Cities issue a flood of bonds in the face of proposed state money-grab
State Treasurer Bill Lockyer released data Friday that confirmed what many local government watchers have known anecdotally for weeks: local officials went on a municipal-bond selling spree in the first two months of this year, desperate to gather as much money as possible in case Gov. Jerry Brown succeeds in his plan to eliminate redevelopment agencies. And some paid a premium to do it.
Municipal redevelopment agencies sold nearly $700 million in bonds between Jan. 1 and March 9, compared with $1.2 billion for all of 2010, according to state figures.
The rush to market comes as the Legislature considers Brown’s plan to eliminate the state’s 400 redevelopment agencies and send much of the $5 billion a year in property taxes the agencies control to counties, schools and the state.
City officials have responded with fury, saying the plan will starve local economic development, halt affordable housing programs and cost jobs.
Many redevelopment projects run on borrowed funds, which the agencies pay back using a portion of local property taxes, which naturally rise when neighborhood improvements boost land values. Brown said his plan would not touch existing debt, setting off a frenzy over the last two months as city officials sought to quickly create debt so they would remain in control of enough money to finance pending projects.
In addition to bond sales, cities have been creating financial agreements between their redevelopment agencies and the cities themselves.
Last week, for example, the Los Angeles City Council voted to tie up more than $1 billion in future redevelopment funds.
L.A. didn’t sell any more bonds, but dozens of other municipalities did, including Culver City, West Hollywood, Calexico and Galt.
What’s more, some officials worry that the agencies got less-than-fabulous interest rates. Of the 45 bonds issued, 16 had rates above 9%. Many rates on tax-exempt bonds were in the 7% range.
By contrast, for most of last year rates on tax-exempt bonds were between 5% and 6.5% and rates on taxable bonds “generally didn’t approach 10%,” according to the treasurer’s office.
“These prices are steep,” said Tom Dressler, a spokesman for Lockyer, who added that his office was concerned that cities are “flooding the market with bond sales at a time when issuers are at a disadvantage.”
But many city officials said they had no choice.
“We were concerned about the rates,” said Rochelle Swanson, mayor pro tem of the Sacramento-area town of Davis. But faced with the threat that redevelopment agencies may not be able to sell bonds in the future, she said, they decided to move forward and sell about $18 million in bonds for a conference center and parking structure, among other things.
“Everybody understands that there is a real possibility that they won’t be able to sell any more bonds, ever,” said John Shirey, who heads the California Redevelopment Assn. “I would hope that people recognize that when bonds are sold, projects are funded and people get jobs as a result.”
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