|Lightning striking twice in the same place|
The captive population of Sierra Madre woke up this morning to find a much larger hand in its pocket. I guess everyone should count themselves lucky that they got to keep the rest of their pants. Of course, you should never completely assume this will always be the case. Someday it could come to that as well. That giant ripping sound just might be your wallet being separated from the rest your Wranglers.
There are two reason why City Hall needs to constantly find new revenue sources. The first are the growing pension, benefits and salary costs of maintaining Sierra Madre's helping hands. Apparently it has been deemed wise by those who lead us that we need to establish a kind of mini Los Angeles at 232 W. Sierra Madre Boulevard. This being essential to maintaining the quality of government here in our little town. Or so the story goes. All done so that the important work of collecting fees in order to cover the labor costs of collecting fees can take place at the highest possible level. Think of this as a form of double happiness.
The other reason is approximately $19 million dollars in 1998 and 2003 water bond debt. Done at a time when government here had apparently lost most of its mental footing. This has today become the black hole of Sierra Madre finance, consuming about a million dollars in Water Company revenue every year. If you have ever wondered how it can be that our old leaking pipes don't get replaced, new wells don't get drilled and the quality of our water infrastructure never seems to improve, this is it. The money that would have normally been used to take care of such things now gets sent to the Bank of New York, and from there into the hands of some very well cared for bond holders. And will for at least another two decades.
Sierra Madre's fully owned water enterprise will remain crippled and financially endangered if it cannot somehow get out from under this mountain of debt. This is no temporary situation. And you will be required to pay more and more for water because of it.
Despite all the diversionary talk you may have heard about repairing water infrastructure here, this bond debt is the actual reason why water rates are about to go up for the second time in the last three years. The bond covenants wrapped about this vast sea of highly toxic debt are not adequate to the meet the demands of the bond holders, and because of that our Standard & Poore's bond ratings are low and could be getting even lower. Something that cripples any attempt to refinance those bonds and escape the high interest rates we are hopelessly locked into. It is not a very good situation for a small City like ours to be in.
Caring as deeply as I do about this topic, I made a little speech at the meeting last night. This is how it went:
There has been some talk, even in this room, that if the water rate payers of this town succeed in killing off the next water rate hike through Prop 218, we could somehow lose Sierra Madre's water company. The city would be forced to sell it to a private company that would raise our water rates every two or so years. Kind of like the way it happens now.
I have some good news. Should the water rate payers succeed in defeating the upcoming proposed water rate increase through Prop 218, we will not lose the water company. The good news is the millions of dollars in water bond debt from the 1998 and 2003 water bonds, the actual source of most of our water company's financial difficulty, is insured. And should our water company default on its payments, or go into bankruptcy, that debt would be paid off by the insurers.
This would benefit us in three important ways:
1) We would be out from under $19 million with interest in bond debt, freeing up $1 million a year in water revenue that can then be used for desperately needed infrastructure repair.
2) Our bond ratings would then be so low that no damn fool could ever put us into this kind of financial predicament again.
3) The water rate payers can go ahead with a Prop 218 protest with no fear that their actions could cost us our water company.
If it was a privately run business our water company would have been taken into bankruptcy long before now. No real business could long tolerate, or even survive, the kinds of deep financial hits the City of Sierra Madre is taking today. But since this is a government entity, and therefore well removed from the competitive marketplace, the solution has been to ask the captive consumers for more money, and often. Which is what City Hall is doing now. It is a far easier solution than actually dealing with the real problem, which is $19 million dollars (with interest) in bond debt.
Bankruptcy is a valid business tool. It is used all of the time in order to get troubled businesses out from under the kinds of financial peril our water company finds itself in. General Motors did it, United Airlines did it, as have some of the very largest financial institutions on Wall Street. And rather than going back to the captive water consumers of this town for more money over and over again, our City government really does owe it to us to take care of this problem once and for all. It can't go on like this for too much longer.
A decade or so ago two really bad City Councils, both led by the same individual, made some very bad decisions regarding water bonds. Today we are paying the price. I do not see how we should be forced to suffer the nasty consequences caused by mistakes made by those people for the next twenty years.
It is time to take our water company into bankruptcy and get out from under the consequences of other peoples' financial idiocy. It is not the kind of solution anyone should ever take lightly, and I am certain it will not be easy or consequence free. But it would be a better situation than what we are facing now, and will be for the next two decades.
Either this City Council does this for us, or we do it for them through Proposition 218. After all, in the end it really is our money, and we can decide whether or not they merit receiving it. And if they are not going to be willing to do the right thing, and instead just kick this can further down the same road, then we need to refuse to comply with their request for another water rate increase.
As we all know, without our money City Hall is just another small group of people with opinions. In this case, not the opinions that work for us.