If 2009’s Greensboro's City Council borrowed more than the city could afford knowing water rates would have to go up, did they violate the Prudent Man Rule?

Prudent Man Rule

 

An investment standard…to govern the action of those responsible

 for investing money for other people

 

The fiduciary is required to act as a prudent man or woman would

in regards to investing monies of others

 

Bloomberg Financial Definition

 

The WR [Water Resources] Department has a capital plan that includes pay as you go capital, bond capital, and operating expense.  We also have a rate plan to pay for it all, which included a ~6% increase January 1, 2010.

 

Being told that this was unacceptable by some members of Council, we submitted two alternates,

reduce rehab work or take the cash from retained earnings.

 

The latter was selected.

 

…Council will have to make a decision soon, to award a contract and funding, of replacement of the ~$23 million Fluid Bed Incinerator [FBI] at TZ Osborne Water Reclamation Facility.

 

The bond funding of it is in the plan, and if it is awarded, it is likely that Council will need to commit to a rate increase in early FY 10-11, of about 10%.

 

While the specific project (FBI) was not discussed in detail at the meetings, the requirement to have a larger increase later, if the 6% was not accepted now, was communicated in both briefings.

 

Allan Williams

Director of Water Resources

City of Greensboro, during 2009’s City Council Election Cycle