If you can read this, either the style sheet didn't load or you have an older browser that doesn't support style sheets. Try clearing your browser cache and refreshing the page.

(Fox Business)   If you're looking for a list of California municipalities that will be declaring bankruptcy in exactly 20 years, here you go   (foxbusiness.com) divider line 58
    More: Fail, franchise taxes, Franchise Tax Board, Stifel Nicolaus, Poway, municipalities, municipal bonds, fiscal years, school districts  
•       •       •

3352 clicks; posted to Business » on 08 Aug 2012 at 4:43 PM (2 years ago)   |  Favorite    |   share:  Share on Twitter share via Email Share on Facebook   more»



58 Comments   (+0 »)
   
View Voting Results: Smartest and Funniest

Archived thread

First | « | 1 | 2 | » | Last | Show all
 
2012-08-09 03:02:07 AM  

ZAZ: 40 year municipal bonds shouldn't be legal in the first place. A high school a few miles from me was funded with 40 year bonds. The building will need to be rebuilt before the construction bonds are paid off. If you can't afford it in 30 years, you can't afford it at all. At least we don't allow cities to gamble. Some banks had to give refunds after illegally selling auction rate securities to city governments.


I'd argue that a city shouldn't be able to finance anything for longer than 20.

I'd declare the bonds illegal, force the school districts to pay back the purchasers back at 5% annual interest, with said interest being paid by all the people who approved them.

tarkin1: But if the schools are right and interest rates skyrocket, they will be VERY happy - just as people that take out a 30 year mortgage at 3.6% today to buy a home worth 1 million will be laughing all the way to the bank if interest rates sky rocket up to 10%.


Depends. If interest rates shoot up and he's looking to sell, he may be forced to sell that $1M house for a lot less - because otherwise nobody will be able to afford the monthly payments. Lower interest rates enable more expensive houses.

AiryAnne: Stop building Taj Mahal style schools and athletic facilities, stop paying Administration ridiculous salaries, and stop teaching every elective that can be imagined.


Well, reading the article, I can understand some of the stuff. Landscaping to meet federal water standards, for example. However, that was a known issue that funding should have been set aside for. As for 'every elective', I'll go back to - shop SHOULD be taught in schools, and most electives aren't any more expensive than teaching a regular course.

timujin: The High School in my neighborhood was built in 1924. I'm pretty sure they'd have paid off any 40-year bonds by now.


True, but I've been in such schools and they've generally been renovated several times since then. They did it to my Jr. High while I was there. It can add up to a substantial fraction of the cost of just building a new school. Of course, it was in HS that I really saw administration bloat - went from 1 VP , 1 secretary and 4 guidance counselors to 6 VP, 8 secretaries, 20 counselors, and 10 security guards.
 
2012-08-09 09:19:16 AM  

astro716: BMFPitt: astro716: Isn't the SAT indexed every year to give an average of 1000 nationally?

No, it isn't.


Wow. I'm convinced.


If this tangent on a tangent means that much to you, why don't you spend 2 minutes verifying my statement, then?
 
2012-08-09 11:05:49 AM  

Firethorn: AiryAnne: Stop building Taj Mahal style schools and athletic facilities, stop paying Administration ridiculous salaries, and stop teaching every elective that can be imagined.

Well, reading the article, I can understand some of the stuff. Landscaping to meet federal water standards, for example. However, that was a known issue that funding should have been set aside for. As for 'every elective', I'll go back to - shop SHOULD be taught in schools, and most electives aren't any more expensive than teaching a regular course.


Since we're talking about California, here's what a $600million Taj Mahal style school looks like:
laist.com

And that's in LAUSD borders.. you know, the district with a 20-30% dropout rate year to year and the district that is lowering graduation requirements dramatically in an effort to raise graduation rates because only 60% of kids graduate. Makes sense to spend more than a billion dollars on a school facility rather than on faculty, books, tutors, etc.
 
2012-08-09 01:44:59 PM  
California operates its budget the same way the Feds do. Refuse to raise taxes because it's unpopular, but also refuse to reduce spending because that too is unpopular.

Only problem is they can't print money, so they SHOULD just be going broke and defaulting. Personally I think it would be a great thing for all the stupid lenders if CA locals DID go default and leave them with worthless paper. Banks should NOT be lending to CA at all.

The voters have only themselves to blame for electing spineless math-retarted yes-men to local and state government. They are getting exactly what they deserve.
 
2012-08-09 01:52:27 PM  

cefm: California operates its budget the same way the Feds do. Refuse to raise taxes because it's unpopular, but also refuse to reduce spending because that too is unpopular.

Only problem is they can't print money, so they SHOULD just be going broke and defaulting. Personally I think it would be a great thing for all the stupid lenders if CA locals DID go default and leave them with worthless paper. Banks should NOT be lending to CA at all.

The voters have only themselves to blame for electing spineless math-retarted yes-men to local and state government. They are getting exactly what they deserve.


To be fair, taxes were raised a ton of times in the past decade in California
 
2012-08-09 02:22:36 PM  
Man, I tell you. You live long enough on planet Earth you get to see some odd things.

Who would have thought a muni bond would become a high-yield bond in the USA?

Amazing!
 
2012-08-10 07:24:52 AM  

bhcompy: Since we're talking about California, here's what a $600million Taj Mahal style school looks like:
[laist.com image 640x427]


Now, this might sound crazy, but that doesn't look 'excessive' to me. Sure, it has a big 'lawn', but that's cheap and useful for physical education tasks. A couple sidewalks with mulch along the side, probably to control erosion, some trees for a bit of shade. Exterior stairs, lots of windows, pretty standard construction. Opinion may change on closer appearance, and the writing on the wall that I can see but can't read might be a bit of a waste, but the overall building isn't excessive(in my opinion). White painted roof/bldg saves energy expenses.

Physical plant is expensive, but doing it right can reduce expenses for decades. More normally I'll ping on administer expenses. You shouldn't need dozens of VPs, secretaries, etc...

Part of the reason for the $600M price tag would be the standard incompetence and that when built they probably had to outbid all the home-building companies for people and supplies.
 
2012-08-10 10:30:16 AM  
The bonds are self amortizing - it isn't a $1 billion balloon payment in 40 years, which is what the article entirely misses. There are sinking fund provisions that spread principal repayment out over a number of years. The school's debt service schedule will be around $45-$52 million per year during the final 20 years of the bond's life. It's a lot of money, but it won't bankrupt the school district. The Poway ISD's annual revenues are roughly $250 million today, so if you assume 2% annual increases in education funding then annual revenues will be in excess of $530 million by the time these bonds are fully retired. The biggest issue is that the school agreed to waive the call provisions in the bonds, because the accretion rate, or implied coupon, is 8% which about 200 basis points more than what they would be paying if they refunded the bonds today. It is an expensive deal for the school, no doubt.

Link

Also, keep in mind that Vallejo filed for bankruptcy in 2008 and continued to pay on their outstanding school bonds. Municipal bankruptcy does not automatically mean all of a municipality's debts will be adjusted. I challenge you to cite a school district that has defaulted on its debt obligations.
 
Displayed 8 of 58 comments

First | « | 1 | 2 | » | Last | Show all

View Voting Results: Smartest and Funniest


This thread is archived, and closed to new comments.

Continue Farking
Submit a Link »






Report