|Baa1 is not A1, even with grade inflation|
Which, while it isn't really a very wonderful situation, can be lived with in a way. After all, this is a blog that recognizes the need to entertain its readership, and sometimes the PRA replies I have received from City Hall are a howl. They also serve as an object lesson in how a local government that is not interested in the requirements of those who pay its way reacts when questioned about things it would prefer to not discuss.
What does make City Hall's PRA replies of special interest are the emails from Elaine Aguilar that accompany whatever useless nonsense they send my way. These are usually a litany of Elaine's opinions on the matter at hand, sent in order to perhaps sway me into accepting her perspective. Or maybe sway you since she knows I'll post them here. They also serve the purpose of creating something to actually send. After all, legally they do have to reply somehow, so it might as well be a chatty email.
When I sent my PRA regarding the status of our Moody's water bond ratings, among other things, Elaine did respond promptly. There was precious little documentation included, but I did get that email stating her opinions. What follows is a portion of that email:
I am responding to your request for public records (your initial email request is at the bottom). The purpose of this email is to notify you that the City does not have any records responsive to your request. I don’t have any notes, emails, or documents relating to my comments to the newspaper, or relating to the “current state of our Moody’s bond rating”. I don’t have any notes, emails, or documents relating to my comments to the newspaper, so I can’t confirm that the newspaper has even quoted me accurately, given the length of time since the article was published.
The item that I can provide is the current link to the City’s water bond rating analysis (link).
As you can see, the link Elaine provided me here as proof of her assertions is an old Moody's press release from September of 2011. The same one I posted to this blog in October of 2011. She then moved forward from there to make some other observations which, if you are interested, can be read by clicking here.
I did have some additional questions about our Moody's bond rating however, so I initiated an exchange that ended up going like this:
Did our bond rating change between the time of the PSN article and now?
Elaine answered me thusly: Hi John – the link I included in my earlier email is the link to the current Moody’s report – the same “September 30, 2011” rating remains. “New York, September 30, 2011 -- Moody's Investors Service has downgraded to A3 from A1 the rating on the City of Sierra Madre Water Enterprise (CA)” - Elaine
The problem is that what Elaine says here doesn't appear to be true. I have an old friend from high school back east who makes sick money swapping bonds and doing other downtown New York kinds of things. He sent me a series of screen shots detailing what the real current ratings of Sierra Madre's water bonds are these days. I reproduced one of those screen shots above.
If you'll examine this inset (click on it and it will enlarge a bit), please look for the fourth line identified as "INSU MDY." That is Moody's, and you can plainly see that our current rating is Baa1, and certainly not A1 as stated by Elaine in her otherwise intriguing email. Here is my back east buddy's comment:
Moody's at Baa1. Ugh. Not exactly something I would want in my portfolio. This is why your city can't refinance at lower rates. Baa1 is a lower medium grade bond rating. Rated as medium grade, meaning it comes with some speculative elements and moderate credit risk.
Wikipedia has some useful information about bond ratings and how they work. You can check this out by clicking here. The chart in particular is good. As you will see, a Moody's Baa1 isn't anything to write home to mama about.
One piece of speculation. Our Moody's rating has leavened a tick recently, with the outlook going from "Neg" to "Pos." Why is this? My guess is Moody's has been told that City Hall is going to raise our water rates again. Something that would also indicate that the City is keenly aware of what our real bond ratings are these days.
So why wasn't Elaine upfront with me about our bad water bond ratings at Moody's? Why did she state that our water bonds are rated higher than they are, and then supply a bogus old document as some sort of proof of this? I honestly don't know.
But I do know I don't enjoy being told things that are not true. Particularly in a PRA reply, a document that is required in this state to carry at least some legal viability. And look at it this way, when has the City ever been forthcoming on a water bond matter? Why have they refused to acknowledge that it is the driving force behind their mad passion to raise our water rates for the third time in three years?
Perhaps they really are hiding something.
Why debt is killing Sierra Madre's water company
Our water bond debt service is costing us $853,845 a year. Throw in the $145,688 a year that we are sending the Metropolitan Water District to pay down a $1.46 million dollar loan they floated us a few years back, and we're talking $996,033 every 365 days. Round that off to a cool $1,000,000 a year, and you can plainly see that our Water Enterprise (as it is officially known) could soon be going belly up unless they raise our rates again.
(These figures are available on pages 52 and 53 of the Comprehensive Annual Financial Report for the City of Sierra Madre, fiscal year ending June 30, 2012. It can be found on the City's website.)
This is $1,000,000 that would otherwise be used to repair Josh's famous "leakers," drill new wells (they're useful in drought years like 2013), and do the other kinds of maintenance that has not been getting done because so much of the revenue the water department generates goes to cover large volumes of highly corrosive debt.
This debt is the real reason why our neglected water infrastructure is in its current state of advanced decay, and why the City needs to raise rates yet again. We are literally being bled dry by bad debt.
Here is one more question. Don't you think that the City of Sierra Madre should be telling us the truth about why they want to raise our water rates again? Don't you think they owe at least that to the people whose money they wish to take at an even higher rate than they do now?
Personally, I think that unless they start telling us the truth, and soon, we will have no choice but to launch a Prop 218 protest to stop them from taking more of our money for water.
If only as a matter of personal pride.