California to Sell Bonds to Make Up Huge Deficit

New York Times ^ | 7/20/02 | AP

[kattracks]

ACRAMENTO, July 20 — California plans an $11.1 billion bond sale, believed to be the largest one-time borrowing by a government agency in American history, to alleviate a deficit built during the state's electricity crisis of 2000 and 2001.

The money is intended to replace $6.5 billion California spent for electricity in the winter and spring of 2001 and to repay a $4.3 billion loan also used to buy power.

Lawmakers also are counting on the bond sale to help the state make ends meet as a $23.6 billion shortfall in the overdue state budget looms. Without the sale, the state would have to take out short-term loans to keep cash flowing.

Within weeks, Wall Street rating agencies expect to grade the riskiness of buying the California bonds.

"This is a very unique situation," Dan Aschenbach, senior vice president for Moody's Investors Service, one of three major Wall Street rating agencies, told The Los Angeles Times.

"I don't think there's any other type of bond issue that's had to be put in place to resolve an issue as significant as a $6 billion deficit to the state," Mr. Aschenbach said.

The cost of retiring the new bonds is built into utility rates, so the debt will be paid off gradually as customers of Southern California Edison, Pacific Gas & Electric and San Diego Gas & Electric get their bills over the next 20 years.

The bond sale is intended to spread the financial pain of an extraordinary year of blackout threats and astronomical power prices.

The state treasurer, Philip Angelides, had sought to sell the bonds 14 months ago, but a deal was delayed by concerns over possible lawsuits and by a dispute between the California Public Utilities Commission and the administration of Gov. Gray Davis.

Even with an "A" rating and interest rates between 5 percent and 6 percent, over the next two decades utility ratepayers will pay nearly as much in interest on the bonds as the $11.1 billion the state borrowed.

[kattracks]

ping

[no-s]

I definitely have a sinking feeling about this one.

[BlackJack]

Moody's doesn't seem to excited either. This article might
be of interest:
http://www.financialsense.com/transcriptions/Sinclair.htm

[knarf]

Let's see now ...

The market has all but disappeared and Kalifornicatia is going to sell bonds to a skitterish public to get more money so the financial mishandling can be ignored and payed for by the ones that were robbed.

Oh so that's economics 101.

[Miss Marple]

Another story on the bond issue.

[dalereed]

"It is always good economic planning for individuals, corporations or governments to finance expenditure on current account items with long-term financing, NOT!"

Most baby boomers and younger probably think it's a great idea since it's exactly how they are living their lives. Their lifestyle and personal money management is going to send us into a depression as deep as the crash of 29.

Get out of debt and be ready to take advantage of the missery profit that is waiting in the wings.

[snopercod]

Thanks. Does anyone else find is curious that the NYT and LAT are the only two papers covering the largest bond issue in history, coming right on the heels of the largest Revenue Anticipation Warrant issuance in history?

It sure seems that the press is purposely ignoring this. And why is Bill Simon silent?

[randita]

Even with an "A" rating and interest rates between 5 percent and 6 percent, over the next two decades utility ratepayers will pay nearly as much in interest on the bonds as the $11.1 billion the state borrowed.

Is there anyone home at the Simon election headquarters? If you can't make hay out of this one, you darn well don't deserve to win. Davis and his Democrat cronies, through, stupidity and incompetence have cost the taxpayers of CA $22 BILLION on this alone--not to mention the amount you're on the hook for in the $43 BILLION in overpriced energy contracts.

And the Democrats in the Legislature are hung up on budget savings which would accrue if, for example, they required Medi-Cal recipients to file eligibility forms 4 times a year instead of 1.

When does Davis hit the state employees pension fund, I wonder.

[Miss Marple]

Also interestingly, the New Tork Times article leaves out the information on WHO will be buying those bonds.

[galt-jw]

after california goes bankrupt, that is the government, there should be a few opportunities.

[Dick Bachert]

Hey, put me down for a few mil of these hot little puppies.

Davis did such a GREAT job with the power thing, this is a no-brainer -- NOT!

Next big BOMB from Whorewood: "What if they held a bond auction and nobody came?"

[Ernest_at_the_Beach]

Thanks for the ping!

calgov2002:

calgov2002: for old calgov2002 articles. 

calgov2002: for new calgov2002 articles. 

Other Bump Lists at: Free Republic Bump List Register

[Ernest_at_the_Beach]

Thanks for the ping!

Be sure and see the news on the Other BOND's issued (7 Billion of "RAW" bonds)
[CALIFORNIA] STATE CONTROLLER KATHLEEN CONNELL SELLS LARGEST ISSUE OF REVENUE ANTICIPATION WARRANTS

[Willie Green]

More fiscal mismanagement from the Kalifornia bureacrats.

It makes sense to issue bonds to build infrastructure such as new power plants.
That would be similar to taking out a mortgage for building a new home.
But you don't take out a mortgage just to pay your monthly bills --- That's BAD news and totally irresponsible.

[heleny]

why is Bill Simon silent?

Perhaps Bill Simon should generate 1992/Perot-style graphical charts. I don't remember much about those, but simple and colorful illustrations leave stronger impressions on the general population and look nicer on TV than plain speeches about dry facts and figures.