Wednesday, September 2, 2009

Menasha Default: What Does It Mean for City Services?

Link to September 2 Appleton Post-Crescent article, "Menasha defaults on $24 million steam bond payment".

Excerpt: The default means the city's credit rating will certainly drop further from its current B1 negative outlook rating, eliminating it from traditional borrowing in financial markets for several years.

Without the ability to do traditional borrowing, tight budgets might require the city to reduce services, which may lead to lower property values in the community.

The last two paragraphs of the article summarize a municipal case study in how not to do business.

The steam plant cost $41 million to build — more than three times the original $12.8 million estimate — due to questionable engineering, faulty projections and hasty decisions to proceed on a design-build basis without a spending cap or securing an important fourth steam customer.

Net plant revenues are unable to cover the massive debt despite significant taxpayer subsidies.

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