(January 2, 2009) -- On December 31, 2008, LATimes.com published an important story on what it described as "a financial sleight of hand" used by some City Halls [LBReport.com verbiage follows] to evade Proposition 13's requirement of a public vote on more debt/taxes.
The scheme invites cities (spending more than their revenue, likely in part due to profligate pension and employee contracts) to indebt their victimized taxpayers a second time by conveying/mortgaging public assets without a public vote to get a cash bailout for current incumbents by turning the city's taxpayers into de facto future indentured servants of Wall Street investment bankers.
See if this sounds familiar:
[LATimes.com text] The city [of Oxnard] had tried, and failed, to get voters to approve a bond measure for street repair. And it had borrowed money against almost all of its public property, including a soccer stadium, three fire stations and its library -- even the Police Department's evidence-storage building.
With virtually nothing left to hock, the city came up with an ingenious way to take on more debt: It borrowed against future revenue by "selling" its streets to a city-controlled financing authority...[L]ocal governments throughout California are digging themselves deeper into debt, and many are doing so through exotic financing schemes designed to sidestep the need for voter approval...
In a typical example in the private sector, a business sells a property to raise money, then leases it back from the buyer. In the public sector, lease-backs are more a financial sleight of hand. A city council that needs to raise money might sell its city hall to a council-controlled finance authority. The council would then rent, or lease back, the building from the finance authority.
The authority, meanwhile, would issue bonds using the city hall as collateral. It would pay back the bondholders with the "rent" it collects from the city.
The sale of the building is a legal abstraction, a shuffling of paper whose purpose is to keep the debt off the city's books. That way, officials can circumvent the state Constitution's requirement of voter approval for government borrowing...
Now...here's what someone at City Hall agendized for a closed session -- the public excluded -- for this coming Tuesday, January 6 at 4:30 p.m.
Mayor and Council adjourn to closed session in the Council Lounge.
Pursuant to Section 54956.8 of the California Government Code regarding a conference with the City's real property negotiator:
Property: 4100 Donald Douglas Drive (Long Beach Municipal Airport) Long Beach, CA
City's Negotiator: Patrick H. West, City Manager
Negotiating Parties: City of Long Beach and Barclays Capital; Citi Group; Goldman Sachs; JP Morgan;
Merrill Lynch; Morgan Stanley; Fieldman Rolapp; Gardner Underwood; and Public Financial Management
Under Negotiation: Terms of Lease or Acquisition
LBReport.com urges in the strongest possible terms that the above item be removed from Closed Session discussion and either cancelled or put on the open City Council agenda for public discussion.
By its previous actions, and by its present ones, LB City Hall is showing taxpayers exactly why they should not trust city officialdom with further taxes...and certainly not with a taxpayer debt-funded bailout that would pawn public assets...and definitely not with the potential (intended or unintended) consequences entailed with LB Airport.
