« Comcast Low-Income Internet Service |
| Pacifica Police Nab Armed Suspect in Attempted Murder »
Our esteemed colleague at Pacifica.city, Dan Stegink, dug up dicey details on the City of Pacifica deal with Deutsche Bank to finance city properties. Click the link above and take a deep breath!
Posted at 08:49 AM in News & Weather | Permalink
You can follow this conversation by subscribing to the comment feed for this post.
Digre, O'Neill, Ervin (Nihart did not vote) voted to use certificates for an unapproved expense. How did they sneak this by the voters?
SMC Harbor District pays down its debt today.
Is it POSSIBLE Pacifica City Council can learn from SMC Harbor District?
Or will it continue to spend money we do not have?
And then turn around and float another bond, until even the banks won't accept its pleas for more $$$$?
Is it POSSIBLE O'Neill, Ervin, and Digre do not understand that Pacifica cannot incur debt without at some point having to pay it off?
Is it POSSIBLE the city manager and finance director advised this as a correct use of funds?
Is this legal use of the funds?
Laurie Soca |
April 08, 2016 at 07:44 AM
Didn't AT&T sell the Crespi property to the city for a token amount of $1, so that the bond money was used to cure the insurgence of water into the property? That was the reason AT&T moved its operation out of that location.
big banker |
March 15, 2016 at 07:19 PM
"Guess who lost?"
It remains to be seen what other debts and liabilities the City Council has signed off on.
Laurie Soca |
March 15, 2016 at 07:02 PM
"Larry Rosenstein is correct. Deutsche Bank does not own the buildings. And the deal was not secret. This adoption of the 2008 Certificates of Participation (COP) could not have been done without being on a City Council agenda. And the the names of the council members who adopted this are included in the document."
It might as well have been a secret, and without a newspaper to translate and explain to the public just what was done in their name, it's disingenuous to say it's done all the time, without taking into account Pacifica's dire fiscal situation. We aren't some rich city that can just engage in any project it wishes to, such as the improvement of the frontage road known as Palmetto Avenue.
The police station and the Community Center are financially encumbered for another 20 years, and as a result, we have that much less room to maneuver.
And is using gas tax monies to service debt allowed under the law? I'd like to know the answer to that question -- and not from Wikipedia, from a reliable source, please.
Don't forget the "reserve fund" required under the terms of this enslaving agreement. A debt-fueled "reserve fund" is one that only a bank could love. No finance director as of July 2007, and this agreement was signed in 2008, and our brilliants negotiating with a global bank: Guess who lost?
Lionel Emde |
March 15, 2016 at 08:28 AM
It's sort of like a hybrid of a sales-leaseback, but a technical sale never takes place. The verbiage is the same as what Wall Street and hedge funds did with the thousands of foreclosed homes they purchased. The had X amount of rents and they securitized it and sold the future rents in small pieces to many investors.
The bank doesn't physically take possession of the properties. It's not like a note on your house, where the bank has a lien, and when you pay it off the house is 100% yours.
Chances are that in 2008 the rate on the police station bond was much higher than current bond rates.
I wonder why the city didn't just go back to First National Bank of Northern California and negotiate a higher working credit line.
The way the city mentioned this $1.5 million was as if it was found sitting in a bank account no one knew existed. Like putting on a jacket for the first time in the winter and finding a $20 bill in the pocket.
This is just one of the many reasons there is so much distrust between the the citizens of Pacifica and City Hall.
Remember the legal definition of bankruptcy is when your debts and liabilities are higher than your assets.
big banker |
March 15, 2016 at 08:00 AM
We obtained the actual 2008 Certificates document, not from the City of Pacifica, which has never allowed it to see the light of day, but from the law firm that produced it and that is aware it is a public document subject to demand.
Anyone reading the June 23, 2008 City Council minutes can see that while "Deutsche Bank" was mentioned, it was NEVER publicly divulged that we were using buildings, let alone the new police station (Public Safety Building) or Community Center buildings as collateral.
The closest the public came to finding out was the phrase "Certification by City Manager as to the rental of certain property between the City of Pacifica and the City of Pacifica Financing Authority."
[The copy above has been optimized for optical character recognition for easy text searching of the terms. If Mr. Loeb or anyone else is able to find mention of them, please post them here on Riptide.]
Both the police station and Community Center buildings have been leased until 2037 (beyond the life expectancy of four out of five City Council members and likely the buildings themselves), but the biggest problem is that this loan consolidation, designed to save us $2M in interest, actually cost us more interest than had we done nothing at all.
Likewise, the diversion of funds from the gas tax (25% of each fund is supported by such) has crippled (and will cripple) the repair of our city streets for the next 21 years.
March 15, 2016 at 07:27 AM
City Council members responsible for this disastrous debt were termed the Authority: Jim Vreeland, Julie Lancelle, Pete DeJarnatt, Sue Digre, Cal Hinton. City Administration were City Manager Stephen A. Rhodes, Kathy O’Connell, Cecilia M. Quick, Esq., Ann E. Ritzma, Van Ocampo, James Saunders.
ENORMOUS debt, little CASH FLOW. Not one of the "Authority" stopped this debt disaster. And not one of these folks would permit this to happen to their own finances.
What else has council borrowed against?
Laurie Soca |
March 15, 2016 at 06:43 AM
Larry Rosenstein is correct. Deutsche Bank does not own the buildings. And the deal was not secret. This adoption of the 2008 Certificates of Participation (COP) could not have been done without being on a City Council agenda. And the the names of the council members who adopted this are included in the document.
Certificates of Participation are a common form of cities financing public works projects. We did one in the 1980s to purchase the old AT&T building that is now the Community Center.
A COP is essentially a loan that the city takes out using public buildings as collateral. It’s like taking out a mortgage on your home when you own it free and clear, to finance some other project. And this one in 2008 is a conversion of the COP that was originally done in 2006. Think of it as refinancing your mortgage to change a high variable interest rate to a fixed rate.
The action on the council agenda is to use some of the proceeds of the COP to fund the Palmetto streetscape. Some say a better use of the funds would be to allocate all of them to meeting the city's emergency response needs.
Peter Loeb |
March 14, 2016 at 11:07 PM
Deutsche Bank is the trustee, but it doesn't own the buildings. The lease agreement is between the City of Pacifica and the City of Pacifica Financing Authority, which is another of those cases where the City Council acts as a separate agency. This is described on page 10.
The financing authority assigns its rights under the lease agreement to the trustee (page 11), which generally means that the lease money goes to Deutsche Bank for distribution to the holders of the certificates. But in case the city defaults on its obligations, Deutsche Bank as the trustee could re-let the property (page 46).
Also, this agreement wasn't done in secret; it was a consideration item at the June 23, 2008 meeting, and the main purpose was to convert to a fixed interest rate:
According to Wikipedia, the purpose of these agreements is to provide financing without requiring a bond, which would require a vote. Doing this obscures the city's debt situation, but the decision to do this goes back to at least 2006, when the city did have a finance director.
Larry Rosenstein |
March 14, 2016 at 05:21 PM
Lionel: We still own the property, but we sold the leasing right to the bank. So for 29 years from the start date of 2008, we will lease back the buildings for a total of $36 million (principal & interest) on $19.815 million. The kicker is that we committed all of our gas tax revenues to cover for that time period to cover the first 25% of the lease payment. So no street repairs for 29 years unless they are funded by other sources.
Thomas Clifford |
March 14, 2016 at 05:20 PM
Dan is the new research king!
todd bray |
March 14, 2016 at 03:56 PM
I think people should take a look at this piece. Dan Stegink is to be complimented for his hard work at reading impenetrable documents and finding words to at least partially translate them.
Deutsche Bank owns both the Community Center and the Police Station, and the city is "leasing" them from the bank. That's one takeaway stunner in the document. Another is that some sort of "reserve requirement" is being funded by this huge debt the City of Pacifica incurred in 2008. Are the city's reserves all borrowed money?
Remember that by 2008 we had no finance director to advise the council.
Then there's the "Palmetto Streetscape" project, which staff and the council plan to dump $1.5 million into at tonight's council meeting from this pot of borrowed German money.
There's a regular commenter here on Riptide who has asserted that the city is leveraged to the hilt and is essentially bankrupt. At least the first part of his assertions is true. The second part remains to be seen.
Lionel Emde |
March 14, 2016 at 08:36 AM
I'm sure this is all too sophisticated -- but doesn't that mean we're paying Deutsche Bank about $1.5 million a year to use our own civic properties? What happens if we can't pay?
Laurie Soca |
March 14, 2016 at 07:26 AM
This is only a preview. Your comment has not yet been posted.
The letters and numbers you entered did not match the image. Please try again.
As a final step before posting your comment, enter the letters and numbers you see in the image below. This prevents automated programs from posting comments.
Having trouble reading this image? View an alternate.
Comments are moderated, and will not appear until the author has approved them.
(URLs automatically linked.)
(Name and email address are required. Email address will not be displayed with the comment.)
Name is required to post a comment
Please enter a valid email address