Thursday, August 30, 2012

Passing the Buck--Big Time!

Only folks who play with other people’s money and will be long gone when it’s time to pay the piper would feel free to enter into an agreement that obligates the borrower to repay almost a billion bucks to finance a loan of $105 million.

Poway Unified School District recently became the national poster boy for capital appreciation bonds whose delayed repayment schedule (beginning in 2033) accounts for the embarrassing interest-to-principal ratios for PUSD’s 2011 loan.

Unfortunately Poway isn’t alone when it comes to employing this borrow-now-pay-a-lot-much-later financial instrument. Most prominent on the list is San Diego Unified’s 2010 agreement to repay 1.25 billion dollars, starting in 2030, for a loan of $164 million.

Other bonds with similar interest-to-principal ratios, but smaller amounts borrowed, have been issued by school districts in Oceanside, San Marcos, and Escondido. A number of community college districts also issue capital appreciation bonds—most prominently the San Bernardino Community College District whose 56 million dollar loan would eventually cost almost half-a-billion dollars by 2048, the final repayment date.

Fortunately, some capital appreciation bonds, unlike those employed by the Poway school district, can be refinanced.

It should go without saying that this etched-in-stone bond with eye-popping repayment figures wasn’t clearly presented in the 2008 election when Poway voters approved the sale of $179 million in “general obligation bonds.”

A boldface declaration in the text of Proposition C assured voters that the maximum tax rates levied to pay for the bonds would be the existing rate of “fifty-five dollars ($55) per year per one hundred thousand dollars ($100,000) of taxable property.”

Another incentive for reluctant voters was the prospect of $20 million in “free money” from Sacramento.

The impartial analysis of county counsel blandly noted in its third dense paragraph that bond interest rates could not exceed 12 per cent per annum or mature later than 40 years after issue—“pursuant to the Government Code.”

Prop C passed with 64% of the vote, but when funds ran out and planned construction projects were still incomplete, the easiest way to keep the “no tax increase” pledge and complete construction was to employ the capital appreciation bond alternative—a choice that passed the buck (a billion bucks, in fact) to a future generation.

Lacking the federal government’s power to run trillion dollar deficits, local politicians naturally latch on to convenient alternatives like borrowing with long-deferred repayment schedules and praying for another housing boom.

In both cases, however, our children and grandchildren are the ones left holding the bills.

Thursday, August 16, 2012

2016: Obama's America -- D'Souza unveils Obama's background

Dinesh D’Souza and Barack Obama were both born in the same year (1961), lived in foreign countries as youngsters, and eventually attended Ivy League universities in the United States. That’s where similarities end.

D’Souza’s emigration from India left him profoundly grateful for a country that provided a talented foreigner entrĂ©e to Dartmouth, the Reagan White House, and a successful career that eventually financed living quarters in Rancho Santa Fe.

According to D’Souza, Obama’s upbringing in Hawaii and Indonesia imprinted on the current President a set of ideas derived from anti-colonial, anti-capitalist mentors whose convictions were congruent with those of his absentee, polygamous father, Barack Hussein Obama Sr. These convictions, which included seeing America as an exploitative colonial power, were further embedded by Obama’s preferred professors at Columbia (Edward Said) and Harvard (Robert Unger).

This thesis is developed in detail in D’Souza’s book, “The Roots of Obama’s Rage,” and presented more succinctly in a documentary film now showing in Southland theaters: “2016: Obama’s America.”

Beyond Rev. Jeremiah (“God damn America”) Wright and former domestic terrorist Bill Ayers (whose influence upon the Democratic candidate were largely dismissed by the non-Fox media during the 2008 presidential campaign) D’Souza explores the profound impact of Frank Marshall Davis on young Barack Obama.

Davis, whose name “Frank” is mentioned 22 times in Obama’s autobiographical “Dreams from my Father,” was a card-carrying communist (#47544) whose views corresponded closely with those of the missing father Obama idolized.

“2016” doesn’t claim that the President embraces in toto either the up-to-100% tax-the-rich ideas of Obama Senior or the radically anti-American views of Frank Marshall Davis. It does, however, note that the fervid anti-colonialism and leftism of Obama Senior and Frank Davis make sense of various presidential actions from immediately returning to the Brits a bust of Winston Churchill to the downsizing of America’s nuclear arsenal and global influence.

D’Souza also sees policies that restrict American oil production, while touting Brazilian exploration, as congruent with a mindset that seeks to set right the “sins of colonialism.” The film further notes that Obama’s five-trillion dollars of deficit spending is consistent with a desire to undermine the nation’s (presumably exploitative) capitalist system.

One could apply a similar motivation, though the film does not, to recent immigration policies that abet millions of illegal aliens living in America.

Just how much the President’s views have been shaped by the radical mentors D’Souza highlights is hard to say. What’s clear, however, is that Senator Obama would never have become the Democrats’ presidential nominee in 2008 if the national press corps had scrutinized his background with half the intensity they devoted to Sarah Palin’s family.

Thursday, August 02, 2012

A High-speed Green-Labor Pipedream

Progressives are doubtless celebrating with Gov. Jerry Brown yet another victory for green ideology and union muscle over economic reality.

Three weeks ago Sacramento gave a 2.6 billion dollar send-off blessing to a high-speed rail system whose final cost estimate miraculously shrank from 98 to 68.4 billion dollars in the authority’s most recent business plan.

That .4 fraction (four-hundred million dollars) is a nice bureaucratic touch. It suggests to clueless Californians that the estimate is quite precise—a figure that taxpayers can take to the bank. Never mind that a politically-required recalculation had just lopped off almost 30 billion from the prior “guesstimate.”

A more reliable directional analogy for government-sponsored super-projects would be Boston’s “Big Dig”—a tunnel initially estimated to cost 2.6 billion dollars that wound up taking taxpayers to the cleaners for over 20 billion (including bond interest). But not to worry—much of that featherbedded tab was picked up by the flush-with-cash feds.

Brown and his green-union coalition hope for a reprise of that scenario with the ultra-fast choo-choo. Indeed, it’s doubtful that this ego-inflating legacy project would have been approved even by the economic illiterates in Sacramento were it not for free fed money—in this case 3.2 billion dollars.

Anyone who is confident that this monumental white elephant will be built within shouting distance of 68 billion dollars or will ever pay for itself, once constructed, should ponder this sentence that appears on the Rail Authority’s official web site:

“On November 1, 2012, the California High-Speed Rail Authority (Authority) released a Draft 2012 Business Plan (Draft Plan) for public review and comment.” The message goes on to say how public feedback was solicited and received for this November 1, 2012, draft—including more than 250 website comments.

Many Californians are aware that the aforementioned All Saints Day is three months in the future. One might think an error of this sort would have been corrected by now, but such corrections are only common in private businesses that, according to President Obama, aren’t really built by the folks who started them.

Few Californians are aware that the currently projected completion date for the much-heralded Los Angeles to San Francisco leg of the bullet train project is around the year 2027. (Don’t hold your breath.)

As one wag put it, by the time Phase 1 of the project is completed in 2029, unemployed residents of the Golden State will be able to zip from L.A. to San Francisco “for the price of a Southwest Airlines ticket…in twice the time it takes to fly.”