The hedge-fund enclave of Greenwich, Connecticut, is embroiled in a debate about whether to overturn a policy of avoiding long-term borrowing that has roots in the Civil War.
Home to billionaires such as Ray Dalio and Thomas Peterffy, the top-rated town returned to credit markets in 2007 to sell bonds after a 74-year, self-imposed hiatus. It operates under a policy of limiting debt backed by its general fund to maturities of five years or less. The approach reduces interest payments while constraining the scope of projects that can be done at once.
“There’s no doubt that they’re pretty unique,” said William N. Lindsay, a director at Independent Bond and Investment Consultants LLC, a Madison, Connecticut-based group that advises Greenwich and other towns in the state. “With the wealth they have, they can afford to do things a little differently.”
Greenwich, a community of 61,000 about 35 miles (56 kilometers) northeast of New York, last week sold the most debt in its 358-year history. The offer of $85 million of one-year notes to pay for a high-school auditorium and work on a fire station came the day after residents gathered at Town Hall to discuss the borrowing policy. The Greenwich League of Women Voters sponsored the meeting.
Financing Pressure
As infrastructure ages and municipal interest rates remain below a four-decade average, the bond limits have prompted Democratic leaders to press for longer-term credit. They want to tackle more projects at once, including fixing a leaking municipal pool and overhauling a civic center with cracks on exterior walls.
Officials nationwide face a dimmed appetite for debt after the 18-month recession that ended in 2009. The $3.7 trillion municipal-bond market is poised to shrink for the fourth straight year as localities borrow less.
Greenwich also sold $45 million in longer-term bonds on Jan. 16, including five-year general obligations to yield 1.12 percent. That’s about 0.17 percentage point less than benchmark munis, data compiled by Bloomberg show.
The bulk of the issuance, $28 million, comes due by 2019. The balance is spread from 2020 to 2034 and is earmarked for projects that aren’t repaid with general-fund revenue, including a nursing home that receives federal money.
Ceiling Bump