Monday, April 25, 2016

Most People In Sierra Madre Have No Idea They Are Paying Almost $15 Million Dollars For A $6.75 Million Dollar Water Bond

Yesterday (link) we talked about a City Council meeting agenda item Sierra Madre's Mayor is apparently trying to slip in under the radar.

One clue is the title of this stealthy little number has absolutely nothing to do with the actual topic. I mean, would you have ever guessed that an agenda item poetically titled "Authorization of payments on behalf of Public Financing Authority and Successor Agency" (link) has anything to do with Sierra Madre's interest only payments on $6.75 million dollars in 2003 Water Bond debt? Just a little opaque?

The answer is probably not. This is a uniquely bad arrangement that is costing the residents of Sierra Madre millions in needlessly squandered revenue. But there is no need to alarm anyone during so celebratory an evening.

I doubt that anyone who is up on this stuff won't understand why Mayor Capoccia is trying to divert resident attention away from this mess. It is one of perhaps two of the greatest financial blunders in recent Sierra Madre's history. Committed by individuals who are still quite politically active in the community today, and would prefer that you just butt out and mind your own business.

However, and like many things that require a little extra mental exertion, most people in town won't get any of this anyway. Which is fine. Anyone who thinks that they can somehow cause the average Sierra Madrean to understand the vastly dysfunctional finances of their own city is delusional.

Better to just tell them that this was all done to save the Library. Or something. The best anyone can really hope for here is to make fun of the situation, mostly because it is already pretty laughable. In a rueful sort of way.

The following 2003 water bond debt numbers were actually put together by City Staff. This was back when MaryAnn MacGillivray was the Mayor, and she asked them do it. In stark contrast, the current Mayor isn't sharing any of this sort of information right now. Even though the matter is on tomorrow night's City Council meeting agenda.

Which is fine because I will.


There you go. Sierra Madre's 2003 water bonds were originally $6,750,000. For some reason the city decided to make interest only payments on those bonds through the year 2019, while extending all payments all the way out through the year 2034. Much of it at the cost of wasted millions in the form of interest only payments. The entire cost once all is said and done being $14,925,486, or substantially more than double the principal.

Making this just as bad as the City of Sierra Madre's financially debilitating commitment to CalPERS. Another blunder costing the city many millions of dollars it doesn't have.

Neither of these problems have yet to be discussed by the current City Council in any meaningful way. Even when they were working to raise utility taxes. And certainly neither of these towering acts of financial genius will be discussed too much tomorrow night when the above item does come up. Not when there is a party where cake and soda will be served.

Given that, why would you want to trouble your pretty little head over any of this?

sierramadretattler.blogspot.com

45 comments:

  1. This City never fail to ruin my breakfast. So, who's brilliant idea was this loan any way? Bad Bart and Stockley the banker?

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    1. Corrupt Bad Bart
      Failed Banker Stockley

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  2. They are applying for jobs in Sierra Madre in hopes of getting on the Sheriffs Department.

    http://www.cnn.com/2016/04/24/us/colorado-police-department-resigns/index.html

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  3. Evidentially there are not enough well educated well informed residents in this town yet.

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  4. The total of interest only payments is $5,090,310. You could trim a lot of trees for that kind of money. Or, to mix in the Stockley angle, buy a lot of books for the Library.

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  5. That 5% rate is high. Too bad Sierra Madre's bond ratings are so bad. Refinancing could have saved the city a lot.

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  6. Too bad so sad. And I'm sure the biggest task these leaders are doing is figuring out how best to kick the can even farther down the road so the boat doesn't tip in the next few years while the current group is in "power". But, as stated, we don't want to hurt our pretty little heads thinking about this too much, which is why we voted these leaders in - trust them to take us where we need to go.

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  7. Starting in 2020 the payments more than double to around $640,000. This as the payments on the principal finally kick in. Where is that money going to come from? Additional water rate increases?

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    1. The thinking was/is that, in 2020, the 1998 water bonds are finally paid off. Then the $$ that were going to pay the '98 payments will be freed up to pay the '03.

      Don't kill the messenger.

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    2. How does adding over $5 million dollars in interest only payments on 2003's water bonds help pay off the 1998 bonds?

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    3. 1998 bonds are paid off completely in 2020. The difference in paying interest only vs fixed interest is 1.9 million dollars. By delaying the principal payments until 2020, ratepayers did no have to pay an extra $5 a year for their water through 2020. Given that people here complain loudly about increases at this level, one would assume those who come here would have voted against a fixed interest rate.

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    4. The interest only payments are over $5 million dollars. Where do you come up with the $1.9 million figure? And given the city's finances, why is that insignificant in your mind?

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    5. 7:16 - is it true you initiated the 2003 water bonds in order to build water infrastructure for the Downtown Specific Plan?

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    6. 30 year, fixed interest at 5% is roughly 6.3 million dollars. As you can see in the table, interest only is 8.2.

      8.2 - 6.3 = 1.9 million.

      7:39 - I assume the majority of the 6.75 million dollars were spent on booster stations, contaminant clean up, and the 8 million Mira Monte Reservoir. But you sound pretty knowledgable, enlighten me.

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    7. Has anyone ever seen a complete breakdown of what that 2003 bond money was actually spent on?

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    8. Interesting question.

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    9. That's not part of the process

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  8. Sorry, Sierra Madre. You voted for all of this.

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  9. At least we have our own water company.

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    1. Perhaps not for long.

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    2. One good thing is the Bank of New York isn't likely to repossess Sierra Madre's Water Company. That would be a really bad last resort for them.

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    3. That would be about .02c on the dollar.

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  10. The problem with all these things is that the bad consequences of these decisions always happen on someone else's watch and when the one's who made the bad decisions are safely out of office. That's why there is never any accountability.

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    1. CalPERS is the Hall of Fame example of that.

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    2. 7:07A There is or could be transparancy! A little honesty from the current CC would be nice. Quit the PC garbage and tell us like it is. Or do you all like the fact that yes UUT people never discussed this? The lack of really informed voters as well as non-voters is nauseous. How many of you will even show up at tomorrow's CC meeting? You'll have to vomit thru all the platitudes they give each other, but you can ask the hard questions. I'll bet none of you go! So typical. So just keep whining when things get in an even worse mess.

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    3. 7:07, tomorrow is not the time to bring this up. It will get lost in the celebrating. May you can be the brave one to bring this up at the next CC meeting. Can we count on you?

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    4. That is why this was agendized for tomorrow's meeting. By law it needs to be discussed by the City Council, but obviously nobody will be paying close attention.

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  11. The last real transparency Sierra Madre has seen happened when MaryAnn MacGillivray, Don Watts and Kurt Zimmerman were in office. These water bond figures are invaluable and would never have seen the light of day without them.

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  12. What was the bond money used for?

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    1. Water infrastructure, which was OK.

      What was not OK was financing it with interest-only bonds instead of paying principal & interest each year.

      That would have required a water rate increase sufficient to pay the 98 and 2003 bonds at the same time. Why do that when you can screw the ratepayers through 2034?

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    2. Some of it was DSP related. There was no way Sierra Madre's water infrastructure could accommodate all of that proposed stacked and packed high density development.

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    3. The "Shenanigan Years" are still with us.

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  13. Well we're screw*d. No use crying over spilt milk,or water in this case.

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  14. Did you know that if a parcel tax for infrastructure is passed in two years, those monies can be used to guarantee a revenue stream for another 30 year bond. At that time, the current interest only bond could re refunded and the outstanding debt could be refinanced at a lower interest rate and rolled into the new bond?

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    1. Is that good?

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    2. Not so fast, sparky.

      Read the financial report at the bottom of yesterday's Tattler. Even though the water department has enough reserves to meet debt servicing, Moody's still gave us a crappy financial rating.

      What this means for you is that refinancing at a lower rate is out of the question. The bond issuers have to be even tough on financials than before the 08-09 meltdown.

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  15. Let's borrow our way out of debt!!

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    1. I'll drink to that!

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    2. Let's borrow the money for our bar tab!

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    3. The next revenue enhancing strategy for Sierra Madre is "Rent-A-Resident." Call City Hall for details.

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  16. I guess none of you were around when this was discussed last year? Or the year before? or during the budget discussions?

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    1. It should be discussed and reviewed each year. When it comes to budgeting, that is what adults do.

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    2. No. What did they say?

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