Bonding seems to come up frequently here in Waterbury, as if it were the magic solution to many problems. I wonder how many city residents understand what bonding is. For example, the Mayor has proposed purchasing the Wachovia building for $5 million through bonding. What the newspaper left out is the explanation of how much debt the city would accrue in doing this. How many years will it take to pay off the five million and how many millions more will we have to pay in interest?
When a city makes major purchases through bonding, it's not much different than an individual person making major purchases on a credit card. Given what's been going on with the economy recently, it seems like now is a good time to be much more cautious and frugal.
There have been times when I have had to rely on credit cards to cover my necessary expenses. I learned early on that you have to be careful about how much debt you accumulate--if you have too much debt, you won't have enough money to cover your monthly payments. This could happen to Waterbury with bonding. Too much bonding, and we won't have enough money to make our payments and keep up with other expenses. As I understand it, the interest rate paid by the city is variable. Which means monthly payments could get larger. Can a city declare bankruptcy?
The way I see it, there has to be a limit to how much debt Waterbury can afford, while it seems there is no limit to the number of things the city could spend money on. If the Wachovia building can be acquired without increasing the city's expenses (compare the bonding costs to the rent money saved, then factor in the lost taxes and any ongoing maintenance costs), then it's probably a good plan.