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“When I use a word,” Humpty Dumpty said in a rather scornful tone, “it means just what I choose it to mean – neither more nor less.”
Could the Anaheim City Council majority be channeling the spirit of Lewis Carroll during Public Hearings? That theory seems more believable than the “reality” offered by the cast of characters convincing us that up is down, unfunded liabilities are “investments,” revenue imbalances are “benefits,” and bond payments are a “net gain.” (Note: I do not speak for CATER here, but as an aggrieved and astonished individual.)
Really, to attend a City Council meeting (or watch one on the internet at Anaheim.net) is to be dropped down the rabbit hole, not sure precisely which way is up, but suspecting that if one drinks anything offered in that strange and backwards land, it is certain to taste like KoolAid.
Tuesday night we watched, dumbfounded, as once again the 4 member Council majority left their intellectual curiosity at the door, and accepted as Gospel truth the arguments presented by staff who understand that their jobs depend on offering their leaders political cover to do exactly as they please. Reality be damned, we don’t need to understand it, we just want to DO it. Now get in there and give us the “findings” we need to make it happen…or OFF WITH THEIR HEADS! (in this case the separation of head from body would be replaced by the separation of a paycheck and pension from the long term career of those defying the orders of the Queen and her Royal Court, also known as Closed Session.)
For those who don’t spend your every waking moment trying to calculate bond maturity totals (as the real party animals do) the basic dispute in Anaheim is NOT whether or not to expand the Convention Center. The dispute is over admitting the project lacks the payoff claimed, and disputes the financing mechanism used to do the job.
The City of Anaheim insists they are using “Lease Revenue Bonds,” a system in which a specific and dedicated revenue source is allocated to pay the cost of the bonds, without exposing the General Fund to risk of projected revenues falling short, in years of economic downturn. (Oh dear Lord, I am starting to sound like them. Make it stop.) If the City is really using that type of financing, then voters in Anaheim are not entitled to vote on the bonds. Indeed if they are using that type of funding, voters have no NEED to vote, because they/we are buffered from the negative effects of funding shortfalls. That makes sense.
(By the by — if the Bond payments were part of the Convention Center’s budget, we’d see that the CC was $10 million in debt every year. And that’s why they aren’t part of the Convention Center’s budget.)
But the Anaheim City Charter, our local Constitution, says that if taxpayers are on the hook for the payments, then we get to have a say in whether or not to take them on. In short, if this is such a great idea, then City Hall can convince Anaheim voters of the great idea. And since the average Anaheim citizen displays a lot more skepticism and curiosity than the elected leaders who accept the fruit-flavored offerings ladled out from staff’s pretty punch bowl, there is a chance that the bonds may not pass muster if the “facts” are reviewed by a bunch of people with a stake in paying for them…and little to no stake in their benefits.
While there are certainly a number of disparities in the calculations of whether the numbers work to justify the expense, and we will cover that because it is relevant, the primary reason for the push-back from CATER (and separately the push back from a Mayor NOT connected to CATER who happens to see some financial issues the same way) is that the bonds DO leave Anaheim’s General Fund on the hook, staff has point blank SAID that the bonds leave the General Fund on the hook, and the City Council majority has stuck their manicured fingers into their ears while chanting, “I can’t hear you!”
Take this exchange, between City Council members and Finance Director Debbie Moreno, during the Tuesday Public Hearing, which was lovingly captured for us by a loyal OJB reader:
03:09:06 Pub Comments closed-
03:09:11 Kring.- “Thank you. Debbie, we had a speaker, Ms. Ward, who talked about $14.5 Million coming out of the General Fund, for the expansion, can you make a comment about that?”
(Author-pretending-to-be-Editor’s Note: Actually, Mrs. Ward pointed out that the $14.5MM comes out of the General Fund NOW for the Convention Center bonds we already owe, and that amount was called a General Fund Obligation by no less than Debbie Moreno, when explaining to the Mayor during June Budget Hearings why the amount was not listed as a Convention Center expense. Since the City considers the bond payments to be an obligation of the General Fund, it leaves the Convention Center budget free of that pesky line item reduction, letting the Finance Director make the outrageous claim that the Center generates revenues of a few million dollars back to the General Fund! In reality it is a $10MM deficit. At least it would be considered a deficit by those of us who calculate a budget by subtracting the cost of a mortgage from your own home finances. If not…well I guess your monetary outcomes look equally as rosy as the City of Anaheim’s. Good luck with that by the way. And now, back to the conversation already in progress…)
03:09:11 Kring.- “Thank you. Debbie, we had a speaker, Ms. Ward, who talked about $14.5 Million coming out of the General Fund, for the expansion, can you make a comment about that?”
03:09:28 Moreno- “The General Fund will provide the lease payments, uh, for the expansion. It has done that historically, and so that’s where you see, in the Staff report, let me show you…..today, we pay, out of the General Fund, related to capital improvements, besides the 1997 Resort improvements, roughly $16.9 Million. We would expect, after the first several years, of the refinancing of the previous capital improvements, and the Resort bonds, that we’ll pay, uh, just under $15 Million in lease payments, out of the General Fund, each year.”
03:10:13 Kring- “So the General fund will be will be made, whole? There is really no money coming out of the General Fund, per se?”
Note: Where does Kring GET the statement “there is really no money coming out of the General Fund” from someone who said THREE TIMES in ONE PARAGRAPH the money comes from the General Fund?
03:10:19 Moreno- “There is money coming out of the General Fund for lease payments, but the theory is, that that’s supported by the TOT that it generates, and so, as you see in the staff report, we show that, I think it starts at roughly $24 Million a year, in incremental revenue, we get from the Convention Center, and then when you offset the debt costs, there’s a net benefit each year.”
03:10:43 Kring- “Right. Correct OK, Thank you.”
This exchange of Lucille Kring and Debbie Moreno followed an earlier rebuttal by Mrs. Kring, following a comment by yours truly, during the recently added, extra “Council Communications” immediately after Public Comments (AKA getting the last word.) The worst offenders when it comes to a visceral NEED to rebut public testimony with a nasty rejoinder are Lucille Kring and Kris Murray, although Eastman can be the gift that keeps on giving as well. I find it especially interesting that the egos involved cannot conceive of someone NOT agreeing with them.
The sign of a good leader is someone able to accept new information, and use that information to perhaps change course before the ship hits an iceberg. A leader unwilling to accept facts, statements, or public records that dispute their delusions, quickly becomes a despot. Or an object of ridicule.
Back to Lucille….
“I want to address a speaker I think is no longer in the house, because she said the Charter says you have a right to vote because these are General Obligation bonds that were used to expand the Convention Center. That is blatantly untrue! We are using Revenue Bonds. Revenue Bonds are-that- have a very specific revenue that will go to pay for the bonds. So none of that money is coming out of the General Fund. A General Obligation Bond is something like if you’re undergrounding utilities or you’re putting a sewer system into place, those things have to go to the ballot box because you are using General Fund money. This is not.
And in the mid-90’s, I want to remind everybody that the mayor voted for $500 million worth of Revenue Bonds to beautify the Resort, the last expansion of the Convention Center, which opened in January of 2000, and it built the parking structure at Disneyland. These were Revenue Bonds from the TOT of the City, and the City never defaulted, the money did not come from the General Fund.”
Ironically, not only did Kring miss that the Bonds do come from General Fund money, and should be voted on, she missed that numerous Utility bonds have been floated without public vote. Oops. Check the website EMMA and plug “Anaheim” into the search bar at the upper right corner. Do you remember voting for any of these?
I love that she also takes a cheap shot at the mayor for his approval of the 1997 Bonds. As though if he agreed to a bond once (which DOES have a dedicated revenue stream, diverting 100% of taxes from a number of Disney properties to pay for it) then he must agree with every bond. Hmm…I don’t think Tom Tait put that in his campaign literature Lucille, therefore it doesn’t really count, right?
The 4 to 1 vote on Tuesday was followed immediately by an email blast from the “Keep Kris Murray’s VIP parking status” campaign, and in the category of “Drink Me,” I hope the public outreach opportunity rife with errors is the result of one too many trips to the leftover stash of wine in the Kring post-“Pop the Cork” inventory garage, because otherwise Kris Murray’s campaign is seriously overpaying their communications people. The text here is direct from the mail blast, untouched by human hands (or those of a blogger.)
Perhaps we can help Kris out here, and take a stab at translating what she (or, que, the sub-minimum wage Mexican writers to whom this was apparently outsourced?) might have been TRYING to say, in a post-celebratory missive to those unfortunate enough to depend on her email blasts for “information” about City Hall policy updates.
“The expansion will be 100% privately Financed with funding made available by the 2% Increase in the City’s Transient Occupancy Tax (TOT) que Anaheim and Garden Grove hotels in the designated resort area self avaliado Themselves in 2010 Establishing the Anaheim Tourism Improvement District ( RITA).”
I think she may be trying to tell us the Convention Center is paid for by the private donations of a special 2% bed tax, which many of us call the ATID. I guess we could rename it “RITA” if Kris thinks it sounds prettier. In that case I would like to rename ARTIC “Christine.”
First we need to say, STOP claiming the ATID represents a choice by hoteliers to “tax themselves.” If hoteliers taxed themselves for the Tourism Improvement District, the bed tax would have remained at the 15% visitors already fork over in addition to their room rate. At 17%, hoteliers clearly chose to tax THEIR CUSTOMERS, to pay for something entirely self-serving for their own industry.
Where else do you get to do this? (OK perhaps the airlines. Or Congress.) But do other industries ring up your order while explaining, “That will be $38.00 for the Blouse, marked down from $117 (careful shopper) and of course sales tax, and our new 2% Shopping Improvement District fee which covers the cost of marketing our retail center and transportation projects that make it MORE DIFFICULT to get to our store, and does not account for the Federal funding we aren’t telling you about…that comes to a total of…”
(Um…, that comes to a total of, “Give me back my debit card.”)
Second, the ATID, which taxes visitors, not the hoteliers, ironically making it HARDER for Anaheim to compete with surrounding communities offering lower bed tax rates, DOES NOT PAY FOR THE BONDS! Let’s return to the transcript of Tuesday’s meeting, just to be sure we are not misquoting anyone.
03:26:14 Tait- “Councilmember Eastman”
03:26:15 Eastman- “Um, I have a question, Debbie, I’d like to go back to the discussion over the General Fund, and I’d like to make sure that everybody understands, what we’re talking about. Can you tell me, the T…TID, which is the self-funding, that’s coming from that special assessment, that 2%, is that kept in a separate account, is it an accounting thing, that’s just kept separate for accounting practices?”
03:26:43 Moreno- “It..the..uh..collec..the ATID assessments are actually kept in a special revenue fund, set aside, because those revenues are restricted, 75% to pay for the marketing and promotions, and 25% for, um transportation.”
03:27:01 Eastman- “OK. But then you made the statement that the whole amount of the payments, on the bonds, is coming out of General Fund. So, does that money…the part that’s set aside, to be invested in infrastructure, in the Resort District, from that…..TID? Is that invested in our General Fund, and then it comes out of the General Fund, so how do you keep track of that? That’s ..I’m confused a little bit on that.”
03:27:33 Moreno- “so what happened was, that the ATID was formed, and so the hoteliers agreed to self-assess the 2%.
75% went to marketing and promotions, 25% to transportation.”
Note: ZERO PERCENT went to bonds. This is important.
Moreno continued: “Because they did that, the General Fund no longer needed to pay for the Marketing and Promotions. So back in 2010, that was roughly equal to $6 Million. So that meant the General Fund no longer paid that operating cost. Um, and we’ve estimated if we’d had that same agreement to provide marketing and promotions, which is based on a formula of TOT, that over this term, through the end of 2046, that is savings of roughly $450 Million that the City would have otherwise have to provide. So, basically, what the ATID did was give us the opportunity to give up an operating cost, which there’s no residual value, and then reinvest in our convention Center, that is an asset, that has a residual value.”
03:28:40 Eastman- “OK, I’m still a little bit confused, basically, in the fact that, and I want to make sure that nobody else is confused, (No Gail, it’s OK, we get it. Keep up.) uh, so the money comes in, and 75% of it is going to be used, you’ve got a pot, it all comes in, 2% comes in to that pot, 75% is going out to the Visitor and Convention Bureau, for marketing purposes and everything, what happens to that 25% that’s in that pot?”
03:29:10 Moreno- “that’s for transportation uses.”
03:29:12 Eastman- “OK, so that is set aside for ANOTHER use?”
03:29:15 Moreno “Correct. So that’s over and beyond this amount.”
03:29:17 Eastman- “OK, so just for the fact, so that everybody really understands, why, it IS coming from General Fund, it’s because of that SAVINGS, that we’ve got, because we aren’t PAYING out that 75% of ATID”
03:29:33 Moreno- “Basically, yes.”
03:29:34 Eastman- “OK, got it.”
03:29:35 Moreno- “that’s correct.”
03:29:36 Eastman- “OK, well I hope that helps….anybody else… that might have been a little confused with the pots, and the percentages, and all that, so essentially, it’s basically savings, that we’re able to then… apply”
03:29:48 Moreno- “Right, and reinvest”
03:29:50 Eastman-“Right, and reinvest in our….asset…our…infrastructure. Alright . Thank you.”
Sure it took a while to get her to understand it, as it often does for Gail, but eventually she DID seem to parrot back her comprehension that the ATID pays for marketing and transportation, NOT the bonds, and the bonds are paid for from GENERAL FUND money that was once “committed” to marketing the Resort.
Disappointingly, leaders missed that we are swapping a discretionary choice to market the Resort as a non-essential function of government, and replacing it with a mandatory demand for bond payments, no longer based on a percentage of what the TOT takes in but now based on BOND PAYMENTS that MUST be paid.
(“May,” “must” — aren’t those pretty much the same thing?)
But back to Kris and the Magic Email Blast and Mushroom Factory (remember this is verbatim, spelling and sentence structure is as we received it!)
“This expansion is and stimated to create 1,860 construction jobs and 2,043 jobs During new supported annually. As well as bring in 14 new conventions and trade shows, 160,000 attendees and 450,000 attendee days. And for Anaheim taxpayers, the expansion creates total net city benefit of $ 577.3 million over the next 30 years for city services. This expansion is a huge win -win for Anaheim!”
Anyone else want to take a shot at what she might be trying to say here? I got “win -win” and “jobs”….not sure how “net benefit” of $577.3 million was calculated by staff who admitted that they failed to calculate the cost/benefit of the NAMM and Natural Products conventions, because they assumed they would find the funding for the Convention Center expansion, therefore determining whether or not the loss or retention of the two conventions would compensate for the cost of the Convention Center expansion was a moot point. Yes, I know, business majors reading this are trying to figure out how to open their office windows in order to jump. That is why the windows don’t open. Sorry.
Just to confirm, I dug out an old email exchange between a blogger who has left the building, and City staff, including Debbie Moreno and Ruth Ruiz. See for yourself if it sounds like calculating potential loss or benefit is even possible.
4. “How can you draw the conclusion that expansion of the Convention will generate additional revenue to pay off the debt obligation via TOT if you don’t track revenues from the resort area?”
City of Anaheim: “While it is difficult to segregate the TOT dollars specifically attributable to the Center, we can reference the effective doubling of TOT revenues ($45 million to $90 million) since the last Resort and Convention Center expansion (2000-2001). Since the expansion, the debt payments/obligations have stayed the same or reduced due to refinancing/pay-downs, but the TOT revenues have increased and further funded other services provided by the General Fund. Additionally, the creation of the Anaheim Tourism Improvement District (effective Dec. 2010) will provide the base funding for the next Center expansion. As the hotels in the Resort (and Platinum Triangle) have agreed to assess themselves an extra 2% on the room rent, this money is now being used to provide funding for the Visitor and Convention Bureau. The TOT dollars previously used to fund the VCB are now dedicated to Center improvements.”
Those who have been following along know that a LOT more happened in the 2000-2001 era to potentially account for the doubling of TOT, and it was not the Convention Center alone, despite Debbie Moreno’s efforts to credit the numbers that way. The 1997 Bond issuance that enabled the last Convention Center expansion called out here as 2000-2001 ALSO spawned….wait for it…little minor improvements like street rerouting, etc eventually enabling construction of Grand Californian Hotel and Spa, California Adventure (second gate) and the Downtown Disney shopping district. Could THOSE little teeny tiny differences possibly have upticked the TOT just the smallest bit to skew the numbers Moreno is attributing solely to the Convention Center expansion? Who out there still feels good about the numbers she is throwing around today? Show of hands?
But wait! There’s more!
5. “How much TOT is generate by the resort? Is the claim by SOAR that 50% of the cities revenue is generate by the resort accurate?”
City of Anaheim: “More than $80M of the TOT revenue collected in FY 2011/12 was generated by Resort Area hotels. We cannot confirm SOAR’s assertion because we do not have a sales tax, a property tax, or a business license tax revenue report specific to the Resort.”
So we don’t have reports specific to the Resort, much less specific to Convention Center driven numbers….but we will bet the City’s General Fund futures on a “W-A-G” offered by the Magic Eight Ball on Debbie Moreno’s desk?
At some point, when held accountable for the pathetically irresponsible policy choices of their administration, the Council majority will ignore their repeated attempts to leap up and over what they have been told, and claim they were relying upon staff to make their decisions. They will find at that time, as the leaders in Bell discovered the hard way, that “reliance upon staff” is not a legal defense.
And if the irresponsibility shown in these decisions has benefits their friends who in turn benefit THEM or their campaigns, the accountability may well stretch beyond angry voters with pitchforks and torches, demanding change, and revert to an industrial design table facing some form of law enforcement.
Ironically, the staff that enables the overspending is the most in danger here. While Anaheim’s residents will pay the long term consequences of a City stripped of its future revenues and unable to offer service levels of any livable nature, when it comes to a stand off for limited resources, Bond holders traditionally go toe to toe with Public Employee pensions, to see who gets the last scraps of a bankrupted agency.
So while I may have the freedom to pack up and leave Anaheim if things continue to spiral into the porcelain bowl, Debbie Moreno has nowhere else to turn for the pension she counts on to keep her from sleeping in a refrigerator box in her old age. I will bet she can find some pretty good, solid boxes behind the Convention Center’s service entrance. Maybe that will help.