Tag Archives: Chico City Council candidates 2020

New trend – California municipalities are “leasing” city streets to pay their pension deficit – a sneaky way to get a new tax past the voters

13 Sep

I was looking at Pension Tsunami

http://www.pensiontsunami.com/

and found this recent article from Forbes about how a city can make an end run around the voters by using streets and roads as security for bonds. You have to read it to believe it. 

https://www.forbes.com/sites/ebauer/2020/09/02/forget-pension-obligation-bonds-two-cities-areno-jokeleasing-their-streets-to-fund-pensions/#3cf8ccfa2233

“They’re using a bond-issuing mechanism called ‘lease revenue bonds.’ We’re all used to cities paying for public works, stadiums, and the like by issuing bonds which are paid off by a dedicated revenue source — sewer bills, hotel taxes, etc. But lease revenue bonds are different.”

According to Charles Schwab, “Instead of issuing long-term debt, like general obligation bonds do, to finance improvements on a public facility, the municipality may enter into an arrangement that uses lease revenue bonds. Often a trust, not the municipality, issues bonds and generates revenues to pay the bonds back by leasing the facility to the municipality. The municipality will generally appropriate money during each budget session to meet the lease payment.”

General obligation bonds require voter approval, but as staff described in their sales tax measure pitch earlier this year, there are ways to get bonds without voter approval. This is just one way.

Here’s how it’s a tax – once they make this deal, they can just “appropriate money” during each budget session to make whatever payments the lender demands.  “Appropriate” is a Legalese for TAKE. If you look at the agendas for city council meetings you see an appropriation at almost every meeting. A “lease revenue bond” is how they officially pass their pension deficit onto the taxpayers – they borrow money specifically to pay their pension deficit, using city infrastructure as collateral, and then it’s OUR debt, not theirs. 

This is what Chris Constantin and Mark Orme were intending to do with the money generated from the sales tax measure they tried to put on the November ballot. They were going to “secure” bonds, using the sales tax proceeds they told us would go toward fixing streets to make the payments. You can watch Orme’s presentation regarding the bond at the June 23 meeting and Constantin’s emotional plea for the tax measure at the July 7 meeting here:

http://chico-ca.granicus.com/ViewPublisher.php?view_id=2

Nobody brought that bond up during the council discussion. When members of the public raised the question Orme actually denied it – having made a presentation that is available on tape? They were trying to pull a fast one, and they knew it. Stone rejected the proposal, ending the conversation about a tax measure for now, but he never raised the issue of the bond. I would fully expect Chico City staff to try to pull out something like this in future, and we need to let council know it’s out of the question. 

If your district is up in this election, you need to grill your candidates about the pension liability and how it will be paid.  Let the candidates know you’ve done your research, ask pointed questions. Don’t let them fake their way through another election.