Why should we be concerned about Municipal Bond borrowing
l3wis Salon has written a great story about the in’s and out’s of municipal borrowing.
When I listen to Tracy Turbak I get this very uncomfortable feeling. There is always something missing in his monthly reports, things are just too pat. Take for instance the fee structures of Dougherty and others bond companies. Remember when Bob Litz stepped into it with the bond consultant in Minneapolis? How about the Augustana deal recently, who was the seller of the bonds? The more open the process, the more we see interesting details making you go Hmmmm . . .
Take the EC bonds for instance. We borrowed $115 million, the pay off amount is around $180 million. That is $65 million in interest payments we will never see again or be able to use on other infrastructure projects. We also are not taking into account the millions that we will spend over the 30 year loan period on maintenance. Do you think SMG, Ovations or the hundreds of promoters who will be profiting from will chip in on those expenses – taking a cut in profits? LOL!
Do officials tend to know that these deals are structured in such a disadvantageous way? Do they think that for whatever reason they’ll make it work or outsmart the banks? Or do they often not know what they’re getting into?
One of the big problems is that often the banks really downplay the risks or misrepresent the likelihood of the risks occurring. Often, government officials are really not aware that the risks could actually materialize. One of the things that’s featured prominently in the report is interest rate swaps. With interest rate swaps, in particular, one of the big problems was that there’s all sorts of risks that were embedded in the deals, and in the paperwork there’s all these disclosures that say these risks exist, but when the banks actually pitched the deals the pitch said not to worry about those risks. Or they would make projections of all the money the city could save but those projections were all based on none of those risks materializing.
I encourage you to read the entire article.
We have to realize as a community, we are over $400 million in debt. I believe almost half of that comes from entertainment palaces, this in a community that has almost half of it’s school children on FREE and reduced lunches and homeless people dying in parking ramps across the street from city hall. We as a city need to reign in our debt.
