Wednesday, August 16, 2017

Sierra Madre's Water Bond Ratings Improve To "A"

Mod: I know, good news on The Tattler. It doesn't happen everyday, but sometimes you just have to throw all caution to the wind and let it rip. And this really is good news. Up until recently the water bonds Sierra Madre owes millions of dollars on were rated junk. Meaning that should the city wish to refinance what has been something of a financial disaster, it would be forced to pay exorbitant interest rates to do so. Which would kind of defeat the purpose. This came to me from Gabriel Engeland, and I am pleased to break the news to you here.


Mod: I did a kind of impromptu interview with City Manager Gabe Engeland about this surprising development. Here is how that all went.

Tattler: Question that just popped up on my blog: ".22c out of every water dollar goes to debt. That is now. What happens when the bond payments double in 2020?"

City Manager Engeland: The 2002 Bond payments increase in 2019-2020, but the 1998 Bond payment is retired the same year.  In 2019 payment of all debt in the Water Fund will be $846,720. In 2020 payment of all debt in the Water Fund will be $663,190. We actually will lower the overall debt burden in the Water Fund when the payments on the 2002 bond ratchet up. However, because of the way the 2002 bond was structured, this debt will eat up a larger portion of operating revenue even as the total payments decrease—and this is after the interest only portion is complete. If we are successful in the restructuring of the debt we can avoid some of this, but we won’t be able to avoid all of it.

Tattler: Does Sierra Madre's low Moody's bond rating play any role in this refinancing? I have been told this will make it more difficult.

City Manager Engeland: The bond rating will be a factor in the restructuring process along with other items, like reserves, operating revenues, customer base, etc. The market will determine our creditworthiness and the current rating will be one of the first things it considers. The bond rating is actually somewhere in the “A” range right now (I forget the exact rating) and the outlook has moved to “stable.”  Previously the bond rating was in the “B” range and the outlook was negative. Both of these are improvements over the past and are due in large part to the work our Assistant City Manager has done on this bond issuance. She’s fantastic. The rating essentially means we have the ability to meet our commitment but we may be influenced by changes in economic conditions or other circumstances.

Tattler: That is good news. The last Moody's notice I saw was in 2015 and had the bonds rated at Ba1. Maybe Moody's can send out an update? They're usually not that shy. It could be received as a big win in town.

City Manager Engeland: We’re on the same page.  We contacted them a few days ago to send the official letter.  What they initially sent was the “rating history” which showed the improvement. It’s odd they didn’t send a formal letter when it happened.

Mod: But wait, there's more! S&P isn't the only bond rater that has upped Sierra Madre's from somewhere in the junk realm to an "A". Which, by the way, isn't the best of all possible ratings, but certainly is much better than where it was in 2015. This piece of happening news comes to us from something that calls itself EMMA, which stands for "Electronic Municipal Market Access." It shows that both Moody's and KBRA (Kroll Bond Rating Agency, Inc.) are also piling on the wild joy as well. None are quite as high as they could be, but certainly this is a vast improvement.


Mod: Link to EMMA here. More news as it arrives.

sierramadretattler.blogspot.com

33 comments:

  1. Not to burst anybody's bubble, but bad water bond ratings usually happen when the banks want Sierra Madre to raise its water rates. The rates have now gone up a couple of times since 2015, and now the city gets to wear its shiny new gold star.

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  2. Damn almighty - this Gabe dude seems like the first person at the City kicking ass and taking names. That old adage "I bang my head against the wall because it feels good when I stop" well, damn, we just stopped and it feels good. Like.. "the City" isn't against "us" but is working for and with "us". Maybe it was just too easy to start cleaning house, since it was in shambles, or maybe it wasn't but no one clearly and easily conveyed that to "us".

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    1. Sorry folks Gabe is not responsible for the bond rating change. Our high water rates changed that.

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    2. Aguilar and Inman go, and the water bond ratings improve. Quite a coincidence if you ask me.

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  3. Ok, so the rating has increased. The bill is still due, and it is quite a bill indeed. Let us not get too gleeful.

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    1. But at least Gabe seems honest about City issues. That seems a low bar of achievement but compared to Inman, Cimino and Aguilar it is huge !

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    2. Engeland is a fixer. He turned around the last city he worked in, now he is trying to salvage Sierra Madre. His contract is for 5 years. He is off to a good start, but there is a long ways to go.

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  4. Where can I invest in this? Sounds better than Amber mine.

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    1. Check with your broker. You can get all the information on EMMA. Search Sierra Madre. Check yes at the bottom of the disclosure and presto...it's all there.
      https://emma.msrb.org/IssuerView/IssuerDetails.aspx?cusip=826392

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  5. Our new CITY MANAGER is bringing us luck all ready.

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  6. Actually the UUT,new taxes,and price increases are responsible no luck when dealing with bond ratings.

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    1. The UUT was always about bond and CalPERS debt. Not the library, which is now for sale.

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  7. Warning to all those gleeful readers, do not look a gift horse in the face as you will soon be shoveling more than rewards from those action most likely manure from the fall out from a so called reward and progress? This is not going to end well just remember all those former profits who claimed help is coming and it's just over the next hill of beans.

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    1. If you look a gift horse in the face you will turn to stone.Wait you talking about trump or bond ratings?
      On a more serious note,a better bond rating gives us the chance to refinance at better rates and attract investors thereby reducing our debt. Simple and basic no downside.

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  8. The shock of good news.

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    1. Really. Some people are much more comfortable with bad news.

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    2. The residents have been in an abusive relationship with city hall for years. While this now shows signs of ending, many are still fearful. It will take time for the full healing process to be completed.

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  9. If "you" attend City Council meetings, this information was discussed back when the explanation of ratings and the changes that were taking place in bonds were discussed.
    The asst. City Mng. Is alright, just need to keep both eyes on her.
    The changes in the amounts of water being imported will be discussed soon by the council, as the aquifers are improving.
    Timing for new management was spot on; Mr. Engeland has a strong finance background and has shown that he is forthcoming and transparent, excellent qualities in a manager.

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    1. I'm sure the 4 residents who regularly attend city council meetings were pleased to hear about this.

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    2. Don't forget about the few of us who view the meeting at home on channel three. I'd attend in person but then I'd have to purchase more blood pressure medicine. This way I can turn off the tv until I calm down and save prescription dollars.

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    3. You need to watch city council meetings on YouTube. After the meeting is over you can find the whole shebang available there, and you can skip over everything except that handful of moments you're actually interested in. Nobody in their right mind should stand for having to watch the whole thing. Life is too valuable.

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  10. More than 4 residents in Sierra Madre should be attending City Council meetings.
    Complacency is what landed this town in the messy situation's that face new management.
    Council members and Planning Commissioners come and go; history has shown that these people are not a cohesive unit working together; the public needs to hold all of our elected representatives responsible.

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    1. The Council counts on the fact that the residents will be complacent, that's how they are able to vote in so many new taxes.

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    2. And what did Denise Delmar say about using the overcrowded Park House for the water meeting? "Oh, we only expected about 10 people to attend that's why we didn't use a City Hall." See, the Council expects low attendance at the meetings.

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    3. It's cyclical. I think community awareness is on the rise again. People are figuring out that the Measure UUT campaign was not honestly run.

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    4. The council prays for low attendance. Unfortunately for the town, the people that attended the meetings in the past have either moved away,died or given up. It's time for all the newbies that "LOVE" this town to get their Generation X and millennial butts to the meetings.

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    5. Why should a millennial be to blame? It's not their generation that screwed up... it's yours.

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  11. No, they were pissed off about the water penalties.
    Community awareness is only as deep as their pockets.

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    1. Don't taxes come from pockets?

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    2. The sad truth is many people cannot come to grips with these kinds issues. It is beyond them. High water bills? Sure. Those come in the mail and are written on paper. But the finer points of utility taxes, bonds, pensions and years of deferred debt? Not a chance.

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  12. In H. G. Wells's The Time Machine[edit]
    By the year AD 802,701, humanity has evolved into two separate species: the Eloi and the Morlocks, whereof the Eloi live a banal life of ease on the surface of the earth, while the Morlocks live underground, tending machinery and providing food, clothing, and inventory for the Eloi. The narration suggests that the separation of species may have been the result of a widening split between different social classes. Having solved all problems that required strength, intelligence, or virtue, the Eloi have slowly become dissolute and naive: they are described as smaller than modern humans, with shoulder-length curly hair, pointed chins, large eyes, small ears, small mouths with bright red thin lips, and sub-human intelligence. They do not perform much work, except to feed, play, and mate; and when Weena falls into a river, none of the other Eloi helps her (she is rescued instead by the Time Traveler). Periodically, the Morlocks capture individual Eloi for food; and because this typically happens on moonless nights, the Eloi are terrified of darkness.
    https://en.wikipedia.org/wiki/Eloi

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  13. Hungry?, Pass the Soylent Green please.

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