It is only now that Sierra Madre is being forced by the State of California to drastically reduce its water usage that this has become so urgent an issue. Specifically it is the prospect of having to pay $10,000 a day in fines to Sacramento that has finally made City Hall sit up and take notice. Which is probably why the state has been making such threats. It is the one proven way to get cities such as Sierra Madre to pay attention to their water wasting ways.
Of course, should El Nino somehow bring the rain necessary to alleviate the effects of the drought this winter the urgent need to repair water mains and all those pipes attached to them could be alleviated. If the prospect of all of those state fines went away things here would likely return to the way they have been for a while.
Old habits do die hard.
Councilmember John Harabedian brought up the prospect of raising money through the selling of more water bonds. Here is a brief refresher on why that would not be possible for Sierra Madre.
The entire Moody's run down on Sierra Madre's dismal water bond situation can be linked to here. There is a clarity to their expose' that only truly dispassionate New York money men can bring.
And remember, Moody's is only talking about the bad bond stuff from the 1990s here, which was actually a consolidation of some previous toxic water bond debt. There is many millions more in bad bond debt that the complete idiots responsible for the failed Downtown Specific Plan saddled us with in 2003. And for whatever reason (I've yet to hear one that makes any sense) we are only paying the interest on that financial disaster up until 2020.
Sierra Madre's water bands, all of them, are rated junk. Any attempt to issue more of them would be sheer folly. At best the city would be forced into an extremely high interest situation. One that would only serve too put this city into even further into debt than it already is.
Here is what the service on Sierra Madre's debt from the 2003 DSP water bonds looks like. Note that the City of Sierra Madre is only paying interest on that debt right now, and just how many additional millions of dollars that is costing you. Then think about all of the new pipes Bruce Inman could have bought with that kind of dough.
That this did not come up last night is hardly surprising. It never does. This is one of the greatest scandals in Sierra Madre history, and the consequences stare us in the face every day. The crisis this city is facing now is directly linked to this massive, destructive and entirely unnecessary interest only bond debt.
Have you ever wondered what kind of institutional dementia it took to lock this city into $6,750,000 in water bond debt in 2003, and then somehow decide to make interest only payments on the principal until 2020? Without even paying off even $1 of the original amount until 17 years later?
What exactly is the cost plus interest to the people of Sierra Madre for that $6,750,000 2003 DSP water bond? That I can answer that for you. The combined figure is $14,925,486.00. In other words, due to that unique repayment schedule Sierra Madre's tax and water ratepayers will have ended up paying way more than double the cost of this 2003 DSP water bond once it is finally retired in 2034.
To be exact, that would be 31 years later, with the total cost in interest debt service alone being over $8 million dollars. Talk about your mad stacks from sad sacks. With that kind of money you could have repiped the entire city and still have had enough left over for two new libraries.
And again, we're not even adding in the 1990s bond debt that Moody's is so upset about. If you did the figure would balloon to over $24 million. Get the picture?"
One interesting moment last night was the revelation that the recent series of water rate hikes didn't really have very much to do with infrastructure renovation. Which is odd because in the Raftelis draft report justifying the jacking up of Sierra Madre's water rates for the 5th, 6th, 7th and 8th times in the last decade or so water infrastructure repairs were discussed. As they were in the Moody's report.
Here is an example:
Now if you were to ask the man in the street why water rates have been cranked up these last few years that good fellow would likely tell you it is because the pipes need fixing. And sure 'nuff the man in the street would be wrong. The water rate increases were put into place mostly because of Sierra Madre's massive water bond debt. It was to cover covenants and other fine financial details related to the maintenance of so heavy a bond debt load, and keep the bankers in New York happy.
The result? They still rated our water bonds junk. As they are even today.
Councilmember Delmar discussed the importance of leveling with the public about Sierra Madre's water mess. She cited the lack of trust, which is a very accurate assessment. What this post is covering today is no secret to those who understand the real issues. A lot of people know this material.
A good place to start the leveling would be Sierra Madre's water bond debt. It is why the city has no money to stop both the daily water loss through leaks and solve its discolored foul water problem. It is also why the city is not likely to meet that 32% water use reduction number, and could be at risk of having to pay huge fines to Sacramento.
It is time Sierra Madre leveled with the public about the greatest financial scandal in its history. That being its toxic water bonds. Tell the people what the real cause of the problem is here.
Name names. There is a first time for everything, you know.
Somebody made a great post last night. Here it is:
Throw in some news about all of that water bond debt and the idiots responsible for it and who knows? Maybe Jerry Brown will realize that the residents of Sierra Madre are not culprits but rather victims and cut the folks a break.
Maybe there might even be state investigation. Wouldn't that be something?
Massive Doyle - Stockly Era Water Bond Debt: Could It Cost Sierra Madre Its Library? (May 2015 click here)