Friday, January 17, 2014

The Five Questions About Our 2003 Water Bonds That City Hall Won't Answer

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There are some taboo topics for City Hall in the Prop 218 conversation, and they have to do with a few of the core causes for their pumping water rates up by a lofty 61%. Raising these topics does seem to set some people off, and that can make for informative blogging. We do aim to keep things entertaining here as well.

At the heart of everything financially ruinous for our town stands the 2003 Water Bonds. Originally sold to investors for $6 million dollars, through an extremely misguided policy of making interest only payments for a decade and a half that debt has now climbed to a frightening $15 million dollars. Something that had led to an impending financial ruin for this City's once proud water enterprise, along with degrading our Moody's water bond ratings to the level of junk (link).

So we thought that today we would put together something we are calling "The Five Questions About Our 2003 Water Bonds That City Hall Won't Answer." Because let's face it, what could be more unconscionable than a City government asking for yet another water rate increase while at the same time refusing to answer some of the questions at the very heart of their need to do so?

Of course, this does give us the opportunity to just keep asking these questions. Something that we are more than happy to do. It also allows us to continue urging people to send in their Prop 218 water rate protest forms to City Hall. At least until we get some answers.

Here are those 5 questions:

1) Why did the City Council at the time the 2003 Water Bonds were sold commit us to something they must have known this City could not afford to pay back? Or, if not, where did they think that money would come from?

2) Why did the City decide to pay only the interest on the 2003 Water Bonds, knowing full well that doing so would require Sierra Madre's water rate payers to assume financial responsibility for an additional $9 million dollars in completely useless debt?

3) Why does City Hall refuse to in any way identify the elected officials who originally set us off on this financially ruinous course? Or discuss whatever their reasons were for doing so, even though those actions have today helped push our water enterprise to the brink of bankruptcy?

4) Why has the City refused to address the widely held misperception that these proposed water rate increases are to fund water infrastructure upgrades, rather than mainly servicing demands laid out by Moody's that we pay more for water in order to repair our junk level bond ratings?

5) Is increasing water rates 61% intended to refurbish Sierra Madre's junk level Moody's bond ratings so that the City can then sell more bonds? Potentially increasing the bond debt load this City is carrying to as much as $40 million dollars?

So there you are. City Hall is closed today so we won't be getting our answers right away. Maybe they'll be ready for us early next week. I'll let you know if that ever happens. 

Our story about the unusual departure of Nancy Walsh gets some traction

Sierra Madre's best weekly newspaper, the aptly titled Sierra Madre Weekly, has now picked up on some of our recent musings about the inappropriately silent and rather unprecedented departure of Mayor Nancy Walsh from our political scene. Something both baffling and, dare we say it, less than civil. Here's what The Weekly has to say about it (link):

Political ‘silly season’ in Sierra Madre - Prop 218 protest votes growing with the deadline Jan. 28Our friends over at the Tattler bring up a good point in a post Tuesday with a great headline: “Where Have All The Flowers Gone? The Civility Party, Once the Hope of Many, Is Now No More.”It seems that everyone is either leaving council, has left or is planning to do so.

Nancy Walsh apparently did not file by Monday’s deadline, although we received no formal announcement from her or Josh Moran.

As the Tattler says…..“They’re all gone. Not a one of them is left for us to marvel at their decorum and civil ways. The Civility Party, the three 2010 Sierra Madre candidates for City Council who won feverish acclaim as those who would restore our community to something it probably never really was, all of them have now gone away. 

Has there ever been a Mayor anywhere in this troubled old world who decided to leave office and didn’t bother to tell anyone? Nancy Walsh, who never drew the papers necessary to run for a second term of office, became ineligible to seek reelection after yesterday’s 5PM deadline for incumbents. She didn’t issue any public statements or press releases about this momentous decision, no condolences were given to her disappointed followers, no speeches were made, no dinners held, nor did she speak to the news media about why exactly she has chosen to so abruptly end her career in politics.

She didn’t do anything. The deadline for filing came and went, and nothing was said. That was it.”

The Tattler has also been keeping a running tab of the Prop. 218 Protest votes received at City Hall: The latest as of Tuesday follows: “Envelopes now at City Hall – 872 (Important Note: envelopes may contain multiple ballots.)

Hopefully Nancy Walsh's unusual departure will finally be explained in this weekend's Mountain Views News. Most likely in an article written by one of the few people she actually speaks to, Susan Henderson.

Until then we'll just have to wonder what Sierra Madre did to be treated with such cold indifference and disrespect.

http://sierramadretattler.blogspot.com

62 comments:

  1. Great questions! Too bad we may never know the answers! Could you please post the Council members who got us into this pickle? Maybe we "uncivility" people should have a party to celebrate the most disgraceful mayor ever in Sierra Madre, led by the many volunteers, to whom she threatened, "We put you in and we can take you out!" Well, Madam Mayor Soon-to-be-Gone, not pulling papers to run again is the only worthwhile act you accomplished while in office. If you didn't see Tuesday night's City Council meeting, please watch it on your computer (just go to KGEM), to see how she mismanaged the meeting; doesn't even know proper protocol for running a meeting.

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    1. Agreed it was a bizarrely led meeting.
      The KGEM vid is not available yet, or for some reason.

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    2. bizare is as bizare leads

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  2. I listened to Mayor Walsh's "state of the city" talk at Kiwanis this week. When Susan Henderson introduced Nancy, she noted that Nancy was not running for re-election.

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    1. How did the faithful assembled react?

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    2. Walsh would be such easy pickings for an operator like Henderson.

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    3. Henderson cultivates and exploits wounded souls.

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    4. It's how she makes her living, 8:01.

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    5. ironic, Walsh being introduced by Henderson. Introducing someone who never accomplished anything and introduced by someone who made up her own accomplishments

      peas in a pod

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  3. These sound like the kinds of questions a forensic auditor might want to ask.

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  4. Question #6 What was the $6 million used for?

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    1. That one has been answered and answered - see yesterday's comments, or the city website. The point is not that they took the money and went to France for a wild month or anything. It's why they screwed the residents like this with a backbreaking debt load.

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    2. My guess is it was part of the set up for the DSP. The 2002 City Council made a big gamble on our dime and lost.

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  5. The Civility Party has not gone away. They are backing
    Noah Green and Green Goss. The same dirts are behind the scene
    bank rolling the campaigns. Walsh and the Chamber are behind Noah Green.
    Morans and Buchanans, etc are behind Gene Goss

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    1. What a relief! Noah Green, you are sure to lose with a team like Walsh and the Chamber behind you. Walsh defaulted on every campaign promise she made to the citizens of Sierra Madre. The Chamber should stick to the business of supporting businesses in town - which they have failed miserably - and forget politics.

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    2. The Green Goose Tax Me slate.

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    3. NO on Noah

      another young "lawyer" who moves into town, joins the "in" organizations and falls in love with the city and now wants to be a Councilman

      no thanks, we got burned with Joe Mosca and John Buchanan both who were supported by the Chamber which is mostly real estate agents anyway

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    4. Can't vote for Goss - he's a buddy of Buchanan so I put Goss just one step away from all the lies and sneaky tactics that lead to the UUT

      we've had enough "me me me" blowhards on the Council in the last ten years to last us the next 30 years.

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    5. anybody endorsed by Buchanan will not get my vote

      likewise for Moran, Walsh and Doyle

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    6. Goss is a Republican like Doyle is a Republican. Tax and spend.

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  6. I still don't get question #2. How did paying interest only on 6.75 million dollars mean ratepayers would have to pay an extra 9 million dollars? (That math doesn't work, paying a typical principal payment to the year 2019 wouldn't have saved the ratepayers 9 million dollars, not even 1 million dollars).

    If we are talking about the full interest paid on the loan over 30 years, the only way we would not have to pay interest on a loan is if we paid the entire amount up front... in other words, didn't get a loan at all, just paid for it.

    I also don't understand what money they should have used to pay this principal amount. There were no profits in the water company from 2003 to 2012 to use to pay the principal. No money that could have been taken from one area and used for the loan (Except paying less principal on the other 5% loan, to pay principal on this 5% loan). The ratepayers would have agreed to a rate increase in order to pay off the loan faster.

    As I said yesterday, the terms of the loan are that principal is required to be paid starting in 2020. There is another water loan that is being paid off in full in 2019, at that time the dollar amount of those payments then go towards the 2003 bonds. This is like household budgeting: You can pay $500 a month in debt. You have three credit cards. You pay interest only one one, and principal and interest on the others. You completely pay off one credit card and then you take the $500 payment and use it to pay off the two remaining.

    The real bummer is that we are paying off the no-interest loan over the interest loan, but we wouldn't have gotten the no-interest loan at all if we told them we were going to pay it off after the interest loan. So it wasn't an option.

    Again, the payment structure is shown at the end of the 2003 bond statement: They are paying off the other debt in full, and in 2020 paying off principal on the 2003 bonds. There is no intention of never paying down the principal, nor would the legal terms of the loan allow that.

    http://emma.msrb.org/MS211899-MS187207-MD363311.pdf

    Debt payments, by the way are about $20 a month per meter. There is no balloon payment, so that can't go higher (unless more debt is taken on.) If you look at what that went towards, basically every meter is paying about $8 a month for the MiraMonte reservoir to operate through an earthquake and to allow us to store more water during the dry months, about $5 for the Grove Reservoir, and about $3 a month to clean out contaminants. About $2 for those unexpected well repairs. If each meter paid that upfront the cost would have been about $3000 per meter.

    If we had principal payments on this 2003 loan, the per meter cost would have been $22 a month, but in 2019 each meter would owe about $19 a month instead of $20 a month (when the first loan was paid off).

    I'm not trying to be contentious here, but just trying to allow everyone to debate the issues based on the information.

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    1. What happens when you only pay interest monthly on your credit cards?

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    2. Ms. Julia sounds like a consultant hireling for the water department brought on board to deflect The Tattler's unswerving demand to have some very simple questions answered. Lookey here Julie baby, sign in with your real name and affiliation. Perhaps you can make your argument; maybe not. But not as an anonymous source. John C. is upfront about where he's coming from. How about we know who Julia M. is representing and how much she/he is being paid to present a very specious argument.

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    3. Like I said: say I can afford $500 a month to put towards debt.

      Scenario: I pay $400 towards one card with 5% and $100 in interest only on the other 5% interest card. In one year I pay off the card I was spending $400 a month on. Now I have $500 a month I can put towards the remaining card (not $100). I spend the same amount of money every month, I pay the same interest at the end of the day, it takes the same amount of time to pay off the debt, it's just the way I chose to go about paying off my debt.

      According to the 2003 bond, that's what they are doing. The loan agreement was to pay interest only until 2019 and then pay principal, with a completion date in 2034. In 2019 we pay off other debt, and the money freed up from this then goes to the 2003 bonds. That's the structure.

      If you want money going to the principal in 2003-2019 then you have to state where you wanted that money to come from. From other loan payments? From an increase in rates? From maintenance?

      The usual problem with interest only payments is you need to increase rates at some point to pay for the principal, and you are only paying interest because you can't afford to pay the principal. In this case: The principal begins to get paid when money that used to go to other debt is available to go to this debt.

      If we viewed all of the water debt as one large loan, we are not paying interest only. But if you split it up into pieces, yes some of them are being paid interest only.

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    4. We are talking about the 2003 water bonds. We are paying interest only until around the end of this decade. 15 years total. Then we continue to pay both interest and principal into the 2030s. It is the financial disaster druiving the need for the water rate hike. As to your post, I think you would be better off if you just went with one credit card. Not properly managed they can ruin your finances.,

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    5. Julia is funny. In a not on purpose sort of a way.

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    6. Maybe we can set Julia and Steve up with a blind date. They could meet at Beantown for smoothies, then head over to Kersting Court for the free movie. After that? The Buc.

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    7. Doesn't sound like the Julia M to me. Sounds more like our old friend Barty. He knows where all the bodies are buried because he put them there.

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    8. Steve and Bart would make a nice couple.

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    9. Sounds right to me, Chief. Bart's potential exposure on this issue is rather large.

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    10. The one item being ignored in the 2003 interest only bond issue is that the City Water Dept. never set up a "sinking fund" where $$ is put away on a regular schedule. When it amounts to 1 or 2 years of principal payments, then the water dept. would pay off some bond holders early, i.e., "call the bonds". The decreasing principal balance would make the semi-annual interest payments lower.

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    11. Actually Julia most provide for a "sinking fund" to pay off the principal due. A budget is created which calls for paying the interest due AND investing funds into this account to offset the looming principal pay off. For the city to have simply borrowed the maximum they could afford, based on only paying interest, was irresponsible. We are being asked to pay for this mismanagement with no assurance that any corrective action has been taken to ensure it won't happen again!

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    12. There was a type of "sinking fund" but what was being saved was used for repairs instead. I suppose the idea is that the wells should have stayed broken since we can't afford to pay for them.

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    13. True. Living your life by figuring you'll pay the credit card minimums a bad way to go.

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    14. Doyle, or should I say Julia, figured the 2003 bonds would be handled by the vast sums of money made off the DSP. Then came Measure V and the whole thing sank.

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  7. Julia it must be great having today off since city hall is closed.

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    1. Something for her to do until happy hour arrives.

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  8. 1) One thing we can all agree on is that the city owes a lot of money - long term debt,

    2) Who wants the city to borrow - another $20,000,000 in long term debt?

    3) If you answered No...

    the question remains unanswered....

    Did You Send In Your Prop 218 Water Protest ?

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    1. So Bart/Julia M, did you lose interest when we saw through your ruse to make us believe apples and oranges really do make the bond debt more pleasant and tasty?

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  9. Each month my CapOne statement tells me how much it would take to pay off my balance if I were to only pay the minimum payment. It is an eye opener. Causes me to pay off my total balance every month. By the way, it seems to be an important part of Julia's argument is missing - what is the interest rate on the bonds the City has caused us to be saddled with? Did those "financial" gurus back in 2003 think they could refinance for a lower rate somewhere down the line? Remember Stockly was a ""banker"". Yes, double quotes. Actually more like a failed bank teller...

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    1. The interest rate is fixed at 5%.

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    2. Actually, 5 to 5 1/2% depending on the issue and what year its' being paid off. Double tax-free, too!

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    3. A very high rate by today's standards. Unfortunately we cannot redo the deal because our bond rating is junk.

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    4. The mind set at the time was never to pay the bonds off. The plan was to do a refunding. A refunding is what was done with the 1989 Bonds. (betcha didn't know that) Basically a refunding is that you pay off the existing bond with new bond money and start the payment clock (typically 20 -30 year) all over again with larger dept.

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    5. Not refinancing is not necessarily a bad thing. Last thing we want to do is start a new 30 year clock on a bond issue. 6 years left to pay off the 1998 and 26 on the 2003. Get 'er done.

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  10. 10:32

    City Hall is selling our Souls!

    Live City Hall Closed!

    If City Hall can raise Water & Sewer Rates, the city residents can fire city hall employees...

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  11. Accountability is just not done in Sierra Madre politics.
    It's considered to be uncivil.

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    Replies
    1. True. It makes people feel bad to have their awful mistakes discussed in public

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  12. Walsh didn't make a statement because she wasn't told what to say or write by someone else.

    The only time she had an original thought was when she went on her batty venom dripped rant about volunteers and how they served at her (the Council) beck and call

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  13. Can't we write someone in?

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  14. Why not privatize the water operations? Many cities have been taking that course of action and have saved lots of dough.

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    1. Google up Claremont and Golden State Water Co. - what a train wreck.

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    2. Our council believes that would be certain death, 2:47, as articulated, after a fashion, by Moran. He claims that a private company would be ruthless and make the raises on the horizon look tiny.

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    3. 2;47 you are in dreamland

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    4. If anybody takes the time to research public v private there seems to be many horror stories and we could be even in a worse situation

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  15. 2:47

    GREAT IDEA!

    But in this case...

    CITY HALL has its fingers in the cookie jar and will not give up the jar until all the cookies are gone!

    That's why you need to spread the word and get "ALL THOSE Prop 218 protests returned to city hall!

    From a 37 year resident

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    1. oh no, its CAPS GUY again.

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  16. being a 37 year resident has not made you smarter , many cities that sold their water dept are very sorry after doing it
    and please stop doudle spacing

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    1. The water department needs to survive. It will take new leadership in this town to make that happen.

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  17. Another little weirdness from KGEM. The planning commission meeting from last night is online, but the council meetimg from Tuesday night is not.

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  18. Between 40 and 70 percent of the water delivered by LA's Department of Water and Power is spent irrigating lawns. This is an absurd waste. Time to legislate for dry scraping, drought tolerant gardens.

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