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I wasn’t going to write about this matter here today, but now it appears that I should. First, for context, read this from Bloomberg News; I’ll print only the first four paragraphs, but there much to note beyond that at the link:
Citigroup Inc. terminated a deal to purchase $265 million of revenue bonds from Anaheim, California, after opponents sued over plans to expand the city’s convention center, a city spokeswoman said.
Citigroup was the lead underwriter on the bonds offered March 24, according to data compiled by Bloomberg. The bonds were rated AA- by Standard & Poor’s, according to a disclosure document. The deal was set to close May 14.
A local group that calls itself the Coalition of Anaheim Taxpayers for Economic Responsibility filed the suit May 12, alleging that the public financing authority wasn’t allowed to offer the debt because California lawmakers dissolved redevelopment agencies, one of which was a member of the financing authority.
“Unfortunately, the originally targeted investors were not willing to accept the litigation risk and chose not to proceed even though the city, the city attorney and bond counsel were of the opinion that such litigation would not likely succeed,” Anaheim spokeswoman Ruth Ruiz said by e-mail.
Scott Helfman, a spokesman for Citigroup, decined to comment on the termination.
In other words: CATER filed suit on Monday to invalidate the illegal Convention Center Expansion bonds, a deal that was to close on Wednesday. Citigroup learned of this, presumably took a look at the lawsuit, and decided not to buy the bonds after all. The City is apparently looking for other possible buyers.
We’ve just sent a letter to Anaheim City Attorney Michael Houston. Because it is a public record, there’s no reason not to publish it here as well — and in fact the interest of transparency suggests that we do so. The image of it is just above; the text is below the graphic
May 16, 2014
City Attorney, City of Anaheim
200 S. Anaheim Blvd., Anaheim 92805
[BY E-MAIL TO <email@example.com> AND CITY CLERK LINDA ANDAL <firstname.lastname@example.org>]
As you are no doubt already aware, on Monday, May 12, CATER filed suit against the City in the case of Coalition of Anaheim Taxpayers for Economic Responsibility v. City of Anaheim (Superior Court of the County of Orange Case No: 30-2014-00722291-CU-MC-CJC.) We have not yet had the opportunity to effect service of process, but I attach a conformed copy of the complaint as a courtesy. You will note that the complaint largely follows the reasoning sent to the City Council prior to its vote by Cory Briggs, Counsel for our Co-Plaintiff – a communication that the City Council chose to ignore in approving the bonds without a legally mandated vote of the electorate.
We now understand from a story in Bloomberg News, “Anaheim Says $265 Million Bond Deal Terminated by Citigroup,” that Citigroup has decided not to purchase the bonds due to “litigation risk.”
Our purpose in filing this suit has never been to block expansion for the Anaheim Convention Center, but to ensure that, if it is done, it is done lawfully, responsibly, and with the required public debate. We therefore extend to you the following offer of settlement, which may facilitate that process.
- The City will place onto the Nov. 5 general election ballot all matters legally necessary for the bond financing proposed for the Convention Center. Plaintiffs and the City will agree to abide by the outcome of a fair and certified public vote.
- The City will publish prominently and in plain English a certified and sworn accounting showing:
- All bonded indebtedness of all agencies and authorities of the City of Anaheim, including Principal Amount at Issuance and the final repayment amounts and pace of projective revenues;
- A calendar showing individual and total payment amounts due for existing and proposed bonds;
- An accounting of exactly what expenditures were funded by each existing bond, what public properties are obligated under existing Lease Revenue Bonds, and estimate life spans;
- A description of the steps the City has taken to ensure that the City will not face default, either to the bonds or to the Lease Revenue Payments, and of the present and anticipatable prospects and consequences of default on one or more of these bonds, so as to assess risk to the General Fund.
- The City will agree not to use the Anaheim Public Financing Authority for future financing requiring a positive public vote under the CA Constitution or Anaheim City Charter without first obtaining that vote.
- The City will reimburse Plaintiffs’ attorney fees and costs, the specifics of which we can discuss if your client is interesting in pursuing settlement.
I have consulted with Mr. Briggs, who informs me that IOC joins in this settlement offer. He and I will be happy to discuss this matter with you by phone, should you wish, at your earliest convenience.
Gregory A. Diamond
On behalf of CATER