Saturday, November 5, 2016

A Personal Financial Case for the New Library in Brookfield, Illinois

Hi. My name’s Edgar Mihelic. I live and work in Brookfield. I support the library.

I am also a member of “Residents Championing a New Library” the PAC advocating for a yes vote in the referendum.

What I want to talk about today is independent of the PAC and my employer and is in my role as a private citizen. I want to hit two points that important to me because of my educational and professional background. I have an MBA and am the Director of Finance at my organization. This not part of the PAC communication in part because it is a bit wonkish, and not necessarily universally applicable.

This first bit is about your personal cost. People don’t like the idea that the library will cost them X amount of dollars. What is easy to forget about an increase in local taxes is that anyone who pays more in taxes and mortgage interest than the standard deduction will be able to deduct the increase from their federal taxes. This means that any extra local tax lowers your federal taxable income. So if you’re in the 35% bracket, any extra local taxes is not a dollar for dollar increase, but will be decreased by that amount. My taxes will go up, and I’m ok with that from an investing in the community standpoint, but it won’t be one for one. It will be less than X.

The second bit is about the cost of money. I don’t have the exact bond details in front of me, but what is important here is the timing. The interest rate has never been lower. If you are looking at the idea that eventually the building will have to be replaced, and you need to borrow for that (and borrowing makes total sense because you won’t draw from current funds because a new building is a large capital expense), then there literally has been no time like the present to invest in any infrastructure projects - Ever. At issue is that the Federal Reserve wants to increase rates. And they want to keep doing it. We’re at the bottom, and borrowing will never be cheaper.

I understand that this is a contentious issue in the community, and there are many angles to look at it from. I just haven’t seen either of these points fleshed out in conversation here and I think they’re important to raise. I hope everyone enjoys the debate where your preferred candidate will do well.