Eye-opening op-ed piece this morning from the financial juggernaut Bloomberg.com, regarding the deteriorating condition of the current US municipal bond market, which shows further evidence of being solidly "in the tank". Joe Mysak's lead paragraphs provide the gist of the story:
May 30 (Bloomberg) -- The amount of municipal bonds that have defaulted this year is already more than triple what it was for all of 2007.As Weber County Forum readers are painfully aware, our Ogden RDA board has already made its 2006 and 2007 "Junction Project" bond payments by "drawing down" against BDO revenue. And in mid-April we learned of another RDA draw down, presumably designed to satisfy the RDA's obligation toward its 2008 bond payment(s). So far the RDA board seems to have so far succeeded in scraping up the dough to keep itself current in its bond obligations, although Junction revenue hasn't been much help in this regard.
And who could doubt there's more bad news on the way?
So far this year, $736 million in municipal bonds have defaulted. That doesn't necessarily mean they didn't pay investors; they may have just drawn down reserves. That's what happens just before they stop making payments to bondholders.
During all of 2007, only $226 million in municipal bonds defaulted, according to the May edition of the "Distressed Debt Securities'' newsletter, published in Miami Lakes, Florida.
That $736 million is nowhere near the record for municipal bond defaults, to be sure. The record year, if you're counting, was 1991, when almost $5 billion went bust. That's still small potatoes compared with what happens over in the corporate-bond market, where $36.6 billion blew up in 2006, and almost $24 billion in 2007.
But wait a minute: Municipal bonds never default, do they? Or at least this is how they are perceived by individual investors, right?
We're probably going to see a lot more munis default this year and in the years to come, because of the subprime crisis and maybe, just maybe, because of the high price of a barrel of oil [emphasis added].
And remember... we got into this Junction morass because Boss Godfrey assured us that it "couldn't fail," and that the taxpayers would "never be on the hook." And previous councils bought it all, hook, line and sinker.
Whether the Junction Project is in permanent financial trouble we don't know. What we do know is that this project has suffered significant cost overruns and income shortfalls, and that so far it has plainly failed to pay its own way, leaving the taxpayers of Ogden to pick up the tab. We see no evidence, by the way, that there are prospects of this changing in the near future. We'll also add that we do agree with Mr. Mysek's proposition: Reserve drawdowns often signal genuine insolvency.
In the context of our currently sagging and unpredictable economy, it's not the time, we believe, for prudent city government bodies to indulge in frivolous and risky luxuries of any kind. Nor is it time to blindly accept the representations of glad-handed "visionaries" who peddle "can't fail" projects.
And it's in this connection we do hope our city council/RDA board members are all keeping a close watch on the Junction Problem, and remaining mindful of the fiduciary obligations owed their Ogden City constituents. At the very least, we believe that our Council/RDA elected representatives should exercise the same standard of care as they would exercise with regard to their own personal affairs. We also strongly emphasise that the same standards should be applied by our elected council members with respect to both their RDA and council roles.
And it's with all this in mind we ask this question:
"How many council/RDA board members would be dumb enough to invest (or contingently commit) a dime of their own money toward Boss Godfrey's Ice Tower Project?"
Seriously. Seems like a no-brainer to us.
There's still time to contact the city council to express your sentiments about the Ice Tower Project. We suggest you do it NOW.
And don't let the cat get your tongues. It's been quiet as a tomb here today.
8 comments:
If it's "quiet as a tomb" today, may I treat this as an open thread?
I'm preparing to write a decadent history of 25th Street, aimed at the same local audience and tourist trade as Mrs. Woodhouse's OGDEN ANECDOTES.
If anyone would like to share their favorite 25th Street tales, I'd be glad to hear from you. Please reply to q404z@yahoo.com
I don't understand the appeal of the ice tower on any level, especially as it has been proposed. Even in a great economic state, it does not make sense. Ogden is fortunate to have a great central core surrounded by relatively dense historic neighborhoods. Let's build upon that, enough with gimicks we cannot afford, we need real placemaking.
I hear Caitlin Gochnour is a good friend of Jeff Lowe's younger sister, and that she's predisposed to dole out $200 thousand in taxpayer money to Jeff Lowe because of her family friendship.
Perhaps Ms. Gochnour should just consult her conscience and recuse herself from any vote on the giant popsicle project, in view of this Ogden Ordinance provision:
2-7-3: PROHIBITED ACTS DESIGNATED:
No appointed or elected officer or employee shall:
... B. Use Position For Privileges: Use or attempt to use the officer's official position to further substantially the officer's or employee's personal economic interest or secure special privileges for the officer or others.
(1979 Code § 3.50.030; Ord. 94-56, 11-1-1994; amd. Ord. 97-82, 10-30-1997)
Gochnour should recuse herself from the council vote, if this is true.
She can do this by simply leaving the council chamber during the council vote.
Slaves, obey your human masters in everything, not only when being watched, as currying favor, but in simplicity of heart, fearing the Lord. (Colossians 3:22 NAB)
I just want to say that Rudi's front page was great today.
"How many council/RDA board members would be dumb enough to invest (or contingently commit) a dime of their own money toward Boss Godfrey's Ice Tower Project?"
It's all pretty simple, isn't it?
Why is it so hard for elected officials to see as clearly?
I hope Catlin hasn't fallen prey to some exotic form of geigarian geigery. Sometimes the mind suffer's a short circuit when pesented with a proffitable scenario based on one billionth of .0001 % of the American population that may have an interest in climbing an artificial icecicle, once. These numbers are just slightly lower than the accounting of people dumb enough to think of a five mile urban gondola circus ride,(boring at that) as a viable form of public mass transportation.
Is the potato blight going around?
Rumor:
Sorry, but Ms. Gochnour does not need to recuse herself. If your interpretation of the statute is valid, then the city could never issue a contract to anyone for anything, because so doing by the Council or Mayor would be securing "special privileges" for others... i.e. the recipient of the contract. Knowing the sister of someone seeking a grant from the city and a contract is way way too tenuous a connection to trigger the statute.
That said, I hope Councilwoman Gochnour reconsiders her [according to the SE] decision to vote for the grant, for two reasons: (a) I don't think anyone has yet seen a credible business plan from Ogden Climbing Parks that establishes the probability that, if the project is built, it will be self sustaining so far as maintenance and operating costs over, say, the next five years. And if it does not raise sufficient revenues to cover utilities, wages, insurance, maintenance, advertising, etc., the cry for the administration will be "we invested all this money in this facility; we can't let it all go for nought when only a $25K annual subsidy will keep it going." And so on and so on.
And (b): the Godfrey administration's MO is to lowball estimates of projects until it secures Council or press or public support, and then to suddenly "discover" that it's going to cost a lot more than it thought. Here are some examples.
The Administration assured the Council about four years ago that the Rec Center bonds would not require making the city responsible for their payment. On that assurance, the Council approved the project. Within months, the Administration came back to the Council and said that the city would have to guarantee payment of the construction bonds, but not to worry, it would never actually have to pay, the guarantee would just be a sign of the city's support for the project. [Sound familiar?] And as we all know, the city has now started making bond payments, which the Administration insisted it would never have to do.
And recall the first gondola proposal. Godfrey went to the SE editorial board and insisted the gondola would be built entirely by private money, not public money. On that basis, the SE endorsed the project. Withing months, it became clear that it was going to take millions in public funds to build the thing.
And recall the current ice tower proposal. At first, we were assured it would all be done with private funds. Then we were assured that, except for $200K in tax money [RAMP funds], it would all be done with private money. Then the story became, if only the city would pony up another $200K in public tax money, then all the rest would be done with private funds.
This kind of low-ball bait and switch is a common tactic of the Godfrey administration to "sell" very expensive projects. I confess, I am puzzled why Councilwoman Gochnour is apparently convinced that this time... unlike all those other times... the administration means it, and that its word is good.
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