It looks like the chickens have come home to roost for the greedy unions and their corrupt leadership.
I would like to know what happens when there is no money in the bank and it is payroll day. Does the city that cannot go bankrupt just write hot checks or give iou’s to those union guys?
It’s become an exercise in cool nerves to drive around in CA...one false move where a cop can ticket you and you’re getting a ticket. End of story. It’s probably worse elsewhere, but I notice it here. Got my first ticket in 25 years last month.
Unions and Democrats working in collusion have now exacted their time honored outcome.
How many more disasterous outcomes of Democrats and Unions conspiring together do we need? They are like teeming locusts who come together to destroy and pick clean an otherwise rich harvest field. Same outcome, over and over again.
Unions representing police officers, firefighters and other local workers find that entitlements are not free nor lasting.
http://www.dispatch.com/content/stories/local/2012/05/13/emails-suggest-confusion-over-deal.html
As interest rates plunged last year and other school districts saved taxpayers millions of dollars by refinancing bonds, New Albany school board President Mark Ryan emailed the district’s treasurer to ask about his plans.
Four minutes after receiving Ryan’s email on Sept. 19, 2011, district Treasurer Brian Ramsay forwarded it to a financial consultant who had steered the district into an exotic interest-rate swap in October 2007. That deal now stood in the way of the district’s refinancing into lower rates.
“How should I respond to my BOE President about bond refinancing?” Ramsay wrote. “Please inform me on our debt capacities and if we have any bonds available to refinance.”
But New Albany had traded away the ability to refinance, instead locking in what turned out to be a much higher, fixed rate in return for an upfront payment of $1.17 million.
Complicating things, Dexia, the Belgian bank it made the trade with, was going bankrupt, calling into question its ability to live up to its end of the deal, according to district documents obtained under the Ohio Public Records Act.“Mark (Ryan) asks a good question,” responded adviser John Payne.
“ Thankfully New Albany LSD was way ahead of these other districts and refinanced in a way that gave the district its money upfront.” The savings being locked in by the other districts “add up to pennies, or at most a couple dollars a year per household,” Payne assured the treasurer.
Still, in the same 2011 message, Payne said that, because of Dexia’s financial woes, he was already working to get the district out of the deal. That came to pass this year and cost the district $6.1 million, about $4.9 million more than it received at the start of the swap in 2007.
Throughout the life of the deal, Ramsay often turned to Payne for reassurance that the district had made the right financial move, the documents show. He relied on Payne to explain the deal to his board.In fact, when he responded to board President Ryan’s email asking about refinancing, he used Payne’s words, but under his own name:“Mark asks a good question,” Ramsay wrote to Ryan and the district superintendent.
“Thankfully New Albany LSD was way ahead of these other districts and refinanced in a way that gave the district its money upfront. Ramsay said in an interview last week that he did understand the swaps and wasn’t concerned about their safety, but that lots of professionals were involved.Last fall, Hilliard schools refinanced $15 m illion in bonds, lowering their interest rate from 5.25 percent to 2.7 percent and saving taxpayers $2.3 million.
Dublin dropped the rates on $19 million in debt from 4.9 percent to 2.8 percent, saving $1.1 million.
Ramsay could only watch. A year earlier, he had sought reassurances from Payne about the safety of the swap when the district received statements showing that the “mark-to-market value” of its deal was underwater by millions.
“As interest rates continue to fall, you appear to be more and more ‘out of the money,’" Payne emailed Ramsey in July 2010. “It means nothing unless you wish to terminate and refund the existing bonds — not something we would recommend right now.”
If interest rates had gone back up before spring 2011 and Dexia, the bank, didn’t exercise its option to swap interest rates, the district would have pocketed the upfront $1.17 million and the parties would have gone their separate ways. But instead, interest rates plunged to levels not seen going back to at least 1962, according to Bloomberg, which reports on the financial markets.
On April 15, 2011, Dexia informed Ramsay that it was exercising the “swaption,” or option to force the interest-rate swap to which the district had agreed in 2007.
“HELP. What does this mean?” Ramsay emailed Payne.By November, the reality of swapping interest rates was in the district’s mailbox in the form of an invoice from Dexia.
Dexia owed the district $17,479 for the low variable rate it was responsible for paying; the district owed Dexia $241,427 for the high fixed rate it was responsible for.
The net final bill: The district owed Dexia $223,946.And that was just for the first six months of a deal that would continue until September 2025. At that rate, it wouldn’t take long for the upfront payment the district received to be wiped out.
Dexia had another option to exercise in June this year that would have put the district on the hook for even more money. Dexia paid a total of $1.71 million up front, but after fees paid to Payne, Dexia and other consultants totaled $537,542, the district netted $1.17 million. Dexia alone kept more than $200,000 in fees.
When the first swap bill arrived in November, emails show that Ramsay was concerned whether it was for the right amount.
“Is this correct?” he emailed Payne.
“I’m sure the number is good, I just wish it were easier to understand,” Payne responded.Again, Ramsay said in an interview that he understood the bill but was just double-checking. “We got it all straightened out,” he said.
This is what he was trying to unravel: Under the contract, Dexia would pay the district a “ floating rate” based on an ever-changing swap-industry index plus 0.29 percent.
That rate would reset on Wednesday of each week and be recorded for six months. Whoever owed the other cash on the swap would settle up each June 1 and Dec. 1. And the bankrupt Belgian bank would do the calculating.
The next day, Ramsay told the district’s accounts manager to pay Dexia while he continued to press Payne on the bill’s correctness.
Three months later, the district paid a $6.1 million lump sum to terminate the deal.“We wanted to eliminate that risk (from Dexia’s poor financial condition) and still save money, and we accomplished that by getting out of it,” Ramsay said in the interview.
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From Jefferson Co, AL, to school (and muni) districts all over the country, very, very lightweight treasurers and administrators were solicited one by one by the most sophisticated banks in the country to refi existing bonds using exotic interest rate swaps...idea being that these banks would come out and make presentations to the school districts to engage in arcane financial transactions on the taxpayers' behalf that they had not the mental resources to understand. And the preposterous notion that the bankers would be doing these deals in the first place if the deals didn't benefit the banks.
All of these small-town school districts had admins who thought they were going to be heroes and in some cases, engaged in these weird deals for personal benefit of some sort.
In the main, ALL of these deals were losers.
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Training Sought for Township Fiscal Officers
Ohio’s more than 1,300 township fiscal officers reconcile bank accounts, authorize purchases and maintain financial statements, often overseeing million-dollar budgets.
Yet none is required to have even the most-basic bookkeeping training.
A proposed state law would beef up training and require ongoing education for all government-finance officers as a way to reign in corruption and mismanagement.
“One bad apple spoils the bunch, and the worms must be rooted out,” state Auditor Dave Yost wrote in a news release announcing plans last month to introduce the Fiscal Integrity Act. “Being entrusted with taxpayer dollars requires accountability and education. This bill provides both."
Townships, which are home to 40 percent of Ohio’s population, have almost twice as many errors and problems with their books as cities, an analysis of 10 years of state audit reports found.
Among 3,971 state audits of cities’ financial reports, 2.8 percent had some form of error or faulty procedure. Among townships, the review of 10,597 audits revealed 5.5 percent to be problematic.
Fiscal officers might overpay themselves, use public money for personal expenses and provide little if any documentation for transactions, such as Medicaid reimbursements, said Bob Hinkle, Ohio’s chief deputy auditor.
Smaller governments, with fewer employers to oversee operations, typically have more problems, he said. “There’s more opportunity (for fraud and errors) because there are less controls in place."
State law requires only that fiscal officers be bonded and live in the township where they work.
The Dispatch asked 1,100 of the state’s 1,308 township fiscal officers how much training they had prior to taking office and whether they thought additional training was needed.
Of the 180 responses, almost 90 percent said they had no prior experience working with government finance or bookkeeping. A third said they didn’t have any related education or experience.
This article makes a great case for why government employees should not be unionized.
Los Angeles? Going bankrupt? Are you kidding me? The movie stars and film makers will bail them out. sarc
I don’t understand how a city has to pay anything if it doesn’t have the money. How does that work?