Back in September 2020, I wrote about a Finance Committee presentation from a bond consultant. The city is looking for a new revenue stream to pay down the pensions – instead of just asking the employees to pay a more reasonable share they turn to a tax that will not even come to the ballot.
The consultant discussed two options – a Pension Obligation Bond, and “lease revenue bonds”. Neither option requires voter approval.
Pension obligation bonds (POBs) are taxable bonds used to fund the unfunded portion of pension liabilities with borrowed money. The presumption is that investments will pay the debt service.
“Lease revenue bonds” involve municipalities issuing bonds (borrowing money) using their own city streets or buildings as collateral to pay down their unfunded pension liabilities. From the 9/23 agenda: “A lease revenue bond structure (leased asset required, such as streets or buildings) would avoid validation process [meaning, the voters] and could proceed on quicker schedule.”
Essentially, a city leases their streets to a special Financing Authority, which will pay the city their up-front money, and “rent” the streets back to the city, in order to pay off the bonds. (Forbes)
And the taxpayers pay the “rent”. “The municipality will generally appropriate money during each budget session to meet the lease [rent] payment.” (Forbes) These appropriations come at the cost of public safety and infrastructure.
Again, neither requires voter approval. Last month the full council heard the same consultant and voted to have him bring back the fine details, hoping to have this pig in the poke by March.
The other day I got a note from Mary Walsh, who writes about public finance for the New York Times. Here’s an article she wrote about the revenue lease option.
The City of Tucson, Ariz., decided last year to pay rent on five golf courses and a zoo — to itself. In California, West Covina agreed to pay rent on its own streets. And in Flagstaff, Ariz., a new lease agreement covers libraries, fire stations and even City Hall.
They are risky financial arrangements born of desperation, adopted to fulfill ballooning pension payments that the cities can no longer afford. Starved of cash by the pandemic, cities are essentially using their own property as collateral of sorts to raise money to pay for their workers’ pensions.
How did they do that?
It works like this: The city creates a dummy corporation to hold assets and then rents them. The corporation then issues bonds and sends the proceeds back to the city, which sends the cash to its pension fund to cover its shortfall. These bonds attract investors — who are desperate for yield in a world of near-zero interest rates — by offering a rate of return that’s slightly higher than similar financial assets. In turn, the pension fund invests the money raised by those bonds in other assets that are expected to generate a higher return over time.
I have to ask this question – given the mess we’re in with CalPERS horrible record of investment returns, why in the hell would we try to play the stock market? Another good question would be, who makes the decisions? Mark Orme? Scott Dowell? Or an investments firm that charges ridiculous fees?
So, I asked my council representative Kasey Reynolds and will be sure to post her response. I’ll tell you the truth – she has never responded to my inquiries about the Shelter Crisis Designation, so I won’t hold my breath on this one.
Chico Taxpayers Association 
“..risky financial arrangements born of desperation…”
Well, there you go. But she forgot to also say it is born of GREED.
And here’s something people should think long and hard about.
The website of the 20,000-member Government Finance Officers Association, whose stated mission is to “advance excellence in public finance,” fairly screams: “State and local governments should not issue P.O.B.s.”
Or
“They’re borrowing money and basically putting it into the market and gambling,” he said.
And poor Shewmaker…
“Ms. Shewmaker voting against it because she considered the plan a gimmick to avoid putting the matter before voters, who she believed weren’t likely to approve a deal that would increase West Covina’s debt sixfold.”
Well, that’s why she’s EX-city council member Shewmaker. Wouldn’t go along with the criminal Ponzi scheme. You can bet none of the crooks on our city council will make that “mistake.” I bet that’s part of the reason old Randy Stone got the boot, wouldn’t play the game the corrupt unions demanded. He wouldn’t go along with a sales tax increase or a POB. It’s no surprise he lost.
And you can bet none of the local media will mention any of what Walsh touched on if they bother covering it at all. The local media will just parrot what the bureaucrats tell them.
And I doubt you will get any response from you city council member. I have emailed all of them twice regarding making recordings of the finance meetings available to the public and haven’t received any response.
These people are disgusting.
Thanks for mentioning Stone – yeah, he said the employees should “bear this burden” (the UAL), not the taxpayers. I’m afraid most people don’t listen, they just hear what they want.
And like you say, the unions run their own smear campaigns, while all the little badge bunnies stand on their hind legs begging for more.
Here’s some questions from Ron Imhoff:
Have you taken a pole of supervisors to see who absolutely won’t vote to approve the irresponsible borrowing method? Is it possible to amend the county laws (charter) to forbids using that method? Change the County charter to forbid offering any and all retirement plans to all future county employees… forced then to simply pay higher wage instead ?
No, I have not taken any poll of the county board, in fact, I have not had time to look at the agendas or the videos for their conversation. I only just recently read about it in a comment from Tammy Ritter. I’ll tell you what I’ve found out – and this is why I hate districts for Chico – if you’re not in their district, good luck getting any kind of response. Well, you might get Bill Connoly, he’s a good guy. But when I wrote to Teeter about concerns I had at my Paradise rental, he never had the decency to respond. So, it’s up to you to contact your supervisor. Let me know what you find out.
As for your other questions, I don’t know the answers, but those are all very good questions for you to ask your supervisor.
Remember what Arlo Guthrie said: One guy is crazy. Two guys are (bleep!) Now THREE guys, THAT’S a MOVEMENT! Meaning, nobody listens to one person like me, they just write me off as a crank. I need people like you to do some digging Ron. Go get ’em Tiger!