Your future mortgaged to Bond Dealers, financiers of Union Greed

If you are looking for a hidden culprit that assisted public employee unions in their drive to bankrupt America, you need go no further than the Municipal Bond Industry. These folks have churned debt for decades, and used public works projects as their primary source of income.

America needs a municipal debt moratorium. States should be looking into laws that restrict municipal debt to retiring existing debt or necessary infrastructure projects. Building unnecessary schools that look like Taj Majals does not qualify. Putting forth proposals to fund tadiums and convention centers should precipitate a jail term.

Here are some links that outline the extent of the crisis. Remember, if the press is reporting that it’s bad, then it’s REALLY bad. Also remember, this blog has been on top of this for 3-5 years.

Municipal Bonds: The Next Financial Land Mine?

America’s Municipal Debt Racket

Nearly 40 years ago the Garden State borrowed $302 million to begin constructing the Meadowlands. The goal was to pay off the bonds in 25 years. Although the project initially went according to plan, politicians couldn’t resist continually refinancing the bonds, siphoning revenues from the complex into the state budget, and using the good credit rating of the New Jersey Sports and Exposition authority to borrow for other, unsuccessful building schemes.

Today, the authority that runs the Meadowlands is in hock for $830 million, which it can’t pay back. The state, facing its own cavernous budget deficits, has had to assume interest payments—about $100 million this year on bonds that still stretch for decades.

A look at the Illinois legislature will show that a good number of them have a nice little side businesses writing legal opinions on Illinois Debt. Of course, the king of the “Legal Opinion” business, is Chapman and Cutler, which just purchased legislation that makes bond churning easier for strapped, but greedy, municipalities and school districts.

California’s redevelopment regime is an object lesson. Starting in the 1950s, the state gave localities the right to create public agencies, funded by increases in property taxes, which can issue debt to finance redevelopment. A whopping 380 such entities now exist. They collect 10% of all property taxes—nearly $6 billion annually—and they have amassed $29 billion in debt never approved by voters for projects ranging from sports facilities to concert venues to retail malls, museums and convention centers.

Critics, including taxpayer groups, say most such agency projects add little economic value. Sometimes the outcome is much worse. In 1999, Fresno conceived plans to revive its downtown area with various projects, including a baseball stadium for the minor-league Grizzlies, which it had lured from Phoenix. The city’s redevelopment agency floated some $46 million in bonds to build the stadium. But the Grizzlies fizzled in their new home, demanded a break on rent, threatening to skip town and stick taxpayers with the entire $3.4 million annual bond payment on the facility. The team is now receiving $700,000 in annual subsidies to stay in the city.

Filthy, Corrupt, and Greedy. That is what they are. You simply must become politically active, and place permanent caps on ALL GOVERNMENT SPENDING (including the debt).

Stop the Legislature from Rubber-stamping School District Greed

Some folks out there don’t like it when I call Public Education in Illinois a “Legalized Money-Laundering Scheme.” Sadly, it is a 100% accurate description of the legalized reaming of the Illinois taxpayer, all for the bloated payroll, perks, pensions and pork lathered on this fundamentally corrupt and powerful network of greedy unions, administrators, and the private interests that they have co-opted.

As more proof of the concept, I submit an article from today’s Tribune.

Schools districts may get state OK to issue bonds for buildings without voter approval
Appellate Court has barred practice, though many districts waltz around the ban anyway

Strapped for cash and taking their lumps on tax-increase measures, school districts in Chicagoland are increasingly skirting requirements for voter approval of building projects by issuing bonds that don’t require a referendum and then shifting that money from fund to fund.

Even after a state Appellate Court ruled last year that such maneuvers were improper, the Hinsdale Township High School District 86 board reached into a rainy-day fund for $4 million to install artificial turf at its two high school football fields.

Because the court held that another district inappropriately used working cash bonds on a building project, the Hinsdale board didn’t transfer the money directly. Instead it parked the cash in the district’s main education fund before moving it to building funds.

“Money-laundering,” one outraged school board member called it.

According to court filings, 95 school districts in Cook, DuPage and Will counties sold nearly $800 million in working cash bonds between 2000 and 2008 for building projects through these “back-door” means of avoiding referendums. Nearly 75 percent have been in Cook County.

State legislators are now considering a bill that would permit school districts to transfer working cash bond money to any school fund, allowing the controversial practice to become the norm. The legislation, which would be retroactive, was crafted by firms that specialize in school law and a nationally recognized bond counsel, Chapman and Cutler, which has advised schools on the practice.

State Rep. Paul Froehlich, D-Schaumburg, who served on a school board in Schaumburg District 54 from 1989 to 1993, voted against the bill, which was approved by the House and could come to a final Senate vote as early as Tuesday.

“I see it as an amnesty bill,” he said. “It’s giving amnesty to those school districts that didn’t follow the law.”

Critics of the legislation say a fund created to help districts pay bills when the state is late on its payments — as it is now — could be gutted by school districts with a proclivity to overspend. State Board of Education officials estimate 44 percent of districts will spend more than they take in this school year. As for taxpayers, the legislation would take away their right to vote down building projects through a referendum.

John Izzo, an attorney with Sraga Hauser, which represents about 100 of the state’s 869 school districts, helped draft the legislation and testified in favor of it in Springfield. He says the Appellate Court decision simply interpreted “an ambiguous provision” of the school code differently from how Chapman and Cutler and school attorneys had done in the past.

School districts could potentially be ordered to pay hundreds of thousands of dollars, if not millions, in tax refunds if the law is not changed.

School district attorneys say if the legislation doesn’t pass, schools will continue the financing method whether it be as a two-step process, three steps or even four steps.

“If (the bill) doesn’t get passed, in the future, school districts will just do it a different way,” Izzo said. “It won’t change how they do it.”

That last line should tell you just how vile, greedy, and corrupt these districts, law firms, and bond churning scum truly are. They care nothing for the law, the taxpayer, or the economy that funds their money-laundering scheme.

They only care about funding their greed and gluttony. They day is coming when they will be defeated. Pigs get fat, Hogs get slaughtered, and it is time to slaughter this hog.

Municipal Bonds are a key element of Municipal Corruption

One of the things that started me in on calling Public Education a “legalized money laundering scheme,” was my research/ reading about municipal bonds, particularly as they pertain to building schools in Illinois.

This will soon become a serious problem in Illinois, and it will rear its ugly head nationally as well.

Muni Bonds Need Better Oversight

As our nation’s leaders rush to rewrite our financial regulatory structure, they risk committing a major error if they don’t carefully consider the workings of the municipal- bond market. The opacity of this market is unrivaled and thus presents a significant threat to our economy.

Defenders of the status quo argue that the risk of large-scale municipal- bond defaults remains low, and that the market has not had an “Enron moment.” In fact, we have had a major municipal bond-related debacle at least every decade: the New York City fiscal crisis in 1975, the Washington Public Power System defaults in 1980, the Orange County California derivatives crisis in 1994, and the San Diego pension fund fraud in 2006. Just last year, New York Attorney General Andrew Cuomo imposed fines and penalties on bankers who told investors that risky securities were safe investments. Throughout every decade we have had pay-to-play scandals.

Here in River Forest, one of our recent “City Managers” angled for one of those obscene end-of-career salary bumps that are bankrupting Illinois. What did he do next after receiving his unwarranted pension and perks? He went to “consult” for Chapman and Cutler, a law firm big in the bond churning issuance business.

What happened next? Why River Forest retained Chapman to issue some bonds; that’s what. Of course, one should know that this is 100% legal in Illinois, as it is in most places, so I’m not alleging any legal wrong-doing here. I’m simply pointing out that this is real sweet deal for the insiders – Bond issuers, law firms, teacher’s unions, connected architects, builders, and Municipal officials.

School districts have raised this churning issuance scam to an art form, using bonds to suck billions from future tax payers and their future properties, all to gain “premiums” to shovel into the maw of corrupt teacher’s unions.

Wake up people. Who do you think pays for all those un-necessary Taj Mahals?