Capital Idea

Typically capital projects involve investment in infrastructure or purchases of major equipment. Regardless  capital projects  typically have a time span of 10 years, maybe 5 years. It’s a bit curious to see demolition fall under the “Capital Project and Equipment Five Year Plan” cited here.
In my view, demolition should not be bonded nor should it be considered a capital project. Demolition should be an operating expense incurred the year of demolition and budgeted as such. Here’s why it matters.
First, demolition imposes hard costs on tax payers regardless of how much shared services rhetoric you wrap around the topic. If the story above makes one thing perfectly clear, it  is that demolition requires hard dollars; it’s not a free ride. Or put another way: each and every property demolished raises taxes. Or yet another way: if you champion demolition, you are championing higher taxes.
Second, by bonding the demolition expense, the cost gets sprinkled over many years and hence the true cost appears much smaller as a result. This creates incentives to increase demolition as the bonding of the cost makes the impact more palatable on a year-by-year basis. As a rough cut, spending $100K in demolition per year over 5 years is much more palatable than $500K in one year. Hence the incentive to understate the true cost and as a result, pursue more demolition — a disastrous incentive.
Third, the time line of demolition is way out of sync with the bond issue which is not desirable. I may bond the demolition of the house over 10 years even if I demolish the house today but I still end up paying for that over the next 10 years.
Fourth, we should learn our lesson on demolition from past experience when demolition was ‘free’ via urban renewal grants and monies. I think demolition is anything but free and keeping it as an expense would harshly remind us of that fact each and every time. In turn, this would enable alternate ideas and approaches to demolition with financial incentives that would yield better returns to tax payers if we could minimize or eliminate demolition.
Now that would be a capital idea.

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3 Responses

  1. bethanyschumann says:

    Flippin',
    **It is my understanding that:
    Bonding doesn't count against the self-imposed tax cap that the common council has to live with.
    Remember, we have a self-imposed cap on taxes–no more than 1% of assessed value, here in the city. But, that doesn't include (a) fees for water, sewer, garbage, or (b) monies paid on bonds (I clearly don't have a copy of the charter or profess to be an expert, but it is my understanding that if the council bonds out something, that bond payments aren't included in the tax cap so it's another way to make the peeps pay while technically staying under the tax cap.)
    The common council bonds for everything they can't afford to pay for….even little stuff like police cars….

    • flippin says:

      I understand the same– bond funding not subject to tax cap. Naturally this allows bonds then to fund things that should not be bonded such as demolition. What intrigues me is why we bond for demolition yet bond no projects with any construction or growth. What is the last initiative funded by the council that involves any type of growth scenario? I can't think of one. Meanwhile Schenectady is funding a major renovation to their library while here, at the first mention of the budget figures, our local library funding immediately finds itself on the chopping block. Shouldn't we bonding with some strategy to drive growth versus using it as a way to offset expenses resulting from non-growth and intentional anti-growth policies?

  2. wildthane says:

    Unlike the previous administration, we have budgeted every year for the purchase of police cars.

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