For those who may have neglected to put the matter on their calenders, we'll issue another dunning reminder of tonight's RDA and City Council sessions, wherein the Council will consider the re-issance of up to $32 million in Junction Project bonds. Although we posted an earlier article on this subject, we were at the time at a complete loss to explain the meaning of this cryptic item, which was included (in varying form) in both the RDA and Council agendas:
9. Reports from the Administration:Fortunately, Ace Reporter Schwebke is johnny-on-the spot this morning with a pretty decent full report:
a. Tax Increment Revenue Refunding Bond. Proposed Resolution 2009-4 authorizing the issuance and sale of not more than $32,000,000 aggregate principal amount of its taxable revenue refunding bonds; and related matters. (Adopt/not adopt resolution – roll call vote)
• Ogden to consider reissuing up to $32 million in bondsAnd yes indeed, our speculation in our earlier article was correct, assuming Mr. Schwebke got the facts straight. Indeed, tonight's agenda item is all about the Bank of New York's revocation of the Junction bonding letter of credit, AND Boss Godfrey's proposed tax increment bailout as well.
And here's the kicker. The substitution of Wells Fargo Bank (WFB) as the new Junction letter of credit bond guarantor will cost the taxpayers at least an additional cool $1 million:
Wells Fargo plans to provide a new letter of credit to the RDA on the reissued bonds that will not exceed $32 million.And here's another interesting factor. WFB apparently wants to substitute as collateral utility franchise tax proceeds in place of BDO lease revenue income:
That includes about $1 million in bond issuance costs resulting in an additional $80,000 in debt service annually for The Junction through 2030, said Mike Goodwin, the city’s treasurer.
The bonds would be secured by lease revenue from the Salomon Center, tax increment funds and utility franchise tax proceeds. Lease revenue from Business Depot Ogden would no longer be used as collateral for the bonds.Sounds like a situation made to order for our big spending mayor, as he courts that new hotel franchise which he's been pining for, over so many years. With that BDO revenue freed up, there'll be plenty of dough to generously "incentivize" a prospective new hotelier, or any Godfrey crony who might come up with another ambitious development scheme.
And one reliable source informs us that if this new bonding scheme is adopted by the RDA and Council, the principal balance of the Junction loans will jump to an amount in excess of the price of the original bonding. So if our source is correct, after four years of paying the existing bonds down, Emerald City will be in even deeper hock than we were in 2005.
Hopefully the RDA/Council will table this matter tonight, and seek outside legal and accounting advice. If there was ever a time when the council shouldn't take Godfrey's word for something... it's now.
And we're also scratching our heads wondering how the Bank of New York can lawfully pull the plug on the existing letter of credit. Letters of credit are usually irrevocable. Irrevocability is the whole point of having letters of credit, in fact. What good is a letter of credit if it can be voluntarily revoked at any given moment? In this connection, that's one more reason the council should not jump into this. Time to for the council to confer with independent legal council, we believe. The whole story smells mighty fishy to us.
The question also arises: What's the downside (if any) if our RDA/Council simply refuses to go along with this sudden "emergency" re-fi?
That's it for now. Hopefully one of our readers will show up for tonight's neetings and come back with a report.
Lots to talk about here in advance of tonight's meetings. So what say our gentle readers about all this?
Update 8/18/09 8:18 p.m. MT: For what its worth, here's a link to Scott Schewbke's Twitter tweets. Significantly, according to Mr. Schwebke, it appears that the council has decided to table the matter, and reset it for public hearing three weeks hence:
Council formally sets public hearing for Junction bond reissuance to Sept 8.Great interim result, we think. This will give the council ample time to carefully examine the issue, and to determine independently who's telling the truth... and who's not.
45 comments:
Tabeling is good. The whole thing sounds so complicated, it makes my head hurt. That's a bad sign.
Even with the added $1 million in costs, I can't get the total to reach $32 million. According to the 2008 CAFR, the outstanding principal on the Series B and C bonds as of 30 June 2008 was $30,480,000. Principal payments during fiscal 2009 should have reduced this to $29,605,000 by now. Add on the million in fees, and you're still nearly $1.4 million short of the $32 million total.
Also, it's my understanding that the payment period for the new bonds would be 30 years. That would extend the payments out to 2039, instead of the current maturity dates which are 2026 for the Series C bonds and 2031 for the Series B bonds. I wonder if the administration wants to slow down the payments in order to free up cash for some other purpose.
If I were a member of the city council (or a legal advisor to the city council) I'd be all over the Bank of New York to clearly explain the legal basis for the revocation of its letter of credit. Is the BNY legally entitled to revoke the letter, or is there a sub-rosa voluntary arrangement we haven't heard about?
Rudi:
Municipal bonding is an arcane world to which I am [happily] a complete stranger. And I haven't seen the contract between Ogden and BONY regarding the letter of credit. But if it is not revocable [except I'd presume for cause regarding the city's performance], I wonder if BONY shouldn't be obligated to pick up the re-bonding costs its withdrawal is going to cost the city. Again, I am a total babe in the woods in this area, and the terms of the contract between BONY and Ogden City may include provisions permitting BONY to withdraw the LOC without penalty. I have no idea. Just wondering....
Godfrey's motto: Ya got to spend it to make it, who cares if it's not mine?
I while ago I wrote a letter letting people know that Mayor Godfrey was the best for Ogden and now I wonder?
I also said that the city's budget is not monopoly money but Mayor Godfrey seems to think that it is. Though I'm a loyal supporter of his, He Shouldn't rob the bank of taxpayers, to be paying all of us off.
We have always known that the construction bonds on the Junction must be renegotiated because Dave Harmer had gotten a reduced interest rate for the initial bond offering.
My gripe about the Wells Fargo deal is that U.S. taxpayer money has already been given to them just this year because they were bankrupt. Ogden taxpayers have already paid one origination fee on the first $32 million bond.
So now Ogden taxpayers are going to be twice doubledipped in order for Wells Fargo to bail Ogden out with U.S. taxpayer money. Wells Fargo is getting their very handsome origination fee plus another fee for collecting their annual payment on the money taxpayers have provided and also a new origination fee. They are also earning a very handsome interest on the money taxpayers have given to them to keep them in business in order to carry on the exploit of the public.
Wells Fargo is just using the system taxpayers have allowed to be instrumented against us.
Well Fargo is still in financial trouble so there could very well be more taxpayer money thrown into the Ogden Junction mess.
I also remember that those of us daring to question the construction costs and financing of the Junction and the viability of its actually being a legitimate expenditure of taxpayer funds were completely ignored and villified by Mayor Godfrey and his cohorts.
There are a lot more questions to be asked and answered on this refinancing arragement before the City Council agrees to anything.
I urge the City Council to move very slowly on this one. There are too many unanswered questions again for me to just go along with this refinancing.
P.S.
Dorothy, I want to add a postscript to your comments if I may -
The bank that Ogden residents owe allegiance to is Zions Bank which had made loans to Ogden for previous downtown developments and never been paid.
I understand that Zions never received payments on some $5 to $6 million loans plus no interest was ever paid on downtown Ogden buildings which were built before the Junction was started. Zions wrote the loans off as bad debts. Wise Zions loan officers!
It would be very foolish of the Ogden City Council to obligate future revenue sources from BDO or anywhere else to cover this new $32 million refinancing package from Wells Fargo.
The bottom line is that Ogden could not afford the Junction when it was built and it can less afford the Junction now than then.
I told you so!
Usually that feels good to say, however in this case, as a tax payer to the city of Ogden, it hurts like hell.
This is another example of what I have been saying for 5 years now - Mayor Godfrey is incompetent to the core and he is dishonest to the bone. In my opinion he couldn't make it as a mid level manager of a burger joint let alone as CEO/CFO/COO of a multi million dollar enterprise like Ogden, Inc.
On the BONY (I love that acronym!) issue, maybe they are withdrawing because our corrupt mayor asked them to? Maybe they would not go along with his new plan and did not want to give up the BDO income as insurance, nor think about financing still another scheme? Maybe they finally woke up to the dire straights that mayor Godfrey has put their client, Ogden City, into and couldn't pass up an opportunity to exit stage left?
And Dorothy, I'm not all that sure that Wells Fargo was in as bad of shape as you think they were. It seems to me that during the banking crisis of last year WF was one of the more healthy banks in the country and did not want the bail out money but were forced to take it by the feds? In any event, haven't they paid the bail out money back already? Should I close my accounts there?
ozboy,
The banks who got the taxpayer dollars were in the worst shape of any banks in the country- otherwise they would have not have needed the money--
As of today the FDIC is out of the money they received to guarantee payment of all our CDs until December 31 to the tune of $250,000.00 per CD.
I keep harping and I will continue to harp - GET SOME CASH OUT OF THE BANK TO LIVE ON OR YOU MAY NOT HAVE ANY GROCERY MONEY ON HAND!
Bank of America wound up being the "President's Bank" with their bailout - I have wondered if we should all move to Bank of America to be on the favored side -
Another thing - DO NOT BELIEVE ANYTHING COMING OUT OF OUR GOVERNMENT RE THE FINANCIAL MESS -
ozboy:
Wells Fargo must not be in very good shape. They have been in the process of remodeling their bank at 2700 North Washington in North Ogden for months and it looks like it may be abandoned now.
"So if our source is correct, after four years of paying the existing bonds down, Emerald City will be in even deeper hock than we were in 2005."
So where is that guy, Jay Cavendish, as I recall, who's been telling us all along that Godfrey is a genius???
Understandably, we're not hearing much cheerleading from the brain-dead Godfrey lemmings these days.
From the comments on Standard article:
To all of my fellow Ogden City tax payers - Watch out, Mayor Godfrey is up to yet another sneaky deal that is going to put us all even deeper into the black hole of debt.
It appears that what is really behind this unusual re-finance is the freeing up of the BDO guarantees so that he can use that money for still another loser insider deal with his cronies.
Mayor Godfrey will not be stopped unless and until he completely bankrupts the city or the voters wake up and throw his incompetent hind end out of office.
How can the RDA "pledge" anything but RDA development proceeds for a bond? If it's coming from franchise tax money, then it should be a general obligation bond, and require a public vote.
It's not just that this new bond appears shady, it looks to be rather straightforwardly illegal.
Stand-Ex Reporter Scott Schweebke will tweet live from tonight's city council meeting starting at 6 and tommorrow's tax entity committee meeting at noon at twitter.com/standardex
Will these be a topic at the next RDA meeting? Does Matthew Godfrey expect or demand the same right to speak at RDA meetings as he exerts at city council meetings. How much are current franchise tax proceeds and what are they currently being used for? Did Bank Of New York cancel/revoke the letter of credit because of concers about repayment? Were there conditions in the letter of credit that Ogden was not meeting? Is the mayor now obligated to use BDO funds to repay the Junction bonds since they are no longer obligated by the letter of credit?
Will tonights city council meeting be available on channel 17?
Stand-Ex Reporter Scott Schwebke will tweet live from tonight's city council meeting starting at 6 and tommorrow's tax entity committee meeting at noon at twitter.com/standardex
Hopefully a few WCF regulars will also report on tonight's meeting.
As we've already learned, Ace reporter Schewbke has trouble reconciling his off the cuff twitter posts with his major thrust... obeying and worshipping Blessed Boss Godfrey.
we've seen schwebke's tweets before ... they said council meetings are to be broadcast, why would they only do one? ... wondering if the mayor is even going to be there tonight ... it starts out with RDA meeting, then council meeting .... another TEC meeting tomorrow ... whew, busy week and it's only tuesday
just sayin
BB
As You may already know that my family owns the well Fargo bank and I'm just so glad that the mayor is on my side and not yours.
Do you think that the mayor will pay out a another 5 million is law suits when this is all said and done?
So I f I read the CAFR correctly, the franchise taxes contribute a little over 7 million to the generag fund last year.
Is this money used as collateral for the bond, or is it used to pay down the bond?
If it does pay the bond, that's a pretty big hit to the General fund which is around 40 million each year.
How do we know when the sleazoid Wells Fargo issues this new loan, that they too will not be able to call it in, in a couple of years,then re-issue the loan again with new terms and collect another $1 million fee? Who got the fee on the first loan and why was a 30 year loan written so it could be called?
The bankers are playing Godfrey for a fool. And we are paying.
The Utah Constitution appears to require a popular vote before a city can bond against property tax revenue. But I don't see any similar provision for sales or franchise tax.
excellent point made bt SE reader Pro Se under today's linked SE story:
"How can the RDA "pledge" anything but RDA development proceeds for a bond? If it's coming from franchise tax money, then it should be a general obligation bond, and require a public vote.
It's not just that this new bond appears shady, it looks to be rather straightforwardly illegal."
Definitely food for thought.
So far, there is a teacher and a dad with three kids here in council chambers
TLJ
Filling up fast ...
TLJ
Mr. Fasi Filiaga spoke first; no further comments - RDA board adjourns to closed executive meeting.
TLJ
Is there a reason this evenings session is not being shown on channel 17? The tv schedule for channel 17 does not show any broadcast time nor does any repeat show up in the listing. It is not being streamed live on the city website or on the standard-net video. Was last weeks showing a one time occurance.
I can't help but wonder if the reason behind all this isn't that these bonds were illegally obtained.
That could explain how the underwriter could recall them and why the closed session.
As David S speculated a while back, these probably should have been general obligation bonds and subject to a vote.
This could also explain why there are different sources to pay these proposed new bonds back.
Eventually we'll find out and I suspect like every other thing this mayors envolved with there's dishonesty and borderline if not outright criminality.
Schwebke says via Twitter Channel 17 is filming council meeting. Standard should air it Wednesday
Rudi,
Please check out this website - in re: the Independent Municipal Securities Firm of Lewis, Young, Robertson & Burningham.
And tell me why they would have reason to lie -- maybe THEY have the best plan to get out from under Godfrey's mess, maybe not -- that remains to be seen.
Schwebke said the council decided to table the matter, and reset a public hearing for Sept 8th.
What was said was this: It was required in this sort of restructuring situation to provide at least two (2) newspaper announcements, an announcement on the state website, THEN a public hearing was to take place for the negotiation of the final contract. SOP.
Fact was also given that the current extension given by BONY-Mellon expires on Oct 1 - so time is of the essence, because if they recieve another extension request, they might raise the interest rate to 5% - it's at their discretion.
just sayin
TLJ
These people are working for the RDA - and Godfrey wasn't even there to give the evil eye in case anybody said the wrong thing.
I heard Schwebke will be tweeting again from the taxing entity meeting Wednesday at twitter.com/standardex. Any one got any details?
TLJ
is this the same Lewis, Young, Robertson & Burningham that helped the city restructure the citys water rates. the rates that had some residents paying as much as 5000 dollars a year for water.
the same firm that helps the bd dapartment
TLJ:
What I think is happening is that the Administration has dissembled so often, has proven its word to be not good so often, has been wrong in its business judgment so often, that we've reached the point were people are automatically suspicious about anything the administration or anyone perceived to be associated with it proposes.
This is not necessarily a bad thing. People --- especially newspaper people --- ought to be suspicious about anything those in power propose. And, being suspicious, should check it out thoroughly. So should citizen activists.
But it's a fine line between being suspicious of and skeptical about on the one hand, and assuming all proposals are necessarily scams, and assuming all those deemed to be associated with the Administration [LYR&B] are dishonest scammers. I'm all for healthy skepticism, but it shouldn't slop over into the presumption of guilt across the board.
That said, I can understand a heightened level of skepticism with respect to LYRB. That firm did design the Water Horizons project, and particularly the public input elements of it. It was all to be done, we were told, in the open so all would know what they were voting for when they voted on the proposed new water rates and taxes, and precisely what they'd be getting for it. Then, without notice and in the dark secrecy [as is his preference], the Mayor altered what had been agreed to and shifted the construction of a major water tank from above Shadow Valley, more or less, to the mouth of Strong's Canyon without so much as a bye-your-leave to anyone and with no public notice.
Since LYR&B was so closely involved in designing and running the Water Horizons program, and especially its public input elements, it cannot be surprised -- now that the Mayor has, again, ignored the process and what was agreed to -- that people are reluctant to take the company at its word. I'm afraid LYR&B is learning [as many who try to work with Hizzonah have learned], the value of that old folk saying: If you lie down with dogs, you get up with fleas.
The United States Constitution, while not perfect, is the framework for an amazing system of government.
Regardless, it is much better than the one we currently use.
Dearest gentle readers Disgusted & Curmudgeon:
forgive my ignorance - I did not know the history of LYR&B, or the Horizon Water Project.
(not sure what the bd department is, disgusted)
So, the caveat "that remains to be seen" in my post above effectively (along with this public apology) covers my butt!
TLJ
p.s. the parts about the public hearing and the renewal expiration stands though, with this new bit of information: The initial LOC was short-term and expired a year ago. BONY-Mellon has given three extensions since then, while "they" found another LOC lender.
LYR & B is the only firm that Godfrey uses for his analyses..You can go back the 5 years I have been interested and LYR & B have done it all.
There were some very interesting e-mails when this was all coming together....especially when Scott Brown was the Mayor's henchman running the Da Vinci Academy behind the scenes, et cetera, et cetera, et cetera as well as all the other Ogden City financial hokus pocus including the transfer of the old American Can property to the Ogden Community Foundation which was run out of the Mayor's office..course, Scott took some time off for sexual harrassment of City employees and porn on City computers.
I am interested in what Filiaga was doing in one of the meetings meeting last night,,,anyone know? He was on the Council when this intrigue started and voted for Godfrey 110% of the time.
You need to get a copy of the computer disc that was put together to document transfers recorded in the County Clerk's office as well as other proof of what went on but that the Judges Grand Jury Panel refused to proceed with because they only want to deal with a felony such as murder.
It was not for want of trying by certain Ogden City residents that they could never get anyone to listen and look at their proof of misdeeds -- from the Utah Attorney General's office to the FBI to the IRS to the Weber County Attorney Mark de Caria to Governor Huntsman himself.
State Representative Neil Hansen (Democrat) got the Utah State Auditor's office to look at the facts that had been put together by Dorothy Littrell, CPA but in the endd not one person in office in Utah who could have helped Ogden citizens would lend a hand to help.
And the worst blow to Dorothy was a financial blow dealt by Second District Court Judge Parley Baldwin against her and her attorney, Brian Barnard, who filed the suit for her.
Brian Barnard's appeal regarding Judge Baldwin's decision regarding the payment of fees to opposing counsel in that court case will be decided around the 26th of this month.
So much for a citizen's right to fight the Mayor Godfrey system..you can fight but you cannot win in Utah. The old boys' network of government prevails.
I was part of the group taking on City Hall with Dorothy Littrell.
The last post did not mention the Judges Judicial Council which was set up to arbitrate citizen complaints against the judiciary.
We tried going that route about Judge Parley Baldwin's ruling. The Judges Judicial Council gave the same decision as every other Utah Dept. of government we went to in our fight for good government.
They saw nothing wrong with Judge Baldwin's ruling that Dorothy Littrel and the other 60 of us who signed our ccourt case papers were liable to pay some $17,000.00 in attorney fees plus Brian Barnard's being ordered to $10,000.00personally for having taken on our case.
This was the ruling from a Judge who took 40 minutes in court to give this decision without ever having spoken to either Dorothy or any of us Plaintiffs as to why we filed our suit against Matthew Godfrey and Ogden City Attorney Williams and Ogden City Recorder Mansell.
Judge Parley Baldwin set justice back 100 years for Ogden citizens
TLJ:
BD is the business development dept. in the Mayor's office.
Those of us who've been here a bit longer know LYR&B in another context: they were the consultants Hizzonah quietly hired to do a very limited [so limited as to be nearly worthless] study of the by then all but dead flatland urban gondola scheme. When Hizzonah's staff was sending email messages back and forth, trying to figure a way for UTA to funnel federal money to pay for the already completed and delivered [and promptly forgotten] study, and cautioning about the importance of not letting the Council know about the payment they were trying to arrange by having UTA launder the grant funds, it was LYR&B the administration was trying to get paid q-u-i-e-t-l-y. That all blew up whan Dan S. GRAMAed the emails, including the don't-let-the-Council-find-out one.
Note: I thought LYR&B did nothing wrong in doing the study. Consulting on this sort of thing is the business they're in, or part of it. And they did it exactly according to instructions from the administration, which meant they were told to assume that all the Administration assumed was in fact so, and to then evaluate the project on that basis. They were specifically not to examine any of the assumptions or to question them. They did exactly what they were hired to do --- I would have too. They made sure [understanding it was their reputation on the line] in the intro to their study what limits they had had to conduct it under. And then they waited a long long time to get paid as Hizzonah tried to launder money through UTA to pay them.
So while I agree recommendations from them should not be automatically dismissed as scams, I can understand the wide spread skepticism, even suspicion, and the need to look at whatever comes from LYR&B at the Administration's behest v-e-r-y c-a-r-e-f-u-l-l-y.
The local civic-minded intelligentsia should have fielded a strong, smart growth candidate during the last run, hindsight.
Lots of bulldozers above 28th street today, bull-dozers and coiffed men on ATV's with surveyors gear.
Looked like standard fire road maintenance, but who were the suits?
Curm,
By "those of us who've been here a bit longer ... " - do you mean in Ogden or on this Big Blue Marble in the Universe?
Thank you for clue-ing me in on the stickiness of the situation with LYR&B connection to the mayor (who was conspicuously absent for the RDA and Council mtgs).
I'm learning from attending these meetings and then from you more "seasoned" folk on the blog. Thanks,
TLJ
TLJ:
You ask: By "those of us who've been here a bit longer ... " - do you mean in Ogden or on this Big Blue Marble in the Universe?
Sigh. Probably both.
I've been here eight years now, and Oz and other born rhat heah in Junction City folk keep telling me that's not long enough to understand anything about how Ogden and Utah really operate.
Isn't there usually an "Acceleration Clause," or a "Call" written into every loan that is used for mortgage or bonding? I don't know about this "doubling dipping" nonsense that has DL so irate, but whenever there's a re-fi of any loan/mortgage/bond issuance then abnks going to charge for that.
This is a tough economy and since none of us sits on the Bank of New York Fiancial Board, all we're really doing is speculating as to why the cancellation of the LOC. I really don't think this is any of Godfrey's doing. Does anyone really think he's got any juice with the boys back East?
Oh yeah, I think I'll listen to Susi Orhman (sp?) when it comes to where to keep my money. I know good old Dorothy is many's guru, but not here, not now.
Blaine Carl
i like the way you try to discredit someone that has at least 10 times the knowledge of what she is talking about by throwing out a flip comment and by throwing out a partial explanation of how and why calls exist. lets me add some additional understanding about acceleration clauses or calls within a bond. no two bonds are the same. they are like insurance policies in many ways in that its what you want covered, what do you want to pay, what deductable do you want to have, what term do you want and what amount of coverage are you looking for. so in the case of bonds the presence of an acceleration clauses or calls is a way for the borrower to reduce the about of money they will be charged i.e. interest if the call is included. btw this makes the bond less attractive in the market place and more risky on the project.
often when the lenders are concerned about the ability of the creditors project to financial perform the creditors will require the call which is what i suspect was the case with the junction bonds. this allows the lender to call the note prematurely before its financial exposure to a bad deal grows any larger by waiting until maturity. there is no indication that the lender is in financial hardship and i can assure you that letters of credit are a standard service that all banks must offer their customers to stay in business. i can also assure you that bank of new york continues to issue letters of credit but they may have put additional conditions on the city or asked for more collateral which the city did not or could not come up with or that the city thought they may be able to get a better rate with better terms somewhere else.
but lets clear up the different between a letter of credit and a bond. first bonds and letters of credits are two different financial instruments and why the administration is suggesting that the two are linked is beyond me. the city could leave their bonds in place and just renegotiate the letter of credit and it does not have to be with the same lending institution. bonds are usually fixed amounts for a defined usually longer period of time. letters of credit are generally for shorter periods of time and can be fixed in the dollar amount or can function like a line of credit. both bonds and letters of credit are generally backed by assets or collateral. most letters of credit are irrevocable but only for their term or defined period of time. usually issued for 1 to 5 years. when an lc comes up for renewal the lender then presents the terms for the renewal. this can require more or less collateral or changes in the interest rates or more detailed reporting of the projects financial performance or a redefinition of the length of term or dollar amount to be loaned. I suspect this is where the city ran into problems with the bank of new york. the city did not like or could not meet the conditions set by the bank.
as for is it godfrey fault. i think so. he went back on his word to the residents and had the city bond the project, he diverted bdo funds meant to offset our water system repairs that we are now paying for with additional taxes so he could cover the financial shortfall of the project and he cut corners on costs every where from construction to financing as we are now learning. he pushed this project so hard that he was not going to let anything stop it even when it didn’t pencil out. now were all paying for it and this is just another example of it.
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