Mayor wrong on turf fields
To the Editor:
New Milford Mayor David Gronbach's recent letter in The News-Times was titled, "Much more to turf fields.”
Including the mayor's continued personal attacks on certain individuals, this letter tells us much more about the mayor than about the turf fields.
The Turf Field Committee welcomed the mayor's agreement to use the encapsulated rubber product they preferred all along. The committee had only suggested the crumb rubber due to budget constraints: trying to keep under the $3.5 million that was bonded.
The mayor conveniently leaves out the exponentially higher maintenance cost of the organic product he wanted
No money in that fund at the time the project was bonded was to be used to pay for the bonds. There was only conjecture that funds to be collected in the future may be available to pay off the short-term borrowing in full.
One need not be an expert on the matter to read the IRS municipal bond publications which are very clear about what constitutes "replacement proceeds" and what constitutes "arbitrage" that may be subject to rebate.
A cursory reading of IRS Publication 5271 (Complying with Arbitrage Requirements: A Guide for Issuers of Tax-Exempt Bonds) definition of "replacement proceeds" as “Replacement proceeds are monies that would have been used to finance the project if the bonds had not been issued” might lead one to believe that any project that costs less than the amount of funds we have available may not be bonded.
We know that not to be the case, as the controlling regulation 29 CFR 1.148-1(c) states: "The mere availability or preliminary earmarking of amounts for a governmental purpose, however, does not in itself establish a sufficient nexus to cause those amounts to be replacement proceeds," indicating other conditions must be present.
According to Internal Revenue Bulletin 2016-36 (Arbitrage Guidance for Tax-Exempt Bonds), in order for the IRS to find funds as "replacement proceeds," it has to meet two requirements: "Under the Existing Regulations, replacement proceeds arise if an issuer reasonably expects as of the issue date that: (1) The term of an issue will be longer than reasonably necessary for the governmental purposes of the issue; and (2) there will be available amounts (as defined in the Existing Regulations) for expenditures of the type being financed during the period the issue remains outstanding longer than necessary."
First, the term of the subject bond is only one year, so it does not meet requirement (1). Second, there are no “expenditures of the type being financed” outstanding as the project is finished, so requirement (2) doesn't apply. How, therefore, does the Mayor classify these as "replacement proceeds" subject to arbitrage?
Since this capital project was completed under three years, there is no "arbitrage" as IRS Publication 4079 (Tax-Exempt Governmental Bonds) clearly states: "The investment of proceeds in materially higher yielding investments does not cause the bonds of an issue to be arbitrage bonds in the following three instances: (1) during a temporary period (e.g., three-year temporary period for capital projects ..."
Since there are no pledged funds as evidenced by the mayor's choice not to pay down the bond and, instead, to take monies from the LSF to apply against his budget, any monies available for that purpose can be used to pay down debt. That is up to the mayor, the Town Council and the Board of Finance.
I'm not sure why the mayor reached his decision not to use the LSF monies. Perhaps the mayor is trying to draw attention away from his bonding the additional monies needed to finish the Lynn Deming Park project instead of using LSF monies as was done for the rest of the project.
Why? Because that is exactly the same thing he is charging the previous administration of doing with the turf field bonding. It may be because the mayor himself is the one who prevented paying off those bonds with the LSF.
How? The money isn't available, since he maxed out LSF tax relief to hide his spending increases.
All this comes as no surprise to residents of New Milford, who have had to suffer through two successive years of $1.6 million revenue mistakes in the mayor's budgets.
The mayor should pay attention to his own financial problems instead of casting aspersions on others for his own failures.
Editor’s note: The mayor’s letter also appeared in the June 23 issue of the Spectrum.