The Book of GOB

By Vladimir Kogan, University City

E-MAIL STORY

Tuesday, Jan. 6, 2009 | Make no mistake about it: Mayor Jerry Sanders' plan to sell $108 million in revenue bonds under a lease-leaseback arrangement will commit the city to millions of dollars in new spending (on debt service) each year for the next 20 to 30 years without creating any new revenue to pay for it. Given San Diego's well-known existing "structural deficit," this is something we can ill afford.

As the Los Angeles Times article you cite in your story makes clear, lease-leaseback -- and revenue bonds more generally -- make sense only when one foresees new non-property tax revenue to become available in the future. Of course, as we found out with the fictional TOT estimates from the government Office for Making Up Data used to justify the Petco Park bonds, finding new revenue is a Herculean task.

San Diego does need to address its deferred maintenance problem. But the right solution is general obligation bonds, not simply because they require a vote of the people, but because they come with increased property tax revenue that will be used to service them.

City Chief Financial Officer Jay Goldstone acknowledges as much when he says: "Typically, the only time I've experienced doing a (general obligation) bond is asking voters if they will increase their tax burden to cover the debt service. We're not asking for added revenues from the taxpayer to pay this."

His last comment should make us all wonder how the cities can afford new long-term liabilities without new long-term revenues to pay for them.

Editor´s Choice
The reader comments you won't want to miss. (Editor's Choice selection do not represent the views of the editors. They are comments that seem to add to the discussion as opposed to less productive insults or arguments.)

Vladimir, if you run for council, I'll do everything in my power to help you get elected. A lot of people are looking for leadership in San Diego, and you sure do have a great grasp of what is wrong and what can be done to fix it. Run, Vlad, run!

Posted by Fred Williams | reply to this comment
January 7, 2009 9:31 am

Using General Obligation Bonds to fund deferred maintenance items such as resurfacing parking lots and other items on the list that have a useful life of less than 40 years is felony stupid (a term coined by a former city council member many years ago). So much interest and so much debt for such a small and short-lived public benefit. I agree that a strong mayor and a responsible city council must be brave -- bite the bullet for increasing revenues and do so with progressive taxing, development fees, and service fees.

Posted by NorthParker | reply to this comment
January 10, 2009 4:00 pm

5 Comments so far on this story...

It was my understanding the Jerry Sanders was/is the reform Mayor. I know that I read that in the local newspaper, multiple times. Looks like business as usual. I suggest an appropriate San Diego cheer, " We love debt, we love to owe, we're going to borrow, and pretend we don't know."

Posted by Dale Peterson | reply to this comment
January 6, 2009 5:44 pm

"government Office for Making Up Data"--So true! When will San Diego elected officials consider proposing new income sources, before they spend the money?

Posted by Steve K | reply to this comment
January 7, 2009 10:50 am

Every time a lease/leaseback deal is talked about I cringe. In every case I know of the lease/leaseback arrangement is used because politicians are trying to circumvent the law requiring voter approval. Does anybody have real numbers as to the cost difference between using this mechanism and selling bonds? I have looked at the official justification for several lease/leaseback programs and they are so filled with flowery doublespeak that I am highly suspicious about the real cost of the arrangement. Other than circumventing the law requiring voter approval, is there ever a legitimate justification for the lease/leaseback arrangement?

Posted by Paul | reply to this comment
January 8, 2009 9:11 am

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