Thursday, July 27, 2017

Sierra Madre's Water Debt

Mod: The following is now available on the City of Sierra Madre website, and it is a pretty good explanation of just exactly how badly the "water enterprise" is hogtied by debt. Just in case you were wondering why infrastructure repairs are so piecemeal and inadequate, no matter how many rate hikes are put into place. It also confirms a lot of what you have been able to read on The Tattler over these past few years. Of course, what it does not explain is how or why the city got into this mess, or who did it. But as a start it's not too bad. Link here to see all of this unhappiness in its original form.

Water Debt

Water Debt Obligations: The water system is suffering from an extreme lack of financial flexibility. Currently the City's water fund has two bond issuances and one loan. The total payments for debt in the Water Fund are nearly $1,000,000 annually and represent 22% of all expenditures this budget year.  In 2019 one of the bond issuances will be retired.  This will reduce the overall annual debt payments to $800,000, but debt payments will still represent 18% of all water expenditures.

Figure 1, below, shows the City’s outstanding debt obligations, a 1998 bond, a 2003 bond, and a 2009 loan.


Figure 2, below, shows the City’s near term bond obligations.  The 1998 bond will be retired in 2019, lowering the debt burden on the water utility.  The City will have little flexibility due to the terms of the 2003 Bond.


The most challenging aspect of water debt is a water bond, issued in 2003, for $6.75 million. The structure of this bond was to be paid over 30 years, at 5%, with “interest only” payments from 2003-2019. This means the principal is not scheduled to receive a payment until 2019. Currently ratepayers have spent $4 million on interest for this bond.  In 2034, when the bond is retired, total interest paid will be approximately $8.2 million.

Figure 3, below, shows the repayment schedule for the 2003 Bond.


At Council’s direction, City staff is working to refinance this bond issuance with the goal of lowering the interest rate, reducing the annual cost, and/or paying down the principal in a shorter number of years. If we are able to find a more favorable structure for our debt, a plan will come to Council for consideration in fall of this year.

Mod: There is a problem with that. The solons who originally slapped the 2003 water bond fiasco together did so at an interest rate of over 5%. A rate that by today's standards is exceedingly high. What has kept the city from refinancing the 2003 water bonds in the past decade is the Moody's rating on them, which is essentially junk. In other words, Sierra Madre owes millions of dollars on junk bonds. With the principle beginning to come due in 2019. Another thing that needs to be explained. You can read all about that junk rating by clicking here.



sierramadretattler.blogspot.com

38 comments:

  1. Another case of 'three card monty' shill game used to cover up and hide the true intensions of the operators 'city manager & staff' who only want to keep their jobs and pensions until they retire and move out of the area like Az, Nv or Oregon and take the resident's tax dollars with them.

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  2. Giving us all this information is done to win our support that will be needed to pass a new bond which will will include the current amount owed plus a few million more dollars.

    Will the additional debt be used to replace old water pipes or pay
    more to Calpers?

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  3. The best question is now what?

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  4. No amnesty for Aguilar

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  5. We will deal with it it's not the end of the world. Man up!
    "The quality of mercy is not strained;
    It droppeth as the gentle rain from heaven
    Upon the place beneath. It is twice blest;
    It blesseth him that gives and him that takes"

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    1. Mercy in Sierra Madre usually means another rate hike.

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    2. Not much road left to kick the can.

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    3. ...or No road left to kick the can.

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  6. Our problems of past are catching up to us, how do we even start these comments out? There are so many reasons why our past was managed poorly but we need to move past harping on the same mistakes, lets move right into what options do we have as a community and which options work best. Our community is small enough that we should all agree on what is best for Sierra Madre and not someone's bank account. First of all we need to guarantee the safety of everyone and provide that safety while staying on budget. Preserving our small town feel means we wont be providing all the bells and whistles some cities get. First and foremost we need water, a good Fire Department and Police Department. The protection of Life and property in that order is every cities obligation to it's residents. Expenditures such as Libraries, parades, concerts in the park etc. etc. are extras. Lets put every option on the table then evaluate what is best for our community, not just the State of California and especially special interest groups. Lets do right by our children our elders and the safety of all. It is important to note that when non residents are in our town we are obligated to provide them the same protection. We have a lot to think about.

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    1. If things have to be taken away, so be it. However, if you are going to take away concerts in the park or the library, you need to explain why that is. You don't just do it and then not say why it had to be done. There are people in Sierra Madre's past who did stupid things, and the consequences are only now starting to arrive. All of this must be explained. People have a right to know.

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    2. STFU it's not that serious..........

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    3. Transparency has always been a problem in this city. Now they have no choice.

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    4. True. You cannot just give out the numbers and then say you have been transparent. Without explaining how and why they came to be you haven't really said anything.

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    5. The library property is not being sold because the city is rolling in cash, 8:41.

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    6. The library property is not being sold.You should have ended your statement there.If we do decide to move the library it will not be or result in any cash savings or profit to the city.

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    7. The library property is being sold. What do you think happens after they move all the books into the YAC? Another Goldfish Park begins to bloom?

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  7. 8:17...... you are so right. First the people need to know the laws behind running a city. The city staff and council needs to know the laws and obligations they are responsible for. These laws need to be brought up and pointed out to everyone involved so that we all understand our responsibilities.

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    1. You've missed the point entirely.

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    2. 8:48 is a Bart apologist.

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  8. Orcutt's 1st Law: "Before things get better, they must get much worse."

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  9. Very true 8:17am.
    Unlike when councilmen Bart Doylestown made the motion and vote change from City Administrator to City Manager; he was a puppet master.
    Even the Fiance Director, Karen, was caught in the strings of reshaping the town for (someone's) profit.
    The Enterprise Funds covering user charges, were never properly addressed.
    In 1990, the Water Department Operations were 748,021. Water bond construction 646,112. Water Bond service fund 0.
    We appear to have a manager that understands how a city operates. If this council can work with this new manager; slow the money thrown at studies and re work the interest on Sierra Madre's debth; this town will eventually recover.
    Yes, public safety is part of any cities charter, but safty contracts entered into from adjoining cities also meet state mandates inorder to be a full service city.
    Anyone ever question towards the end of our last city management team; did the combinding of departments and committee's take place? Back then, we were told it was a cost saving measure!
    When the Fire Department ceased it's Volunteer Status and the temporary Paramedic program gave up the two year temporary status, into full-time employees with zero funding backing the program; that was another clue to the residents that something down the road would "bite us".
    Check and Balances are a necessary part of all of our lives.

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  10. When the unused dirt lot at the Passionist center is developed the city coffers will be overflowing.

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  11. If it has come down to no concerts in the park etc., then it is time to annex to the County.

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  12. No one cares. It is obvious. No one shows up to the city council meetings but Boy Scout troops, people who see a water bill affecting themselves greater than the city at large, and those who want to flout the rules.

    When there is a city council meeting post on this site there is a substantial decrease in comments. If no one is talking on these issues then there is is no discussion in town.

    No one in this city really cares. Or if they do, most of their neighbors don't or are too ill informed and complacent to know what has/is/will hit them.

    Let's talk about our so called leaders in the city council. I hate to be critical, and Mod please don't sanction, but Mrs. Delmar only talks up in meetings when she has been noted on this comment section. People say, well Denise has been so good on this issue, she'll fight back. Then you see a unanimous vote. She almost never speaks up, and the people on this blog and in town see it as discretion and foresight... How about convenience? How about our other representatives... I don't mean to point out one member of this ill reputed council, but for some reason people seem to give her respite. If the decisions are bad then the council as a whole is to blame, unless there is significant disagreement publicly.

    If the shifty council was to be trusted they would be forthright with their decision and deliberations. They think we are all stupid and they do not care. Especially the mayor, as she is at least supposed to lead this city. She is, at first, leading the misinformation campaign on the library.


    This is why the City Council can get away with placing the library "notice" almost an hour into the regular Tuesday meeting that no one cares about. They beguile you into submission with a Babe Ruth paean prayer and meaningless 'awards' for local sports teams they have never cared about, supported, or publicized until it is convenient for them to distract you from the issues at hand.

    Does anyone really care? Or is it more convenient to be snarky behind a computer screen while the Downtown Library Investors Club does their dirty deeds in public view with soon to be public money with our public Library.

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  13. What does that mean, non residents? Protection from what? Stinky yellow-brown water? Cars making illegal u-turns on the boulevard? Jay walking? Lack of available parking? Bias; about painting blue on a curb site for more than one "handicapped" parking space?

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  14. I vote for my City Council members so I don't have to go to meetings and second guess their decisions on every matter. We elected them to govern so let them govern.

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    1. Isn't that how the city got into the financial fix it is now? Everyone left to go shopping while Bartso the Blundering Bignificense went on a bond binge?

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    2. Being clueless and indifferent is not an excuse, 11:20.

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  15. The playing o' the 'Pipes in the park is a serious matter.

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  16. For the non-conspiracy theorists among us, I think what we're seeing is the new city manager making a real effort to openly explain the terrible situation we're in. The only subtext I take from it: utter incompetence got us here. Seems criminal for any municipal employee or elected official to put a city in this sort of predicament and just walk away.

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    1. Ok he explained what has been known here for years. He vaguely opened up trust, why be complacent and stop now and act like suspicion of a city cover up is a conspiracy. It has been a conspiracy over the years to cover up the interest only payments to cover over the sins of the downtown happy go lucky, hope everyone lookss the other way folks. Seems there are people in this town that want people to continue to be gullible, under the guise of those darn conspiracy mongering wackos who just won't behave... Whatever the motives, let's all fight on the same side, without self-righteous name calling.

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    2. Thank you, 11:42.

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    3. The big dirts don't want you talking too much about the DSP days. That is where all the bodies are buried. Forensic audit, anyone?

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  17. Isn't it funny that it is the preservationist community that wants to save the library, while all of the big shot "I Love My Library" leadership can't wait to sell the place off? Where for art thou, Rob Stockly?

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  18. 10:44A I agree with you. Most people don't care. Most don't know what's going on and if they do they don't investigate. They are sheep. We can't afford a library with this kind of debt. We really can't afford a fire or police dept. The debt from Calpers will only get worse. If you want to preserve any part of the city then you have to pay attention. We need answers. For instance, who got us into Calpers in the first place? Was any citizen asked if they wanted it? Did the city attorney say it was okay? Can any of these people be held accountable for their malfeasance? There are so many questions that need to be answered. Nothing new in this water report. And yea, I can show mercy to those who deserve it. I can also let the past be the past as long as I have a full understanding OF EVERYTHING that transpired.

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  19. The Bond Guys' message to the people of Sierra Madre: "Shut up and pay for our mess."

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  20. 9:48am. Do YOU have a problem with private property owners?
    The Monastery is all private property.

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  21. In small town elections you vote someone into office who has no record. No means of assessing how they will chose to help run the city with their vote on the council until they run for reelection. The City Manager is the major force in setting up decisions and getting them implimented. Many times the citizens in the chamber kept the city from running off the rails but it takes a level of constant vigilance that sometimes falters. The CC members don't know how they are going to perform as they have never done it before. Lot of rubber stamping has gone on in the past. I for one, and I know a few others, am worn out. It is time for someone else to take their turn in participatory democracy: vote and follow-up.

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