California Cities To Put Up Streets As Collateral

[tabs]

The cities of West Covina and Torrance are going to sell 25 years Bonds where their streets are to be held as collateral. The cities are going to rent back their own streets for that 25 years...W Covina sold some 200M in Bonds in July and Torrance is set for their sale in October..at 350M. The money is to be used for their Pension fund liabilities.

https://www.forbes.com/sites/investor/2020/08/28/the-lunacy-of-using-city-streets-to-collateralize-new-municipal-bond-deals/#96ba7bd39c45

Can we call this scraping the bottom of the barrel?

[ckelly78z]

How do I collect if the city defaults...with a concrete saw, and wheelbarrow ?

[MRM]

What rate are the bonds offering? There’s such a demand for yield these days that investors are willing to suspend belief in order to achieve it.

[onewhippedpuppy]

I’m holding out for an airport, that sounds fun.

[wilnj]

Originally Posted by ckelly78z

How do I collect if the city defaults...with a concrete saw, and wheelbarrow ?

You put in a couple of these.

[KNS]

Maybe the cities are smarter than we give them credit for. Trying to collect will be futile and they know it.

[gogriz91]

Man that stadium the Chargers played in last Sunday looked really expensive.

[Sooner or later]

This is from the Bond Buyer article that was used for the Forbes article.

https://www.bondbuyer.com/news/city-streets-back-new-bonds-california-cities-issue-to-fund-pensions

Ultimately, the cities' general funds will pay the debt service.

“Similar to other lease-back deals, the city leases property to the financing authority, the city makes rental payments, and the financing authority makes the bond payments,” said Mike Meyer, a vice president with NHA Advisors, an advisor to the two cities. “It isn’t that common to pledge streets, but several cities have over the years to finance sizeable projects.”

The move prompted city residents to ask if the city defaults on the bonds could bondholders charge tolls on the streets to pay off the bonds.

“In our experience, the structure does not allow for investors to take control of the roads or turn them into toll roads,” Meyer said. “The remedy would be the trustee suing the city for lease payments.”

[GH85Carrera]

What they should do is sell of the the easements and utilities. Yea, that will raise some money.

[sammyg2]

Originally Posted by gogriz91

Man that stadium the Chargers played in last Sunday looked really expensive.

$5,000,000,000.00
with a "B"

that's more than twice what they spent on the Manhattan project.

[Sooner or later]

It was privately funded. It is getting some tax incentives.

[atcjorg]

Originally Posted by gogriz91

Man that stadium the Chargers played in last Sunday looked really expensive.

please get a clue "Construction on SoFi Stadium began in late 2016 and is believed to be the most expensive sports arena of its kind in history, with a price tag estimated at $5 billion. The project was privately funded by Rams ownership"

[Zeke]

In our city we just tore down a high rise that was City Hall with all the offices of a typical city of half a million. We owned it and sold the land to developers. One street over we built a new CH and it was pricey — state of the art. It was built by a private contractor and we lease the building.

Any equity we had in a CH is now nil. And the lease payments are stupendous. If we had simply taken out a loan in the form of bonds or whatever, the monthly and over all expense would have been half of the life of the lea$e.

I'm sure I can't explain why this took place.

[island911]

Originally Posted by tabs

... The money is to be used for their Pension fund liabilities.

The politicians promised themselves fat pensions.

Those pensions should be cut. Dissolved. Vaporized.

Now if those politicians had set the city up to cover those...

But they did not.

[GH85Carrera]

Originally Posted by atcjorg

please get a clue "Construction on SoFi Stadium began in late 2016 and is believed to be the most expensive sports arena of its kind in history, with a price tag estimated at $5 billion. The project was privately funded by Rams ownership"

It would be interesting to see the property tax bill on that place. Since my house is paid for, we get a bill from the county every year just for the honor of living here. Our property is just a tad under 4.99 billion less expensive.

Just what do they pay, likely nothing on the same scale as other building in the area.

[Sooner or later]

Originally Posted by GH85Carrera

It would be interesting to see the property tax bill on that place. Since my house is paid for, we get a bill from the county every year just for the honor of living here. Our property is just a tad under 4.99 billion less expensive.

Just what do they pay, likely nothing on the same scale as other building in the area.

I know they have some tax incentives. It can make sense to do so.

If they give 10 million in incentives, but is grows the tax base of new business by 50 million it is a good move.

We have a Goodyear plant in Lawton. About 2500 high paid employees. Another 1000 or so is support business. Over the last 40 years the state and city has given Goodyear about 100 million in tax incentives for expansions to over 60,000 tires a day. The local and state revenue stream has grown by the billions because of the plant.

Tulsa offered Tesla big incentives in an attempt to get the pick up truck plant. They lost this round but you can be sure they will do the same for any huge job creating opportunity that comes a knocking.

[legion]

Originally Posted by Zeke

In our city we just tore down a high rise that was City Hall with all the offices of a typical city of half a million. We owned it and sold the land to developers. One street over we built a new CH and it was pricey — state of the art. It was built by a private contractor and we lease the building.

Any equity we had in a CH is now nil. And the lease payments are stupendous. If we had simply taken out a loan in the form of bonds or whatever, the monthly and over all expense would have been half of the life of the lea$e.

I'm sure I can't explain why this took place.

I suspect that the contractor and/or new owner (lesser) had connections.

[GH85Carrera]

Originally Posted by Sooner or later

I know they have some tax incentives. It can make sense to do so.

If they give 10 million in incentives, but is grows the tax base of new business by 50 million it is a good move.

We have a Goodyear plant in Lawton. About 2500 high paid employees. Another 1000 or so is support business. Over the last 40 years the state and city has given Goodyear about 100 million in tax incentives for expansions to over 60,000 tires a day. The local and state revenue stream has grown by the billions because of the plant.

Tulsa offered Tesla big incentives in an attempt to get the pick up truck plant. They lost this round but you can be sure they will do the same for any huge job creating opportunity that comes a knocking.

I understand incentives. Tinker leases the old GM plant from the City of OKC for a dollar per year, but brings in a ton of support businesses and good jobs. Tinker brings more great jobs to OKC metro and Midwest City than can be imagined by most residents. Tinker does not pay any property taxes and I am fine with that.

I just bet almost no one really know what sort of incentives a 5 billion dollar deal received.

The same thing happens with Wal Mart all the time. They talk to a city and to build a giant super center with a zillion dollars in sales taxes but Wal Mart demands huge road improvements by the city and if the city does not jump when they want, Wal Mart will close down the store, and move just outside the city, and deal with the county or a different city. The sales tax dollars go away, but the road upgrades are paid for by the city taxpayers for decades.

[Noah930]

Originally Posted by wilnj

You put in a couple of these.

Even better ('cause we're a bunch of sporty car guys): private urban racetrack. West Covina and Torrance may not be Long Beach or Monaco, but who cares from the drivers' seats?

[RWebb]

Who wants to make up some synthetic CDOs of the streets?