Good.
Now, about avoiding something like that happening again. Who says and on what authority that the City is not financially responsible for the bonds? I've been paying pretty close attention and, while I may have missed something, all I hear are "answers" that seem to skirt the issue:
- "Private investors will take the risk."
- "The project owners will be responsible for the financial obligations of the bonds"
- "A bank will underwrite the bonds with a letter of credit"
What I have not yet heard anybody say is:
"Even if the project completely fails, the owners go bankrupt and the the bank that issues the letter of credit folds, there is absolutely no way, under any circumstances, ever, that the City of Greensboro will have any financial obligations because of these bonds. Never, ever, no way. Period."If Wade or other council members are truly interested in avoiding another fumble, they should see if they can find someone who will say that, otherwise, there is another hoodwink in the making.
Roch, I do not think the city would be responsible. But I am unclear as to whether federal taxpayers-- i.e., you and me-- will have financial obligations if the owners default on their obligations.
ReplyDeleteBut it is theoretically possible city taxpayers may be asked to foot the bill for a parking garage and other items to make the project happen. I don't think the city should spend anything to make this happen.
Thanks for commenting, Joe. I've heard several people I respect say that they don't think the City would be responsible either, but none are certain. We should be certain on this.
ReplyDeleteThe federal government's involvement seems to be limited to allocating the amounts of these bonds to the states and then providing the tax breaks on them. They are not the issuers. I have seen information that indicates that the issuance of these bonds involves the local government.
I would not assert with certainty that we are or are not on the hook. But someone with the knowledge and accountable authority should say with certainty.
I'm not sure the question is would Greensboro be on the hook if this project failed. Greensboro's not actually putting any money into it and they aren't even loaning anyone their credit card.
ReplyDeleteThe question is this: If Greensboro - and Guilford County - are given the opportunity to choose a number of projects in their first allocation to receive favorable financing to get off the ground/improve their business and stimulate the economy, should both the city and the county be giving almost their entire first allocation (About 17 out of 19 million city and 9 out of 9.8 million county) of this type of financing assistance to a single project that independent reports say couldn't service its debt with its projected revenue?
Are they blowing the opportunity to invest in more worthwhile projects? (thought frankly none of the ones that applied at the county level look likely to create A LOT of full time jobs).
What has become clear in the last few days is that city and county leaders are saying they at least didn't intend for this project to move so quickly toward such a level of approval and with so little scrutiny. How and why that happened - with attendant accusations of conflicts of interest - is still an open question.
Thanks for commenting, Joe, but my friend, you skipped right over my point and thus emphasized it -- that nobody is addressing this question with any authority. On what basis do you assert that Greensboro isn't "loaning anyone their credit card?" Says who?
ReplyDeleteThe questions of opportunity costs and others you raise are important. We still need something though more than the casual, unsubstantiated, unattributed assertions that you and others offer that Greensboro is not somewhere, not even dead last, in the chain of responsibility for the bonds.
I'm not saying the city isn't in some sense "responsible" for how they're used and for approving projects for them that may fail.
ReplyDeleteWhat I'm saying is that the way that the financing works means that Greensboro - and the county - don't have to contribute any actual money to it. That's not me saying that without attribution, that's the way this piece of the American Recovery and Reinvestment Act works. According to the Act.
I didn't write the Act and I'm not a lawyer -- but every lawyer, lawmaker and policy wonk I've talked to about it from local to county to state to federal has the same reading and it seems pretty plain.
I think you're completely right that there are ways that the consequences of how this financing is used could end up costing the city and the county money in the end - but they're not getting a bill on this end.
Joe, we are talking past each other here. I am aware that Greensboro does not have to contribute any money to the project, but that is not the same thing as saying, "local taxpayers are not liable," which you and Amanda reported.
ReplyDeleteAgain, says who? And if it is "in the act" point me to where; if it is according to "every" one you have talked to, how about reporting exactly what they said, and with attribution.
If you think my suspicions are unfounded, ask yourself why the local bond issuing authorities are involved in the process at all. What is there role?
I'll try one more time to put it another way that might make my concerns more concrete. Can you find an authoritative source who will go on the record to answer this question: "What happens to the bonds if the project goes belly up and the bank that issued the letter of credit cannot or will not meet the obligations of the bonds? Are there any circumstances under which the City would be financially obligated to the bond holders?"
Can you get an on-the-record direct answer to those questions?
Lemme see what I can do.
ReplyDeleteCool.
ReplyDeleteRoch:
ReplyDeleteHave not one but two authoritative sources saying on record basically what you've just asked them to say. Story will run early next week after I nail down one more person I've got to have for it.
what about a credit rating downgrade if the bonds fail?
ReplyDeleteAnon, that is indeed a good question. One would assume that if Greensboro truly has not liability for the bonds, then its credit rating would not be on the line, but this is too big to make assumptions. We should know that too -- for certain.
ReplyDelete