Published: October 11, 2008 12:15 pm      

Local government is pinched by economy

Three weeks ago, when the first hints of a frightening financial storm were on the horizon, many in rural American went, seemingly, untouched. But at the crisis deepens and after the decision of the government to provide a $700 billion bailout plan for the beleaguered stock markets, the impact is trickling down and being felt in small cities and towns here.

According to Woodward City Manager, Alan Riffle, projects such as the Crystal Beach Park project and the StreetScape project have funds that are accounted for and on deposit and will not be impacted by the languishing economy.

Wall Street capped one of its worst weeks ever with a wild session Friday that saw the Dow Jones industrials gyrate within a 1,000 point range before closing with a relatively mild loss and the Nasdaq composite index actually ending with a modest advance. Investors were still agonizing over frozen credit markets, but seven days of massive losses and the possibility of further government support for the markets tempted some investors late in the session.

The Dow lost 128 points, giving the blue chips an eight-day loss of just under 2,400, or 22.1 percent. The average had its worst week on record in both point and percentage terms. The Standard & Poor’s 500 index, the indicator most watched by market professionals, posted its worst weekly run since 1933.

Woodward officials will meet Monday to discuss plans to secure another installment of the $25 million that was slated for the Crystal Beach Project. Since construction on the Crystal Beach Project began, Woodward has taken tax exempt draws on the money , $10 million at a time, Riffle said. The money is through a capital improvement loan the city secured with Bank of America against voter approved tax revenue, Riffle said.

While Riffle said While Crystal Beach Project monies are secure and the project will go forward as planned, the negative trends in the market have increased the interest rate the city will pay for the loan. “That is the only way we will be impacted on that project,” Riffle said.

But more protracted and undeveloped plans such as the construction of a new fire station could be delayed, Riffle said Friday afternoon.

“The initial source that we go to as communities for low interest loans for infrastructure can’t access any money-they are unable to provide any types of loans grants for funds to any community till a time unknown at this point,” Riffle said “So yes, we are being impacted in a lot of ways.”

While typically, local governments are able to borrow money more cheaply than private citizens, Riffle said this tight credit market has leveled the playing field and now cities must meet the same stringent standards.

He used the most recent loan for the Crystal Beach Project as an example.

“We are only getting this loan finalized on what they call reputation risk factor,” Riffel said. “It is a credit thing with them now and lots of local governments are wanting money from Bank of America and not getting it.”

Add to that, Riffel said, the drastic cutting of low interest loan and grant programs that normally allow for the growth and improvement of local cities and towns and “It can help but impact future projects.”

All of it is impacted by the bailout dollars and other economic stimulus dollars that will come from programs that used to support local government, Riffel said.

“Obviously now, we have adjusted our thoughts on how we move forward with any capital project not currently underway,” Riffel said. “That means that we will have to have the assurance there will be some funding mechanism for that (any projects) before we can move forward.”