In my last post, I pointed out that City Council members seemed “joyous” at their ability to borrow money not for some great new investment or enhancement to the city but for regular maintenance of our crumbling roads.

Imagine if your buddy held a press conference when he managed to get a loan to fix his car. And imagine further that he was celebrating this even though his car was still in worse shape than it was three years ago after the repairs.

You can’t because unless your buddy is a City Council member, he probably doesn’t think this kind of thing is all that great of a success.

I got an e-mail from Councilwoman Donna Frye after my post. She wanted to remind me that not all City Council members do either.

She said she opposed this borrowing. Remember, it’s not a normal municipal bond deal. For a city like San Diego to borrow money, and go into debt, it usually has to ask the public to vote. That is, unless the city can prove it really isn’t going into debt.

In order for the city of San Diego to borrow essentially $100 million and somehow argue it wasn’t going into debt, it had to pull off a complex deal where it leased out its own property to itself.

This was one of the many reasons Frye said she opposed the deal even though it’s helping smooth some of San Diego’s pocked streets.

Here’s the rest of her note about why she fought the deal:

– it:

  • pushes off the debt to future generations
  • adds about an additional $100 million in debt service (over what was currently owed)
  • uses city properties in a lease/leaseback deal that doesn’t really improve the leased properties
  • gets around a public vote to issue more public debt
  • and doesn’t really deal with the real problem.

I got a fair amount of feedback from the last post from people just happy that streets were getting fixed. And then, of course, I got the requisite “Well what would you do, big shot?”

I maintain that the city is dissolving and we need a comprehensive municipal recovery plan and leaders committed to carrying it out. Anything short of that right now is merely ensuring it’s going to be more painful when we’re actually forced to carry it out. I will try to elaborate soon.

Update: We found a link to a 2009 story explaining this complex borrowing scheme. And I wanted to pull out the relevant paragraphs to make sure you get the flavor of how bizarre this is.

Last spring, City Council members agreed to issue up to $108 million in bonds through an arrangement known as a lease-leaseback. The city would lease five city-owned buildings — the police headquarters, the Rose Canyon operations station and three branch libraries — to a city-controlled financing authority for $1 a year. Using those assets as collateral, the financing authority would issue bonds, the proceeds of which would finance repairs to buildings, streets, sidewalks and storm drains.

The city, meanwhile, would pay the financing authority rent to use the police station and the other properties. That money, which comes from the city’s day-to-day budget, would be used to pay back the bondholders.

You’re telling me we have to do all of this to, um, maintain streets? And that’s OK?


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