Tuesday, October 14, 2014

Reasonable and Defensible?

Sometimes the “why?” is more important than the “what?”  Such is the case in assessing the Augusta Commission’s plan, as reported by Friday’s Augusta Chronicle, to increase the “franchise fee” charged to the local water, sewage, and garbage operations to fill a $1.6 million hole elsewhere in the general budget.  Evidently such a practice has been frowned on and resisted because of the lessons learned after the old city government’s experience with robbing Peter to pay Paul.  Diverting city services revenue away from equipment upgrades and debt repayment to bondholders is bad practice, and it breaks the covenant with the bondholders.

But never fear.  City officials assure us that as long as they can make it appear that the increased franchise fee is “reasonable” and “defensible,” the lawyers can get it past the bondholders.  So investors have an agreement that is supposed to protect them against city officials deciding to take the water/sewage/garbage companies’ cash and paying the sheriff department’s costs.  

The “what” the city officials are going to do is operate within the agreement by satisfying the “reasonable” and “defensible” thresholds.  And by doing so they are going to get an extra $1.6 million (in the form of eventual price increases to city residents).  Why are they they doing this?:  to pay for holes elsewhere in the budget, of course.  And breaking this “spirit of the deal” covenant with the bondholders is evidently such a non issue that the “reasonable” and “defensible” tactic for doing so is literally on the front page of the paper.

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