To the editor:
Dear City Councilwoman Clair Muller: There are two huge holes in your commentary to the editor (“City isn’t misusing short-term loans,” Aug. 8-21). One, you do not state what the interest rate cost is on the short-term funds; no one can make a considered judgment of your defense without knowing that. Two, you make the speculative decision that when the money is needed to fund long-term commitments in four years, the rate will be less expensive than the short-term rate currently being paid. There is no way anyone can see into the future.
It is clear, however, that we are in a time of rising inflation, as food and transportation costs are moving up. Even with a barrel of oil coming down to $115 from $147, you might want to look four years ago when it was $45 per barrel. In Jimmy Carter’s presidency, a 30-year, noncallable, federally guaranteed bond (a much higher rating than Atlanta’s) was trading at 12 percent and did so for more than a year. Grady Lynch, the director of the Georgia Teachers and Employees, poured money into those bonds for more than a year and a half. As one of the equity salesmen for a brokerage firm covering the account, I can attest to that being a painful period.
The truth is it is never wise to borrow short term to finance long term in either your personal financial situation or the city’s.