What Are Bonds?
In a previous article, I mentioned my intention to delve into why the City of Quincy is struggling with its budget. First on the agenda, is an examination of bonds. Bonds provide cities with a means to raise funds for capital improvement projects that wouldn’t otherwise be covered by annual city revenue. Consequently, bonds are typically utilized for projects aimed at benefiting the community. To secure these bonds, cities commit future revenues for repayment, effectively turning a bond into a mortgage on the city’s assets.
Within the City of Quincy’s annual budget, there are line items allocated for bond payments, covering both principal and interest on two utility bonds and one non-governmental bond. Collectively, these payments amount to well over a million dollars annually. While these bonds have been refinanced and consolidated with other loans over the years, the bulk of these expenses are directed towards repaying bonds for Net Quincy and the Smart Grid, neither of which are currently operational.
Net Quincy was conceived in the early 2000’s as a municipal internet service provider, offering internet access and computers to citizens. However, following a change in management in 2014, it was determined that Net Quincy was financially unsustainable, leading to its closure. Today, the remnants of Net Quincy persist only in the form of a former bank building near City Hall and ongoing bond payments.
The Smart Grid project, initiated in 2012, aimed to enable remote meter reading and enhance the city’s electric grid management. Initially budgeted at $4.8 million, the project received a $2.4 million grant from the U.S. Department of Energy. However, after receiving just under one million dollars in grant funding, the DOE withdrew its support, prompting the city to secure a $6 million bond to cover remaining expenses. By 2014, with over $5.5 million spent, the Commission halted the project due to cost overruns, unaccounted expenditures, and the unauthorized addition of fiber-optic cable from Hosford to Quincy. The city retained $1.5 million from the bond proceeds, and in 2019, the Commission opted to resume the project using the remaining bond funds, alongside FEMA monies earmarked for Hurricane Michael damage repairs to the fiber optic lines.
In 2020, problems arose with expenditures, contracts, and the lack of controls on the Smart Grid project, leading to further delays and another change in management. Currently, Manager Nixon and the IT department are working diligently to finish the project. However, this does not negate the fact that the network equipment is over a decade old, the smart meters have almost reached their life expectancy, and the citizens have been paying on a bond for 12 years for something that doesn’t exist.
The result of poor planning, poor decision making, and bad management has resulted into a yearly drain on the city budget for projects that Quincy never received.
It is evident that for decades these bond payments have been a constant drain on city revenues and will continue for years to come.
0 Comments