Making Deadly Bonds More Interesting: Did you know that they have a “License to Kill” … Anaheim’s General Fund?
The Orange County Register’s Art Marroquin has been a busy boy in Anaheim lately. This morning he covered two subjects near and dear to the hearts of Orange Juice readers. Today both the Convention Center bonds AND the Stadium lease made the paper, with an extra side dish of Chamber of Commerce hinkiness to make the meal interesting. I’ll cover the bonds story first, and I’ll get to the Stadium article a little later.
Marroquin’s piece on the bonds is pretty good, although I can’t comment extensively on it because we have a settlement offer on the table. (For those who have missed it, I, Orange Juice Blogger Cynthia Ward, am the same person as community activist and President of CATER, Cynthia Ward. Many hats, not enough waking hours.)
The Register article covers that, sharing:
“Under the settlement, the issue would be placed on the November ballot, and city officials would disclose how much Anaheim owes on outstanding bond payments and how the money was spent, and explain how the city will avoid defaulting on any bond payments.”
Now perhaps that seems like a silly thing to put into a settlement. Why would Anaheim citizens have to wait for a legal settlement to determine how much bond debt the city carries? Or how the payments play out in the future? Wouldn’t that already be public record?
Well … it should be. Indeed, when I put in a public records request for that information weeks ago, I honestly expected to be laughed at, and told that it was on the website and I should go pound sand. Instead the City Attorney’s office has put off my request TWICE. Apparently that information is NOT readily available.
It certainly isn’t part of any training that the Council receives when they take office. I guess I always naively assumed that someone would brief newly elected officials, and say: HERE is the financial condition of the city, and HERE is where we are headed when balloon payments come due, and HERE is how we plan to pay for it. This would be especially critical when new officials take office in late December/early January and are finishing out a budget approved by their predecessors the previous June.
Yet when I asked Councilwoman and Mayoral candidate Lucille Kring [artist’s depiction at right] during a meeting in West Anaheim last week, she had no clue. Indeed, she answered me in the snottiest of manners, responding that NO she didn’t know how much bond debt the City of Anaheim carries, despite having just approved $300M in additional debt, but (in the snarkiest of tones) she sure bets *I* do!
How dare I even ask, really!
I will comment on today’s Register article only to dispute the claim that Convention Center bonds are to be covered by a 2% bed tax from hoteliers. That statement is false. The bonds will be covered by the General Fund, with what the City hopes is money generated by the 2% bed tax, only AFTER that 2% is divided up into other allocations. The ATID was formed July 20. 2010, and has morphed over time.
So, if you want to know: Of the 2% bed tax, 75% goes to marketing, and the other 25% covers transportation projects and capital projects. So only a fraction of 25% of 2% of the bed tax is supposed to cover the Convention Center expansion, AND transportation projects such as Anaheim’s portion of the $318,000,000 streetcar, AND the previous world’s-most-expensive-front-yard “Grand Plaza” space at the Convention Center.
NOW can you understand how CATER may have been concerned that the General Fund might be at risk, and be asked to cover the shortfall between their “anticipated revenues” and reality?
Should one question the City’s ability to anticipate their own bond payments, the transcript of the March 11 Council meeting shows how far off the numbers really are. During the March 11 Council meeting, Mayor Tom Tait asked Finance Director Debbie Moreno, about the cost of the bonds in repayment and annual obligation. Here is that exchange:
(Tait) Ms. Moreno, what is the total amount of the bond payments that will be paid on this?
03:47:34 (Moreno) For the Expansion and the… Parking Structure, it’s roughly $410 Million
03:47:43 (Tait) How much is it in annual payments, so if you have it like a mortgage payment, what would that be?
03:47:47 (Moreno) It averages roughly $13 Million over time, it’s a little bit less at the beginning, and then at the end, it’s… roughly $15 Million.
03:47:57 (Tait) Roughly $15 Million.
03:47:58 (Moreno) Correct.
03:47:59 (Tait) So it’s a $15 Million payment, every year…
Two things stand out about this exchange. The first is Moreno’s answer. $410 million to repay the Convention Center and the parking structure! Remember, that is just $180 million of the total $300M authorized to be floated. There is another $100 million in there for refinanced debt, 
administrative costs, and a $20 million slush fund — because borrowing with interest is a great way to beef up the General Fund and score some extra cops in an election year, right? Talk about “putting the light bill on the credit card!”
Well, the thing we have to understand is bonds don’t work like a mortgage in which one borrows $500,000 at 3% interest for 30 years and the monthly payment is $XX.xx. Bonds are sold in batches that are identified by a “CUSIP number” to identify the release. To understand the cost, you have to track each batch separately.
So when the 2014 Convention Center expansion bonds were released for a sort of pre-sale reserve, we were able to track them on the EMMA website, which serves bond buyers. (Unfortunately, the link is now gone since Citigroup dropped the issue.) The City had pre-released the following:
- CUSIP 03255LEY1 Maturity Date 05/01/2015 2% interest Principal Amount at Issuance $5,880,000
- CUSIP 03255LEZ8 Maturity Date 05/01/2016 3% interest Principal Amount at Issuance $6,7500,000
- CUSIP 03255LFA2 Maturity Date 05/01/2017 3% interest Principal Amount at Issuance $5,959,000
…and so on, for year after year.
The payments would have ranged from a low of $1,405,000 at 4% interest due in 2018 to 21,925,000 at 4.125% interest maturing in 2034, and that does indeed match Ms. Moreno’s estimation of roughly $15 million per year. But … but …
… but then there is the year 2046 when the payment was scheduled to expand to $92,345,000 in Principal at Issuance, funded at 5% interest, due 05/01/2046!! CUSIP 03255LFR5…
And this sort of thing happens with the City’s bonds over and over again! (Readers outside of Anaheim may want to check out their own cities’s records to see if anything similarly fishy is going on.) The EMMA website shows the bonds already owed thanks to decades of the City Council acting ever-so-quietly as the Anaheim Public Financing Authority. Clearly one must edit out the school bonds, but each of the lines that appears on that linked page relates to yet another bond series, each with its own debt, and many with escalating payments that have yet to come to maturity.
One of my favorites is a Lease Revenue bond for Public Improvements, dated February 1997, for the Resort expansion that provided Convention Center improvements, street improvements and the Mickey and Friends parking structure.
We have discussed that debt here at Orange Juice Blog before: our half-a-billion price tag will set Anaheim back ONE AND A HALF BILLION DOLLARS to repay, and is paid by diverting 100% of all taxes, property tax, sales tax, and TOT, from Disney’s Grand Cal Resort, Downtown Disney, and California Adventure, into the bond payments. 
That means that taxpayers lost every gain we were entitled to in Disney’s expanded empire, while Disney pockets every nickel generated by those expansions. (Oh, and Disney pockets $16 per car for the Mickey and Friends parking structure … while paying Anaheim only $825,000 per year to lease it. Who negotiated for the City in this deal — Goofy?)
Of the multiple bond series that had been released to fund that project, the February 1997 bonds don’t begin payments until 2024.09/01/2024 CUSIP 03255LAA7 will pay out $37,465,000 at 6% interest. A few years later, CUSIP 03255LAB5 will cost us $32,900,000 repaid at 5% interest. After a 10 year break, CUSIP 03255LAC3 matures on 03/01/2037 with a whopping invoice presented to the taxpayers of Anaheim, for $168,850,000 paid back with 5% interest to the investors! (TAX-FREE income, of course!)
At least that series appears to be paying out simple interest. Another set of bonds from February 1997 bought more “public improvements” using now infamous Capital Appreciation Bonds. They accrue COMPOUND INTEREST over their life, to be paid out at maturity with the principal.
This set of “CAB”s do not begin paying out until maturity dates of 2017, spanning across annual paydays for some very happy investors until the final maturity of CUSIP 03255LBX6 on 03/01/2037 which ends with a whimper, at only $1,552,768. With the exception of that final year, none of the intervening maturities will pay out at amounts ranging from $4 million to $6 million.
Remember, Compound Interest is added to those numbers — interest that has been stacking on top of itself since 1997. The biggest obligations are still AHEAD OF US — and nobody at City Hall seems to want to talk about it!
So when City Council members, enabled by staff, claim that because we can afford our payments TODAY we must surely be capable of making our payments tomorrow, they show a clear lack of understanding for how these bonds are structured. Worse, we see no attempt from our City Staff to correct or educate the very leaders tasked with making these decisions on our behalf.
NOW, perhaps, readers may finally understand why CATER felt we had no choice but to challenge the City of Anaheim, and demand that the citizens be included in these decisions. One look around the city tells us that our General Fund is failing to meet basic service levels. And, between the dual obligations of covering bonds that may or may not have escrow accounts covering them (because those have not been disclosed to the public any more than the fund balances have been shared) and the rising pension obligations of our workforce, which relies on us keeping the promise that makes the difference in whether our retired librarians live in senior communities or refrigerator boxes, a sober analysis suggests that our General Fund is going to be hammered in the future.
And the failure of the majority of the City Council even to understand what is going on — and, in Lucille Kring’s case, the failure even to want to understand — is quickly making matters even worse!
It is ALL on the line right now. One look at the bonds already threatening to crush us and it is clear something needs to change. We have no time left to wait. And so that is why we sued: partly to stop the illegal issuance of these bonds without voter approval — and partly to ensure establishment of the record necessary for voters to make an informed choice!
Well done here, Cynthia. I’m going to have to read it a few more times for it all to soak in.
You do realize “hinky” and all its derivatives is a Matty Cunningham favorite?
Gustavo, you beat me to it. In the Cunningham world people “pen” hinky quarter-truth propaganda pieces masquerading as insightful essays.
I thought that he would actually WORDSMITH the motherfuckers.
Yeah, that too. And then bestow “kudos” on members of the Kleptocracy.
Apparently the Kleptos are so illiterate that they think this is good writing.
My bad ‘tavo… I added it in the edit, thought a colorful noun was needed there. You know what it’s like being an editor and all…
And yeah I do realize that. I get a minor kick deploying the kleptos’ vocab against them.
I like the word “hinky” too much to give it up no matter who uses it. It’s not like he’s the first one who has used it. Same with “over the transom.”
Excellent work. I am now convinced that Kring is a bona fide idiot, and an arrogant one at that. Murray and Brandman aren’t too bright either, but whether they are stupid or just motivated by their puppeteer is an open question. Poor Eastman is completely lost.
So here you have hundreds of millions at stake and Tait is the only guy who has an inkling of what’s really happening and what the implications are.
P.S. That Finance Director has really put herself way, way out on a limb. Ditto the City Propagandist.
Well done & Well said Cynthia Ward…this plan is,so ‘Convoluted’…that i am not sure, that anyone at Anaheim City Hall even knows what this plan is ?….is it a addition to the, Convention Center,or is this plan an addition..to the Winchester Mystery House ?
What’s really twisted is that NONE of the details were actually described in the disclosure documents presented to the public. NONE.
Now in all fairness, the bond documents are approved BLANK. They have to be, because the Council approves them, and then they are released for pre-sale in those batches, depending on what the market appears to be looking for that day, and what is bought and sold. So there was no way to determine how those bonds would play out. But that SHOULD have been explained to the Council by Moreno, that while they do not yet KNOW what the payments will be, they are in no way to be seen as calculated like a mortgage payment, which was the Mayor’s example, that it is not a consistent payment over time, and that some years can jump dramatically. The closest Moreno got was that it starts smaller and gets a little bigger over time, but even then she offered a range between $13M and $15M…leaving out the potential for serious jumps.
The other critical information that should have been included was the big picture of where we already are! Could they not have done a chart to show “here is what we already have out there” which could EASILY have been followed by, “here are the corresponding escrow accounts where we have been stashing money in anticipation of paying these”…which is what is SUPPOSED to be happening. Since they rolled out the “experts” to discuss how close their estimates of revenues of the past had been to reality, this would be the PERFECT place to offer that info. See? Look! We guessed right, and those lines of revenues and expenses match up, there’s enough in the savings account to cover it, quit yer whinin’….and we could all have gone home.
Either there isn’t enough in the accounts to cover, or they did a poor job of conveying information to the public and the Council making those judgement calls. Since I cannot seem to get the info out of City Hall, I would vote for them having some pretty slim numbers. Indeed, I got an email immediately after filing this with Vern, from the City, asking for yet ANOTHER 2 weeks, to provide basic info that should be in a computer file or a 3-ring binder on the credenza behind someone’s desk!
Why the delay, if their disclosure would shut me up and humiliate CATER?
Cynthia, the council was not informed of any details about CABs. There was a generic statement in the docs, but no reference to which, if any of the bonds would be CABs. Sitting at that “workshop” I got the impression that Moreno didn’t have a clue what was going on – she was just saying what she was told to say.
I know from personal experience about the whole stall routine on releasing public records. It is as cynical as it can possibly be.
Would it speed things up if you gave them the link to EMMA? lol.
Details of these bonds were removed when the sale fell through.
Sorry, I meant for future annual liabilities from previous issues-
With so many intricacies to municipal bonds, one was bound to fall off the tailgate, and unfortunately it makes a BAD picture, WORSE. the bonds are often (mostly) sold at a discount to the issuers, in other words $1 Million face value (to investors) of bonds is “sold” to Citibank, Wells Fargo, etc at, say, a 5% discount, so $950,000 actually comes to the City to spend. (Don’t shoot the messenger!)
I want to be clear that when I write, it is always with the intent of making others aware so that together we can make things better. I was telling a friend recently, we have to be the biggest optimists on the planet. because week after week finds us standing at that microphone in the belief that THIS time, when we present facts and reason and logic, the light bulb will go off over the heads of City Council, and they will stop doing what they are doing and start moving Anaheim in a positive direction. We are also optimists because we believe Anaheim CAN still be moved in a positive direction.
Now, looking at the bonds released over the last few decades, and looking at the Council’s insistence upon “creating jobs” only in low wage sectors that increase the very conditions that send residents to City Hall to complain, with overcrowded parking and schools from families doubling up to make ends meet, the cars for sale and constant yard sales from folks trying to bridge the gap between what they make and what they need, and the gangs and graffiti and youth oriented crime of unattended kids whose parents work two jobs each trying to survive, doing the best they can with what they have got and praying their kids turn out OK, it needs to stop, and we need to turn it around NOW.
This is why we created CATER, because we believe Anaheim is worth fighting for and a handful of us are willing to put our lives on hold for a while and skip vacations and extras to pump money into legal fees and research and printing and all those fun little expenses nobody tells you about when you open a corporate entity. If you feel the same way, please consider joining us.
CATER now has two active (and winning) court cases in play, and a few other issues on our radar. So we are looking for partners, either financial or as volunteers. Our 501c4 non profit status does not offer tax deductibility like a 501c3 might have, but it does offer anonymity, and for many that is more important than keeping the accountant happy with a write-off.
No cash? No problem, we could use a few good men and women to help with some projects. If you can put in some time there is always something to be done around here. We have TONS of data entry stuff that needs to be done. We have meetings to be transcribed. We will be doing some canvassing of neighborhoods and flyer drops as well as booths/tables for public outreach-education, and we would like to host public meetings to start organizing neighborhood groups and get information to them about the City budget, and debunk a few little white lies that have allowed leadership to create a destructive environment in Anaheim.
So there is plenty to be done, and plenty to be paid for, and the work goes faster when we have resources. Contact me to volunteer or to get an address to send your CATER contributions to, at Cynthia@Ward-Associates.net put CATER in the subject line so I can catch it from spam if my computer doesn’t recognize you.
We are having a great deal of fun making hamburger patties from the sacred cows at City Hall, come be a part of it.
… more like cow patties ….. anyway …
What makes you think that in a vote of the people that the voters would understand any of this well enough to make an informed decision?
I don’t see why this is a relevant question.
If the reason for borrowing $300,000,000 is too complicated for the people of Anaheim too understand, then perhaps the people shouldn’t be borrowing $300,000,000.
Well it’s a good thing you have all those bureaucrats, politicians, and professional “experts to clarify things for you. Haw’s that working out in Santa Ana, by the way?
If they don’t, do you conclude that the City Council need not follow the law?
I’ll grant that any financial deal of this magnitude is by its nature complex. But as Ms. Ward points out, the central issue is the long-term cost versus its benefits. Showing the possible variances in payments as they grow over time and where the anticipated revenue resulting from the related development is really going wouldn’t be that difficult. Assuming the Anaheim Council wanted to show those facts, of course.
More unmentioned questions to ponder about the Workshop presentation- While at least SOME detail was provided about the bidding competition for design and construction for the project, HOW was the selection made, of WHO was to provide the financing? Was there any competitive process, on what basis, or why not? Does the profit on that component compare with or exceed the other two?
BBORW, I think the answers those questions may be at root of this latest Big Emergency.
It would be instructive to know who was on the review panel and whether it was, in reality, “pick a card, any card.”
My guess is that Turner was the preordained pick – for obvious reasons. I really became suspicious when the City’s public works guy went way, way out of his way to heap praise on Turner.
Well, maybe it was just his first time in front of lights, cameras, and that big an audience (Famous quote:” Look, I’m speaking Architec-y”) At least he had SOME detail about the Design Competition, and a few details (in response to Tait’s questions!) about the selection process. The subject never even came up with Moreno.
So…..this is interesting. Why did we hear from Moreno in the first place? The City Treasurer is tasked with payment of the bonds! Not the Finance Director! http://www.anaheim.net/title/City+Treasurer/default/Monthly+Portfolio+Reports/
At least, for now….until measure C and its “administrative cleanup” combines the two positions, the ONLY positions I can find in the whole City Charter that forbid overlap BECAUSE of the checks and balances provided by the two separate positions…and what do you bet once they are combined it will be Debbie Moreno doing the bonds and not the Treasurer doing Moreno’s job….
Measure C is going to turn out worse for the City of Anaheim than Measure D and E combined. It may be good for CATER itself, given how it shows the intention to manipulate the bond indenture process, but I’d gladly forego that to prevent a worse-run city.
Meanwhile, anyone who ever described Measure C as merely “technical clean-up” should be ashamed.
I think Cunningham described it as a technical clean up. Bad sign there.
Don’t let Cunningham steal the credit from our Councilman-in-training, Brandman. At the ‘special’ 8am Monday morning meeting he called (9/24/13, 01:06:25) to Strip Agendizing Power from the Mayor, that phrase was the first one out of his mouth, and may have since become his favorite. (And by now a ‘poker tell’ for public caution!)
“Technical clean up.” The new red flag warning that a new Kleptocratic heist is at hand.
A Holiday weekend, perhaps allow time to peruse this from an OC Weekly affilliate,
http://blogs.villagevoice.com/runninscared/2014/04/obamacare-sabotage.php?page=all
which I post here, from the thought that the repeated ‘necessity’ for CC expansion was to retain HIGH TICKET (free-spending) large shows, frequently MEDICAL. The opening article paragraphs about the Med Industry’s price control through HIGHEST spending on DC lobbying, made me wonder if the City has MORE to LOSE from Health Care reform (if ever!) as a CC operator, than it has to GAIN, as an employer, and I wonder if they have a position either way?
Convince me in 500 words or less.
Learn to read more than 500 words at a time.