s ISO rating at a 1, which affects the homeowner’s insurance rates for everyone in the city, aside from the obvious benefits of faster emergency response times. Additionally, that project may not require the sale of bonds, making it all the better a choice for the City of Frisco’s funds.

The ACC is becoming more and more expensive to build, a trend which shows no signs of stopping. It’s time for even the staunchest of AC supporters to rethink their position.

Arts of Collin County.

1. June 2010

Today, after weeks of debate about the Arts of Collin County project, the City Attorney announced that the petition filed by the Frisco Tea Party to introduce a referendum to allow voters to decide whether or not to release the rest of the bonds was invalid. Apparently, the Frisco Tea Party didn’t file the petition correctly.

It seems that the only way for the bonds to be stopped is for the council introduce the measure themselves. As it stands, there are three members who would support the measure and three who wouldn’t. However, place four is up for grabs and if John Keating wins that seat, the measure stands a good chance of being introduced.

It’s not that I have anything against the arts and such. I played the trumpet for five years and enjoy creating the occasional piece of art. But at this time, it is not a good idea to spend additional funds that the city already doesn’t have to build a nonessential building which is predicted to run deficits forever. If the project can be redesigned so that it’s shown to be solvent, I’m all for it.

The economic climate is such that no one needs to be spending more than is absolutely necessary. The Arts of Collin County project, while surely culturally enriching is not necessary. The argument has recently even made in favor the the ACC that construction costs are much lower because the economy has tanked. However, it is not enough to make up for the fact that McKinney has dropped out of the project, costing the other three parties approximately nineteen million dollars.

If this project was really as popular as its proponents make it out to be, allowing the public to re-vote on releasing the bonds would only serve to show how important it is to the people of this city. If, on the other hand, the people really want to postpone the project until the economy recovers, allowing them to vote on the measure is the right thing to do.

If you are for a fiscally responsible municipal government and lower taxes, you simply cannot support the progression of the Arts of Collin County project at this time. Allowing the people of the city to vote on releasing the rest of the bonds is the right thing to do.