Letter to Editor: RDA Bonds - Will money ever need to be given back?
Dennis Cooper writes an open letter to the Novato City Council and City Manager.
I will not be able to attend tonight's City Council Meeting in order to provide my public comment in person. I am emailing with the hope that my question can be answered and my concern be considered in any upcoming discussion/decisions regarding the City Office project. I have cc'd representatives from the IJ and the Patch so that if in their coverage of tonight's meeting they mention anything about public comment on the City Office agenda item, they will also be aware of the following comments.
At the January Citizens Finance Committee meeting that the Asst City Manager noted that the $6M cash that was transferred from the RDA to the City could possibly need to be given back based on how the court ruling around the closing of the RDA gets interpreted. The Asst City Manager also noted that $14.6M of bond money is secure as it involves third party investors and there could be considerable fallout on the municipal bond market if the State undid the bond. All of the above makes sense to me, but I do have a follow up question that I hope you can help me with.
While the State is unlikely to undo the bond, why don't we think there is a possibility that the bond money will need to be given back? If they might take the $6M cash, isn't it just as likely that they might take the $14.6M of proceeds from the bond sale?
The risk of being required to give back the bond proceeds given to the City from the RDA was noted during the March 22 hearing to decide to sell the bonds. Specifically, the concern was that if the legislation to close the RDA passed, it was likely the promissory notes from Feb.2011 would not be honored and the City would be required to give the bond money back to the RDA. The risk was considered low because of a lawsuit at the time to overturn the legislation and because of a second piece of pending (at the time) legislation that would have allowed a form of RDA to continue if a remittance fee were paid.
Today we know that the lawsuit failed, the RDAs have been closed, and there is no option to pay remittance fees to keep the RDA open. We also know that the County Auditor Controller is responsible for paying for the former RDA's enforceable obligations including the debt associated with the 2011 bonds. Given all of the above and that the point of the of the State closing the RDA's in the first place was to raise money, not to take on other agencies' debt, please tell us why we should have confidence that the bond money will not need to be paid back.
Until we know, not just think or have confidence, but know that the State is not going to take the bond proceeds, it is far too risky to push forward on a $12M-$15M construction project that is 100% reliant on these bond proceeds.
Please do the responsible thing and do not approve any more contracts on this project until we know the money is ours. This is not about, "the train has left the station" or "we've been talking about this for 30 years so now is the time to do it". This is a new and seemingly very real risk to the finances of our City that needs to be discussed openly and tended to before proceeding on any form of City Office project.
Sincerely,
Dennis Cooper
Novato
Bill
10:18 pm on Tuesday, February 14, 2012
At a recent Design Review meeting the Architect stated that $1 million had been subtracted from their budget to build this project. No reason was given and no explanation was offered as to where the money went.
We are also facing Gov Brown's November 2012 ballot initiative to add 1 1/2% more to the State sales tax to close the State's budget gap. If it does not pass then the State will cut the school budgets more to compensate. Novato schools will be hit hard because much of their funding comes from the State.
I for one will not support another sales tax increase, if the city center offices go forward. I believe it is prudent to postpone this project into the future until we have a clearer picture on where the economy is going and what may happen to the RDA funds, as stated by Dennis C.
mark burnham
8:27 am on Wednesday, February 15, 2012
bill of course it is prudent to watch our purse strings when there is so much uncertainty coming down the pike. it is amazing that michael frank and the council can talk about the state of the city finances being perilous and yet continue on a path to spend tens of millions on this downtown city office project. it truly boggles the mind. is this how each council member and our city manager would handle their own personal finances?
Trish Boorstein
10:28 am on Wednesday, February 15, 2012
It was great to hear Eric Lucan last night speak against the value of building these new offices. Although he praised Staff and Council for all their hard work on this, he held steadfast on his position to not spend on this project.
My Way Or The Highway !!!
7:44 am on Wednesday, February 15, 2012
You voted for the council and the new office building will go foreword. It has plenty of parking and a beautiful design. Did you know that Eric is now for it also .
Lloyd
8:03 am on Wednesday, February 15, 2012
We simply need the unambiguous answer to this question. If we have to surrender this bond money will the debt become a structural deficit issue to the entire City finances. Unless we are 110% certain are we really willing to bankrupt the City for this building?
Worry
11:25 am on Wednesday, February 15, 2012
It is imcomprehensible that the city council and city manager can talk about building city offices when we just got "finished" passing a sales tax increase to cover their $4.5mm 5 year annual budget deficit and NOW are still dealing with a $2.5 million structural budget deficit!! Add to this huge mess the fact that the city has yet to tackle the huge issue of pensions on the books the city cannot afford. Is Novato going to sit by and let this city council drive our city in to bankruptcy?
Tina McMillan
11:04 am on Wednesday, February 15, 2012
The $1 million was to come from the now defunct RDA to help pay for the downtown offices. With the RDA closing the city has to come up with $1 million more from its own budget to fund this project. The total may be closer to $20 million by the time it is complete not including the interest on the bonds or the value of the land. The city plan was to keep the RDA open in order to funnel the tax increment into new projects. In addition to losing the $1 million the RDA also paid a portion of the city manager's salary. It is not clear what other parts of the budget were funded through the RDA. We need a way to view these costs to understand how the close of the RDA affects the city's structural budget deficit of $2.5 million.
If we are going to have to return the $6 million in cash that the city took outright prior to closure of the RDA, then we are losing principal on our loan. This $6 million would have covered the purchase of an existing class B office building with ample parking, the upgrade and the move. It looks like we kept the loan with the RDA for too long and may lose even more of our investment. The money from the bonds must be spent on a capital improvement project within three years or be lost entirely. The bonds were set up this way by the council and the city manager. Dennis is correct, it makes no sense to go forward on a project of this size and cost.