Debt: Harrison’s History of Borrowing
For more than a decade, Harrison has faced a growing crisis—a debt crisis.
By the end of 2012, the town owed nearly $80 million. For a community of roughly 25,000, the Town/Village of Harrison’s debt level, which rivals some cities, has become a polarizing issue.
Whether you find yourself exploring the hillside streets of West Harrison, or shopping in the central business district downtown, you’re sure to spot something, somewhere that was a contributing factor to the town’s financial plight.
First seen in the July 19, 2013 edition of the Harrison Report
Take, for instance, the pool at Passidomo Park that bears current Mayor Ron Belmont’s name. Just two years ago, the town borrowed nearly $6 million to pay for the construction of it.
But, the problem is not necessarily a new one.
From the 1970s—when Town Hall at Heineman Place was built—through the turn of the century, Harrison saw to the completion of very few capital projects. And with years worth of upgrades to catch up on, the town turned to outside money.
The issue has often turned political as debt levels doubled in the decade since the year 2000. Without accounting for interest, the town’s principal debt soared from $33 million in 2000 to $66 million by the end of 2010.
“The people have questions about where the money is going, how it’s being spent, and how the town is going to generate money to pay back those bonds,” said Harrison resident Sam Navarra, 51.
Although the average town resident does not have a say in the debt saga, he or she is responsible for helping to pay it off in the form of taxes.
Taking on municipal credit helps provide local communities with borrowed money to upgrade infrastructure and purchase capital items. However, the money must be paid back in full with interest.
The allure of bonding became even more enticing during the recent recession as interest rates on borrowing hit record lows. And, at a time when most communities didn’t have the cash on hand to pay for projects, this proved the most attractive alternative.
Spanning the course of three successive administrations—two Republican and one Democratic—the town has taken on significant amounts of long-term debt, primarily due to large-scale projects, like park renovations and streetscapes.
Over the years, Harrison has also bonded for the likes of new police vehicles, highway resurfacing, the MTA courthouse project, construction of a fire training center at the Nike Base, Christmas decorations, sidewalk replacements, drainage improvement projects, construction of a pesticide storage shed, construction of a salt/sand dome on Park Lane, the Rye Lake treatment plant project and replacement generators.
Across Harrison’s borders, the City of White Plains projects its debt to increase to $147 million this year. The City of New Rochelle owes approximately $81 million.
However, more comparable communities to Harrison show substantially less municipal debt.
In neighboring Rye City, there is roughly $19 million in debt on the books. The Town of Mamaroneck has accrued $13.4 million in long-term debt—not including $4.5 million in short-term bonds.
A polarizing issue within town government, the growing amount of debt has become a political football for elected officials and candidates, who have looked to point fingers at one another during past election cycles.
Any discussion in Harrison centering on debt often begins with former Republican Mayor Steve Malfitano‑whose administration saw the town’s debt swell by more than $20 million during his six years in office‑shouldering the blame. Malfitano, who was reinstalled to elected office in 2011 as a councilman, has beared the brunt of criticism.
For West Harrison resident Laura Russo, the issue of the debt and spending leads back to the Malfitano administration.
“He did a lot of stuff in Harrison with the parks,” said Russo, 48. “I’m concerned about the debt. It’s getting scary because there are no jobs.”
During the Malfitano administration, the town initiated the Lake Street project—an aesthetic streetscape redesign of the West Harrison Business District. The 2006 project resulted in over $5.5 million in new debt.
“I think it’s ridiculous. [The town] did it…when the economy went down and they followed through anyways,” said West Harrison business owner Monica Chimes about the expansive renovations. “Too many chiefs and not enough Indians…the goal was to bring in more business, but it didn’t do anything.”
Although the project was conceived under Malfitano, after he lost the 2007 mayoral election to Democrat Joan Walsh, bonding for the work continued.
According to Walsh, the various expenses associated with the project were an attempt to move utility wires on Lake Street. After several failures, Harrison ultimately decided to pay the high cost of moving the wires underground. Thus, $550,000 of the town’s total bonding issued in 2008 was expended for wire and cable relocation on the street.
But some questioned Walsh’s decision.
“I think Joan Walsh [is to blame]…I don’t think she knew what she was doing,” said one West Harrison resident regarding the debt built up from the streetscape renovation project.
In Walsh’s first year in office, back in 2008, the amount of capital spending reached its peak, hitting $16.5 million before it was pared down in future budget cycles. In 2009, the total debt—without interest—climbed to approximately $71 million.
Since taking office in 2011, Mayor Belmont, a Republican, has taken a stance to limit borrowing to the equivalent of what the town expects to pay off by the end of the year, calling it “smart spending.”
“We’re not spending money…we’re investing it in the town,” Belmont said.
This year, the town approved bonding $4.5 million for the police and Department of Public Works, and for a $600,000 refund to Westchester County Club over a tax settlement.
Conversely, approximately $4.6 million in debt is scheduled to come off the books, according to town officials.
Councilman Joe Cannella, a Republican, said, “I’m committed…and certainly the town is committed, to not building more debt.”
However, Cannella has been in office since 2002 and was there during the height of the town’s borrowing habit.
Over that time, Harrison went through a period of eight consecutive operating budget deficits, between 2002 and 2009, which drove the General Fund reserves into the red, to a negative $3.8 million in 2009.
But, Malfitano said that, some of the debt, stems from liabilities he inherited when taking over the mayor’s seat from Ron Bianchi, a Democrat, in 2002.
“If we don’t spend on repairs, then we’ll have to make cuts,” Malfitano said. “These are capital investments that must be made on an annual basis…and cannot be expended as part of the operating budget.”
Under the Malfitano administration, capital spending began to grow, stretching from $7.9 million in 2004 to $12.8 million in 2005. While Malfitano was in office, the debt increased from $33.3 million in 2002 to $54.2 million when he left office at the end of 2007. Those figures do not include compounded interest.
For Walsh, compounding interest has had a vital role in the state of the town’s finances.
“When you borrow something, you still have to pay interest,” Walsh said. “It’s not a matter of A=B…it’s A=B+C.”
According to Moody’s Investors Service, a global firm providing municipal credit ratings, research, and risk analysis, Harrison has an Aa3 bond rating, which is one of the highest ratings possible. But in recent years, the town’s ratings were downgraded from Aa1 rating to the current rating of Aa3.
Despite the Town Council’s current strategy of “smart spending,” bonding only for what they plan to pay off, it is the added interest that catapults the total bill to just under $80 million.
The strategy is sure to be questioned and it’s likely that the issue of the town’s finances will again be a major focus as campaign season kicks into high gear.
Mayor Belmont will try to defeat Joan Walsh for a second time and hang on to his seat for another two years.
What the town’s debt will be in 2015 remains to be seen.
-With reporting by COREY BAUMER