Friday, December 13, 2013

Moody's Drops Sierra Madre's Water Bond Ratings Again

A certain kind of affluenza?
One thing about Google News Alerts, they really do deliver the big news when you need it. This stuff just gets delivered to my door, like they used to do with milk. And now I get to scoop City Hall on a large and very important piece of information. Hallelujah, I'm a blogger.

Which also begs this perfectly loaded question. If the City knew about this, and I suspect they must have known for at least a little while, why did they keep it a secret? Shouldn't we have been told right away? I mean, if they want more of our dough for water, shouldn't they be walking that transparency walk they're always talking about? And don't they know that The Tattler finds out everything anyway?

Remember, there are no secrets in Sierra Madre. Just things that we haven't found out about yet.

And then there is this. Was there some kind of timing involved? Is it really just a coincidence that the notification of yet another Sierra Madre Water Bond ratings collapse and the delivery of our water rate increase information packet (with handy Prop 218 protest ballot included) happened on the exact same day? I mean, these are rather large events for the Foothill Village. So what are the odds of these two supposedly fortuitous events both happening on the same day? Like maybe lottery odds? 

And by that I am talking about the Mega, not Super Lottery. Remember, you do have to be in it to win it.

Enough chat. Here is the Moody's press release. Link here. Be sure to read it to the end. That is where some of the really good stuff is.

Rating Action: Moody's downgrades Sierra Madre (CA) water revenue bonds to Ba1 from A3; rating placed on review for further downgrade
Global Credit Research - 12 Dec 2013
$3M debt affected

New York, December 12, 2013 -- Moody's Investors Service has downgraded to Ba1 from A3 the City of Sierra Madre (CA) water enterprise's 1998 Revenue Bonds, of which there is currently about $3 million outstanding. The enterprise has an additional $8.1 million in outstanding debt not rated by Moody's but considered in our analysis, including $6.75 million Series 2003 parity bonds. The 1998 bonds are secured by a senior lien on the net revenues of the water enterprise. Concurrently, we have placed the rating under review for possible further downgrade, pending the outcome of Proposition 218 rate increase process scheduled for late January 2014.

SUMMARY RATINGS RATIONALE

The downgrade primarily reflects significantly weakened operating results leading to continued rate covenant violation and rapidly declining reserves. The rating also incorporates a weak track record of implementing rate increases, the enterprise's moderately sized customer base with an above average socioeconomic profile, as well as aging infrastructure that requires significant improvements.

STRENGTHS

-Customer base with above average socioeconomic profile

-Fundamental enterprise with historically strong reserve levels

-Debt service reserve fully funded with cash

CHALLENGES

-History of rate covenant violations

-Weakened financial position with diminished reserves

-Aging infrastructure requiring significant reinvestment

-Historically lackluster political will to implement rate increases sufficient to maintain healthy operations

-Expected rise in operating expenses tied to increased water purchases

WHAT COULD MOVE THE RATING UP

-Sustained and material improvement of debt service coverage leading to compliance with rate covenants

-Significant improvement in reserves

-Long-term stable customer growth

WHAT COULD MOVE THE RATING DOWN

-Failure to implement Proposition 218 rate increases

-Further declines in debt service coverage

-Loss of customers and revenue sources

-Further violations of bond covenants

So I guess this water rate hike really is about bond debt after all. And that once again desperately needed water infrastructure upgrades and repairs will take a back seat to the requirements of the Bank of New York

Here is the conspiracy theory. And just so you know, I love conspiracy theories. I know that some people use the term like it is a bad thing, but I run a blog. A real one that gets read by a lot of people. Conspiracy theories are my bread and butter. It's what doesn't pay the bills around here.

This is no coincidence. The timing is just too close. My take is someone who knows what they are doing, perhaps the knowledgeable but badly dressed gents from Raftellis, have been working with Moody's on our little water enterprise problem. The objective being to shock the ratepayers into believing that true doom is imminent, and protesting this water rate increase could only lead to even more awful things. Like an even more rapid descent down the Moody's alphabet bond rating system.

Which I guess is a bad thing. Or so some have said. But maybe not quite as bad as yellow water. 

Allow me to point this out as well. The bonds they're talking about here are the 1998 issue. You know, the ones that we actually are paying off. Moody's hasn't even gotten to the real disaster, the 2003 "interest only" bond debacle our dear Uncle Bart left us. The one where the downtown financial geniuses turned a $6 million bond sale into nearly $15 million dollars in cold hard debt.

As Moody's so drily puts it: "Concurrently, we have placed the rating under review for possible further downgrade, pending the outcome of Proposition 218 rate increase process scheduled for late January 2014."

I do not think there can be any doubt that Moody's is working with somebody connected with our City government to get you to agree to a water rate increase. They certainly know all about our issues. These are heavy tactics, and the big money boys are playing rough. They're worried about losing a little cash, and they are smacking you upside the head.

The only problem being that you weren't supposed to know about this bond rating problem yet. That was going to come later. Probably in a carefully prepared official City of Sierra Madre press release.

But now you do. Be sure to leave a couple of bucks in my guitar case. 

http://sierramadretattler.blogspot.com

79 comments:

  1. As a Sierra Madrean who is currently living where water is in limited supply, (2 hours a day), I don't wish to be a party pooper, but I was one of those who six years ago was explaining our water supply is finite, and we as a town ought to start finding how to do more with less water. Place moratoriums on water meter licenses, seriously consider grey water recycling etc.
    The answer to our current problem is to stop paying our bond debt and declare bankruptcy. I t will be the only way to right our sinking ship. While it will be impossible to borrow money for a long while, it was borrowing money that did this to us. We will just have to be a "cash and carry" city like in the old days....
    I guess the "wonder kins" Doyle, Buchanan, and the others who dug us deep into this can leave know , knowing that
    they royally screwed up.
    C & C will do wonders to make them "see god"at city hall. It makes one wonder how such brilliant attorneys could be so dumb.

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    Replies
    1. Bankruptcy is the exact WRONG thing to do

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    2. The city seems to have been doing everything it can to put us there.

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    3. Don't blame the messenger, 7:01. It wasn't the residents that put us in this mess.

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    4. Thanks for the clear and accurate comment, 4:24.

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    5. I suggested the same a few weeks ago and was skewered! I couldn't agree more. With bankruptcy the city would file a Chapter 13 which reorganizes the city finances not necessarily wiping them away. Would give the city more options at straightening out the budget mess and get back on our feet in a cash and carry way.

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    6. Question: How do you spell J U N K bonds?
      Answer: Sierra Madre

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    7. 9:00 it would also allow the city to renegotiate the PEERS and union contracts.

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    8. Sorry, 9:59 we're not great, but we're no where close to junk rating. Try again.

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    9. Sorry 10:03, but this is what California State Treasurer Bill Lockyear says about our new Moody's bond rating: "Obligations rated Ba are judged to have speculative elements and are subject to substantial credit risk."

      Sounds like junk to me! Continue your education here: http://www.treasurer.ca.gov/ratings/moodys.asp

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  2. City Hall is closed today. How convenient. No answers for you!

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  3. Hmm. In the Water rate Fact Sheet we got in the mail yesterday, this is what they say:

    "Without proper revenue to cover operational expenses, which includes the City's bond covenants, the City's Water Fund credit and bond rating could further deteriorate. In September 2011 Moody's investor service downgraded the City's Water Fund Enterprise bond to an A3 rating from an A1 rating."

    I guess the city will need to do a revision.

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  4. I agree. Past councils messed up - big time. they indeed lacked the moral courage to do the right thing back then and opted for the politically expedient thing. and now the day of reckoning is here. I hate this rate increase, but it must be done. so I will not be sending in my 218 ballot. However, I will work very hard to defeat the UUT tax increase. The city, by increasing taxes is adding insult to injury.

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    1. How can you give that city hall more of your money when you have no idea what they will do with it? How do you know they won't use it to shore up covenants and commit us to even more bonds?

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    2. By law, the water company and the city general fund monies must remain separate. Water rate increase money must go to the water dept. only. ( I know malfeasance could happen, but that's what attentive citizens and auditors are for.)

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    3. Yes. Kind of like how increased UUT funds go for public safety.

      Oh, wait ...

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    4. City hall has not been coy - the Mayor stated outright that the rate increase was for the bond rating.
      Obviously the city hall solution to our problem is to borrow more and more.
      Bankruptcy is the only way to get out of the mess previous "leaders" have created.

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    5. Malarkey. I was at some of the water rate meetings. Half the info they were putting out was a long laundry list of infrastructure repairs. And that message is also in the mailing everyone got yesterday. Ask anyone on the street what the water rate increase is about, and they will tell you to fix things.

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    6. Dear Malarky, secondarily they want to fix things. Primarily, as was stated and published, they want to get good bond ratings. Don't blame me for their unintentional transparency. It's a matter of public record.

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    7. Sorry, that is not what they are putting out the the resdients. This looks like pretty much the same bait and switch they ran in 2010. Create the impression that the rate hike will make everything OK, and then use it to deal with our terrible bond situation. On one level I can understand their wanting to keep this on the down low, however. It is a pretty awful situation.

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  5. Got the protest ballot in mail yesterday, and looked and looked for date it needs to be back in to city hall. Like maybe a deadline date none really stated except will be opened on jan 28 at 9:00 am
    So mail or walk those ballots in right away.

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    1. Get a receipt or proof of mailing so your ballot will not disappear from the safe or counter.

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  6. I take it this bad news from Moody's was not brought up at Elaine's little water rate get together at city hall last night?

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    1. Did anyone from the public attend?

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    2. This Moody's news is on the city's Facebook page. But it was put there by Eric Maundry.

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    3. I eagerly await the City Manager's Report today. Hopefully she will do the right thing and discuss the Moody's situation.

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    4. City Manager's 12/13 report isn't up yet and City Hall is closed.

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    5. This is odd. The City Manager report is up, but page 1 is missing! The other 7 pages can be viewed, but none of them mention the bond rating cut.

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    6. It is all there as far as I can see. And no, nothing about Moody's.

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  7. Unfortunately we are witnessing the giant poker game that takes place every day in local government - the wall street type finance folks (who continue to make huge profits off the public tax dollar) are constantly intimidating bureaucrats so that bonds will be more profitable for the brokers.

    Has the City suspended making their bond payments? Maybe they should, so that they can work to leverage the bond issuance company into issuing new lower cost bonds. Has the City, who apparently continues to make their existing bond payments on time, threatened to leave bond counsel/issuer if they are downgraded? When is the last time your credit was downgraded for making your payments on time?

    This has nothing to do with water, or the city record of re-paying their debt, it is about greedy and manipulative bond brokers.

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    1. Don't know your financial background but you are 100% wrong. You don't know what you are talking about. Maybe you sell reverse mortgages to seniors.
      Check out the 10:13 post.

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    2. You can tell when something on the blog really hits home. The dirt disinformation squad shows up.

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    3. Wow Anon 8:08 am, you are possibly just wacky enough to be our mayor. She has a hard time remembering what Bart told her to say, and constantly messes things up.

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    1. The guy's name is Rizzo, and that was some of the most bizarre nonsense I have ever read.

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    2. Was his first name Ratso?

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    3. re 8:08 The Letter of Credit Bank (banks as you refer to them) do not set the interest rates for bonds. Nor do the underwriters. The Bond interest rates are set by the bond buyers. Right now Sierra Madre is a high risk investment. This means the interest rates the City must pay are higher as to entice potential buyers. At this point the bonds can not be refinanced at a lower rate.

      The down grade was cause by financial information and being in default of one or more bond covenants. The debt ratio is not in compliance with the bond covenants.

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    4. I don't remember referring to them as banks, but regardless. I would respectfully suggest that it is a bit naive to simply say buyers set the interest rates. Rates are affected by a wide range of factors not the least of which is the recommendation of the brokerage firm. I am not sure Sierra Madre qualifies as a "high risk" investment, but obviously rates will be affected by their rating...as they should be. Why should we, the citizens, face ever increasing rates due to poor management of the existing bond repayment? The only reason to really care is if we intend on issuing more bonds in the future. Certainly the City (water dept) could direct a larger percentage of funds towards paying down the debt - something they haven't done.

      Lastly, I hadn't heard or seen in the articles any mention that the City was in default on one or more bond covenants - can you provide any additional information on the "debt ratio" not being in compliance?

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  9. Be sure and bring your postcards into city hall personally....they will try to cheat on this one... City hall pulled another fast one, they are closed today....so people won't be able to do this until Monday.
    They will cheat us for sure. How long are we going to stand for this.
    Bond debt......downgrade
    Bad water.....being publicized all over the county......there goes our property values.
    Bad water....now we have to worry about health issues
    Bad water....only the people who can afford protection devices are in somewhat better position...what about the poor people who can't?
    Outrageous WATER RATE INCREASES.....looks like they are supported by all of the current city council.

    Time to vote all these people out of office, and more important, don't let BART of any of his puppets sneak Manchurian candidates in.
    Isn't the water, debt, highest taxes in the State enough, Sierra Madre?
    If not, what is?

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  10. Maybe city hall was saving this story for poky old Susan Henderson.

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    1. Can't wait to see what sloppy errors Henderson, or whoever really writes for her, makes on this one.

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  11. Downgrading the city's bond rating could be the best thing to happen to the City - it will prevent Walsh, Moran and Harabedian from proposing new bonds in the near future, something that I think is on their radar.

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    1. Without our money to back them up the UUT3 is just another small group of people with opinions.

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    2. If only we didn't have to hear them.

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  12. For those of you naïve people who aren't afraid of the water you are drinking and using to bath and shower.....you better damn well be afraid of what this scandal is going to do to property values here in Sierra Madre.
    Yellow water, chemical odors? Everyone who reads papers anywhere in county or listens to radio or watches local TV news heard about the Sierra Madre water CRISIS (no not the phony shortage) the contamination.
    Hey local realtors....you are going to have to disclose this! Who in the world is going to want to buy a home, rent a home in Sierra Madre with this tainted water? Not a whole lot. DOWN GO YOUR HOME VALUES, Sierra Madre.....think dirty Bart Doyle cares? No he doesn't. As long as they can promote OVER DEVELOPMENT....who gives a damn about us? Crawford does. He does. Keep exposing this outrage, John Crawford. God Bless you,

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    1. The water situation will not stop Adele up at 1 Carter.

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    2. The water is Sierra Madre is MWD water. There are lots of cities that have been using MWD water for a really long time and they don't seem to have any health problems from ingesting it.

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    3. It is a considerable step down from what we are used to here. And the strange colors and smells are offsetting.

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    4. Not having any water come out of the tap would be really offsetting.

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    5. These are some fine choices you are presenting to us this morning, 11:27.

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    6. 11:30 I don't like it any better than you do. If the wells are dry, you buy water, I think.

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    7. Will Adele's Modern Families like chloramines?

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    8. Arcadia draws it's water from the same places we do. They are doing just fine. Our water company has been run into the ground by incompetents and sleazy bond dealing DSP types. We need to clean house at City Hall. The dirt era is over.

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    9. Arcadia's wells are farther down the hill so they're still able to pump. Facts are facts.

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    10. So there is water there. Too bad our water company doesn't know how to get it.

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    11. CETT Investments, Adele's boss, will no doubt instruct her to build into the many many bathrooms of the many many mansions state of the art filtration systems.

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    12. More bathrooms equals more modern.

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    13. Realtors do not have to disclose the source of water.

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    14. Yes, that would only be ethical.

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    15. The Canadian EPA has deemed chloramine "toxic" to the environment (CEPA 1999).

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    16. On February 2, 2004, the San Francisco Public Utilities Commission (SFPUC) added a new disinfectant, chloramine, a combination of chlorine and ammonia, into the Hetch Hetchy water supply. As a result, users in the Bay area began to experience a range of reactions including:

      RESPIRATORY SYMPTOMS
      sinus and nasal congestion
      sneezing
      coughing
      choking
      wheezing
      life-threatening asthma-like symptoms
      bronchial and emphysema-like symptoms

      SKIN SYMPTOMS
      rashes and red burning skin
      intense itching
      dry, chapping, flaking, cracking skin
      welts and blistering skin with scarring and pigmentation
      peeling, bleeding lips, dry mouth and throat
      dry eyes

      DIGESTIVE DISORDER SYMPTOMS
      irritable bowel symptoms-like reactions (IBS)
      acid reflux-like symptoms

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    17. Chloramines are all respiratory irritants with trichloramine being the most toxic (order of toxicity: monochloramine < dichloramine < trichloramine-most severe.)
      In contrast to what water utilities claim, it is impossible to have only monochloramine. It is not unusual in water systems for harmful di and trichloramines to occur.

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  13. This comment has been removed by a blog administrator.

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  14. there is no scandal it wont do anything to property values THE SRY IS FALLING THE SKY IS FALLING

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    Replies
    1. Somebody drank the yellow water this morning.

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    2. Better get a leash.

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  15. Your statement is true in only one stance, a lot of city use MWD water.

    Health issues are another thing, water filters and how many are another or they just use the MWD water to flush toilets and bath in, mush like industrial water is used today.

    Or they could have enough money to cover up their health problems with visits to the doctor and drugs.

    Bottled water could be another reason this health issues hasn't raised it's ugly head. As long as someone is making money off the impure water who is to ask anyway?

    Just think Hinkley, California.

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  16. Is it just me, or there a whiff of unicorn in the air today?

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    Replies
    1. It's just Migwell. You know what an old snout he is.

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  17. Realtors are not required to disclose the point of origin from where the home they are representing comes from.

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    Replies
    1. I wasn't aware that houses traveled. See? You learn something new everyday!

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  18. The city manager's report is up in full. Nothing about bonds.
    I did notice that, as always, the city is hiring.
    No one has been laid off, and staff is added constantly.

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    Replies
    1. Elaine will say anything. If it is true it's a coincidence. Probably unintentional.

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  19. I know this is a small point but all the same it is an example of the efficiency of city hall. Did you notice that some of the report was printed on only one side of the paper? If the city is really doing there job that report would have been printed on both sides of the paper, we really do need a better leader in city hall.

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    1. Not such a small point when you realize just how much paper city staff uses, and that the carelessness about that supply and its cost reflects carelessness about other supplies and their cost. I have noticed the same thing. It's a dead give away of inefficiency and waste.

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    2. For every blank page not used equals 10 reams of paper or 5,000 pieces of paper.

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  20. LOOKS LIKE THE SIERRA MADRE RESIDENTS ARE FINALLY WAKING UP!

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  21. Waking up, this deception and dishonesty is keeping me up. I'm 9:33 and it's been a long day, and then I come on here and read and see the inefficiency of city hall I know it's time to help tell everyone about this. I do have some ideas and I am getting involved. Have an idea to really spread the word. Going to check with some marketing experts and I will post on here my findings. Those of us reading this blog know the truth is written here but we need to get the word out so more people read the Tattler.

    Hang on city hall, your in for a rough ride here very soon and the truth will not set you free.

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