1993-2041: A SEWER BOND(S)
LEGACY UNTANGLED
Bonds are complicated financial instruments and I will try to keep it as simple as possible. As mentioned many times by people here and by City Council and Staff this Bond debt or obligation is not directly or technically the responsibility of the City.
However the City has pledged certain revenue streams to the repayment of these obligations. In the case of the CFD 93-1 (Mello-Roos) this assessment is placed on the property for services and infrastructure costs. but is not a property tax. The City has no authority as to property taxes. In the example I am using The City along with Beaumont Redevelopment Agency created, using the Joint Powers Act*, the Beaumont Finance Authority. The BFA's purpose is explained in Part 1.
*The City has also created other such entities such as the Beaumont Utility Authority, Beaumont Conservation Authority, Beaumont Successor Agency and others.
http://senweb03.senate.ca.gov/committee/standing/GOVERNANCE/GWTFinalversion2.pdf
However, a JPA can issue revenue bonds without holding an
election. State law allows a JPA to issue revenue bonds without
voter approval, provided that each of the JPA’s member agencies
adopts a separate local ordinance. A city, for example, needs
majority-voter approval to finance the expansion of its sewer plant
with revenue bonds. But if the city and a sanitary district created a
JPA, the JPA could issue the revenue bonds without voter approval
if the city council and the district’s board of directors adopted
authorizing ordinances. While local voters can force referendum
elections on these local ordinances, that rarely happens
Each and everyone of these entities has the same Executive Director in Beaumont.
So without voter approval, the newly formed
Beaumont Finance Authority
$8,500,000
1993 Revenue Bonds, Series A (Sewer Enterprise Funds)
(explained in Part i)
And then in 1996 (also explained in Part I)
$7,510,000
Beaumont Financing Authority
Local Agency Revenue Refunding Bonds, 1996 Series ASome definitions and terms are in order at this point from the
http://www.treasurer.ca.gov/cdiac/debtpubs/handbook.pdf
REFUNDING
A current refunding is a transaction where the outstanding bonds to be refunded are called and paid off within 90 days of the date of issuance of the refunding bonds.
In an advance refunding, the issuer sells new bonds and places the proceeds into an escrow account. These proceeds, along with the interest earnings that result from their investment, are used to pay off the bonds at their scheduled maturity or first call date
Federal tax law generally provides that a bond issue may be advance refunded only once (although bonds issued prior to 1986 may be advance refunded twice)
Refunding Escrow Funds are designed to pay debt service on prior obligations that cannot be redeemed immediately.
de·fea·sance
a condition on the performance of which a deed or other instrument is defeated or rendered void
Now we skip forward to 2001
AUGUST 1 2001
http://emma.msrb.org/MS182740-MS158048-MD305529.pdf
$9,790,000
Beaumont Utility Authority
Variable Rate Revenue Bonds
2001 Series A
(Wastewater Enterprise Fund)In the Official Statement:
"The Authority will lease the City's Wastewater Enterprise from the City....The Authority will finance the initial lease payment to the City with a portion of the proceeds of the Bonds. Pursuant to a Wastewater Management Agreement dated August 1 2001 between the City and the Authority, the City will maintain and operate the Wastewater Enterprise.......
......The lease payment (above) will be used by the City to refund the Finance Authority's previously issued Prior Wastewater Bonds........
....The Financing Authority has previously issued its Local Agency Refunding Bonds 1996 Series A (Sewer Enterprise Project) in the aggregate principal amount of $7.51 million, all of which is outstanding."
June 2013
Hello!! Does anyone see a problem here? This 2001 Bond to refund a 1996 Bond that IS STILL refunding a 1993 Bond is quite possibly illegal* and doesnt mature until 2041! Talk about passing the buck to future generations. You wont find this information at the CDIAC site. You wont find it at the City website. If this is the City's idea of being good stewards of the taxpayer's money, we are all in trouble. Wonder why your sewer bills are going to skyrocket? The revenue stream used to pay this debt...YOUR DEBT..not the City's, is covenanted into the Bond that funds generated by the Wastewater Enterprise, over and above operating cost be at least 125% of payments due on the bonds annually until maturity in 2041.
Can anyone tell me when Urban Logic took over the Sewer plant operations?
*see above definition of advanced refunding
