Thursday, April 14, 2016
Mi-Connection looms over Davidson capital spending discussion
Actually, no that’s not correct. The more appropriate metaphor is the 800lb gorilla.
An elephant in the room is something people avoid discussing even when it’s obvious. The 800lb gorilla is something that can’t be ignored. Mi-Connection and the 2007 decision to enter the cable business is definitely an 800lb gorilla when discussing major financial decisions in Davidson.
Early in the March 22nd discussion on the town possibly seeking voter approval to float general obligation bonds for several million dollars, it became clear that any proposal would likely require some future tax increase.
From the point Commissioner Jim Fuller asked how Davidson’s tax rate compared to its neighbors, one could sense a bit of Mi-Connection related tension in the air. Mayor John Woods attempted to blow off tax rate comparisons calling them “apples and oranges”. Fuller responded saying “if you are a citizen paying taxes it seems like a pretty fair question”. Woods, incidentally voted for the Mi-Connection deal when he was a commissioner back in 2007.
Mi-Connection came up several other times throughout the discussion.
It came up in questions about the financial model used to determine the town’s potential credit rating. Yes, the model included factoring in Mi-Connection, and Davidson still might receive the highest rating of Aaa from the ratings agencies. It came up when Commissioner Anderson through out the possibility of lower Mi-Connection subsidies in the future helping the town avoid tax increases to support bond payments. Yes, that could be possible, but the model assumed the current one million dollar annual subsidies would continue for another ten years.
This focus on Mi-Connection might seem overblown to some, but its impact is very real. Here are a few numbers to put things in perspective.
• Since 2010, Davidson has allocated $9 million in direct subsidies or in money set aside to pay Mooresville deferred obligations related to Mi-Connection. That’s spending capacity that could have gone to building things like a new fire station, new sidewalks, or new greenways.
• 6.1 cents of Davidson’s 35 cent tax rate in the current fiscal year is going to Mi-Connection. Everything else being equal, Davidson’s tax rate could be lower than Huntersville’s (30.5 cents) and much closer to Cornelius’s (24 cents) if it wasn’t for this added Mi-Connection “tax”.
• The current subsidy equals about 11% of the town’s general fund spending. While that sounds like a lot, its down from a crippling 23% back in 2011.
• Finally, there is a second hidden tax related to Mi-Connection subsidies - Davidson’s solid waste fee. Many towns include trash pickup as part of your property taxes, or they have modest additional fees. Davidson’s fee is a whopping $201 for a single family home. This high fee was implemented in Davidson at the peak of the subsidies freeing up cash to support the cable company.
If you put yourself in the shoes of a Davidson citizen who lived through those bullet points, it’s easy to see why people might be a little gun shy at proposals that talk about raising taxes. While wearing those shoes it’s also easy to overlook potentially good news like Davidson still possibly receiving high marks from credit ratings agencies. That’s a testament to the good work elected officials and staff have done managing this bad situation. At the same time, people also know in the back of their minds that much of the current talk about things like bonds and debt and even something like the controversial Catalyst Project which stands to bring in a good bit of money to the town, might not even be on the radar if it wasn’t for Mi-Connection and its wasted millions.
To resolve those types of trust issues, Davidson Town Hall may have to directly and fully deal with that 800lb gorilla before it finds town residents willing to extend their trust again.
This post originally appeared in the opinion section of this week's Herald Weekly at HuntersvilleHerald.com.