According to Moodys, the nations largest issuer of municipal bonds, they are asking the question, is bankruptcy becoming a popular strategic choice for municipalities in order to deal with debt? Well they think so and and in response they will begin a wide-ranging review of municipal finances in the nation’s most populous state because as they see it, there is a growing threat of municipal insolvency. It is there contention that it expects more municipal bankruptcies and bond defaults. Recently, Stockton, San Bernardino, Mammoth Lakes have filed and now the possibility of Compton in the coming month. According to Moodys there will be more to come. The fact that their are more bankruptcy filings and bond defaults among California cities reflects an increased risk to bondholders as investors. These risk become the red flags which brings Moody’s focus of attention and an obligation to investors. As bankruptcy becomes a tool for cashed strapped cities, this requires Moody’s to reassess the financial position of all cities in California. Within a year the City of Riverside’s bond rating has decreased from an average of AAA rating to AA /A rating. Mind you this is still considered good, but the fact remains, it visually appears to be of concern.
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A decrease in bond rating to the investment community is a statement that there has been an appreciable increase in risk. Therefore, in many ways it is of concern, because a lower bond rating can mean the difference of getting a better percentage rate on borrowing, especially in times when municipalities are struggling due to lower tax revenue streams. Even if it was a 0.5% increase, it would cost more money to borrow. The other concern is “How will the debt be paid off?” Considering the fact that there will be lower tax revenues on the horizon.
If you look at the example of the US, losing its prestine AAA rating down to a not so prestine AA rating, it really matters. It is a very loud statement that there has been an appreciable increase in the risk – which might still be tiny, but it exists – that the US might one day struggle to pay back all it owes. In theory there will be a financial cost for the US government and US citizens, whose debt is priced off the interest rate paid by the government. Perhaps an additional half of a percentage point on interest rates. According to US Bank JP Morgan, over time, this could amount to an additional $100 billion of interest costs for the US economy.
As a result investors are beginning to wonder if cities are using bankruptcy as tool for their debt? It was noted that some municipalities were considering bankruptcy as a new strategy to address budget deficits and avoid obligations to bondholders. This in essence would be disastrous to the investment community.
According to Chris McKenzie, executive director of the League of California Cities, also considered a lobbying entity for cities, said, “Moody’s has an obligation to review changing circumstances, but we just suggest that their assessment of the framework and ground activities is perhaps exaggerated”. Of course if you’re a paid lobbying group for cities, what else would you say?
If you take the City of Riverside for example, and look at their monthly financials. May for example, and compare ratings in 2011 to 2012. One will find a downgrade from AAA to AA / A. Don’t get me wrong it’s still a good rating, but why the downgrade? Are we borrowing more? Are we incurring more debt? According to the City of Riverside’s Office of Economic Development we are continuing to do well in lieu of distressed economy.
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But can this be due to the fact that the City of Riverside has a continous revenue stream from our utilities, and the utilities we own? Would we consider this a false sense of security for current ratings if utilities were accessed or used inappropriately?
MONTHYL FINANCIALS MAY 2011 MONTHLY FINANCIAL MAY 2012
In Moody’s report, more than 10 percent of California cities have declared fiscal crises, with most troubled areas lying inland in the middle of the state and east of the Los Angeles area. The report also noted the potential for ratings downgrades to cities, counties, school districts throughout the state. I would imagine a downgrade as I indicated in the City of Riverside’s may be of concern and therefore a red flag of interest. Important to note, since January 2012, the City of Riverside is now using IDC Financial Publishing, Inc. for their Certificate of Deposit ratings, instead of the “A” rating system. It’s based on their unique CAMEL system.
According to them these Certificates of Deposit are rated “superior”, but really the banking institutions issuing these CD”s are rated ‘superior’. I may consider these a bit deceptive by the City. In other words, as opposed to rating the certificates of deposit, securities or investments by such institutions such as Moody’s, Fitch or Standar & Poors, IDC Publishing rates the institution or bank. IDC Financial Publishing, Inc. explanation of their rating system is as follows.
How did we get to the point of Cities filing for bankruptcy? The state of the economy for one thing, uncontained government spending, unsustainable employee contracts, the loss of jobs, loss of industry, the cost of doing business. No jobs paying their mortgage becomes an issue. The loss of their homes. Homes in terms of taxes don’t produce income for municipalities, in terms of property taxes, utility taxes; people don’t spend therefore less sales taxes.
One commenter on the Business Insider laid blame toward State Government, others have blamed foreign laborers, perhaps the truth of the matter that there is truth to both perspectives.
This has nothing to do with foreign labor. It has to do with the abuse from government workers. Municipalities, counties and the State of California have made promises of multi-million dollar pensions + benefits to its employees. Partly because CA lawmakers are in bed with the Unions or are too afraid of them. Either way, the public sector union has forced the hand over the last 30 years and no one has had the balls to say enough is enough. Almost 60 cents on the tax dollar goes to pay for salaries + benefits + pensions. In any normal corporation, that would have sent red flags to cut down on payroll expenses but not in the State of CA. After all it’s other people’s money, right ? -You reap what you sow, commenter on the Business Insider, August 17, 2012
UPDATE:08/25/2012: IS CHUCK CONDER, ASSISTANT COUNCIL AIDE TO COUNCILMAN CHRIS MAC ARTHUR, THE CITY OF RIVERSIDE’S NEW JOE BIDEN?
Conder, an Airforce Veteran himself, responded to a City delegation headed in part by Councilman Paul Davis to explore a sister city relationship with Can Tho, Vietnam. The Press Enterprise states it was unclear to whom Conder was referring to, but made the statement as a City Staff Member, “These socialist nuts”. But of course, the obvious talk is about the people Vietnam. Local Riversidian’s are just calling it another Biden moment for Chuck. Councilman Chris Mac Arthur was quick to bring damage control to the situation by stating, “I think Chuck was speaking as a veteran to other veterans, certainly not in his role as a legislative field representative”. The question is, was he on City payroll during the time in question. Regardless, he is a public person and anything he does or says would over shadow the defense of being a private person.
Conder has had his behavior questioned over the year. One was when he was canvassing his neigborhood in Councilman Paul Davis’s Ward 4 on a redistricting issue. The rumour was that he wanted to remain in neighborhood to run against Davis in the next election. Another incident was allegedly a physical altercation at City Hall. Other’s have witnessed Conder referring to women who spoke publicly at City Council as “idiots” and “bitches”. Councilman Chris Mac Arthur certainly knew of this Biden moment. Back in July 27, 2010 Chuck commented regarding the vendetta the Press Enterprise had against City Hall, and the office of City Manager Brad Hudson. We are all aware of the what the cost of his legacy will have on the taxpayer in the coming years. The following is a small excerpt into the mind of Councilman Chris Mac Arthur’s Administrative Aide Chuck Conder.
Stop blasting city brass
The Press-Enterprise’s vendetta targeting Riverside City Hall, and especially the city manager’s office, has become an embarrassment to the newspaper and the city’s good name (“City manager up for review,” July 27). It is time for this to stop.
Have mistakes been made? Probably. Were corrective actions taken? Absolutely!
City Manager Brad Hudson and the city’s leadership team are doing a magnificent job leading Riverside through tough, nearly unprecedented, economic times. Our city is building and growing while maintaining a balanced budget and healthy financial reserve. Celebrate — don’t desecrate — their remarkable accomplishments.
Charles E. Conder III
08/25/2012: ONE DOG SHOT DEAD, ONE MURDERER WHO GOT AWAY.. CONFLICTING STORIES FROM RPD REGARDING THE KILLING OF A FAMILIES PET DOG.
According to Sharon Gonzales an officer told them that the dog was shot through a gate because officers needed to get into the yard to access a suspects house. Well, ok… Whereby, Lt. Toussaint stated that the officer was actually in the backyard, and shot the charging dog to protect himself. This is not the first time pets were shot dead by RPD, residents are asking the question, if a police officer needs to access homeowners yards our we to expect more of the same toward our pets? A sort of mercy killing for the greater good? What if there are small children in the back yard? Regardless, a multitude of comments transpired on this topic in the Press Enterprise. Currently no response from Chief Sergio Diaz, but as in the Bailey Laptop Caper, we are sure he is on it!
UPDATE:08/28/2012: MORE INVASIONS OF PRIVACY EXPECTED BY THE CITY OF RIVERSIDE. According to Councilman Mike Gardner, on the City’s New Neighborhood Networking site, the City of Riverside has contracted with the Department of Animal Services to canvass neighborhoods, going door to door, investigating if residents are harboring unlicensed dogs or cats. Gardner states that the vast majority of vicious and aggressive dog calls that occure in the City are for unlicensed and unaltered dogs. Therefore, I would suspect that once they are licensed, that behavior should cease. Questions? Call Coucilman Mike Gardner’s office 951-826-5242.
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UPDATE: 08/29/2012: CITY COUNCIL TUESDAY: FORMER CITY OF RIVERSIDE DEPUTY CITY ATTORNEY RAYCHELLE STERLING STATED THAT NBC HAS ACCEPTED TO DO A SERIES OF STORIES OF THE CONTAMINATED PCB SITE AG (AGRICULTURAL) PARK REGARDING THE FALSE INFORMATION THAT WAS SUBMITTED BY THE CITY TO SUCH DEPARTMENT AS THE EPA, AND THE CITY’S USE OF NON PROTECTED EMPLOYEES TO CLEAN THIS SITE.. MORE TO COME!
TMC, RATED RIVERSIDE’S MOST “SLANDEROUS” AND
MEZZSPELLED, “MISSPELLED” AND “OPINIONATED” BLOG SITE! TEMPORARILY BLOCKED BY THE CITY OF RIVERSIDE AT PUBLIC ACCESS SITES WITHIN THE CITY, THEN UNBLOCKED. I GUESS YOU CANNOT DO THAT ACCORDING TO ACLU. PROUDLY RATED ONE STAR (POSSIBLY DOWN TO ZERO FROM OUR LAST ACCOUNTS) OUT OF FIVE IN TERMS OF COMMUNITY APPROVAL RATINGS.. TMC IS NOW EXCLUSIVELY ON FILE WITH THE COUNTY OF RIVERSIDE’S DISTRICT ATTORNEY’S OFFICE FOR GOOD REASON, AND PROSSIBLY POSSIBLY ON FILE WITH THE CITY OF RIVERSIDE’S POTENTIAL SLAPP SUIT LIST, FOR GOOD REASON… WE WILL HAVE TO ASK GREGORY ABOUT THAT ONE ( OUR PEOPLE WILL HAVE TO CONTACT HIS PEOPLE)… AGAIN, THANK-YOU COMMUNITY OF RIVERSIDE AND THE CITY OF RIVERSIDE EMPLOYEE’S FOR YOUR SUPPORT! COMMENTS ALWAYS WELCOMED, ESPECIALLY SPHALL SPELL CHECKERS! EMAIL ANONYMOUSLY WITH YOUR DIRT OR CONTACT US BY THE FOLLOWING EMAIL ADDRESS! CONTRIBUTORS WILL ALWAYS BE PROTECTED… YES, WE EXPECT THE JAIL TIME FOR THAT ONE… THIRTYMILESCORRUPTION@HOTMAIL.COM