Loading...
HomeMy WebLinkAboutPFC - Written CommentsReceived After Agenda Printed August 9, 2016 PFC - Written Comments August 9, 2016, Public Facilities Corp. Agenda Comments The following comments on items on the Newport Beach Public Facilities Corporation's agenda are submitted by: Jim Mosher ( iimmosheravahoo.com ), 2210 Private Road, Newport Beach 92660 (949- 548-6229) Item D.7. Minutes of the August 77, 2015 Public Facilities Corporation Meeting Page 1, item B, first sentence: "Jim Mosher indicated that the current agenda does not clarify who the current officers are and believed the President should be rte, presiding over the meeting." [suggested correction of typo] Page 3, paragraph 1: "Director Petros requested and received confirmation from President Kiff that the first City schoolhouse was constructed with debt instruments, the first City water delivery system was financed with debt instruments, and many of the City's initial infrastructure was financed with debt without going before a vote of the people." Comment: While these statements may be accurate, I might note that Newport Elementary opened in 1894, twelve years before the City was incorporated, and these both appear to be examples of using bonds(?) to fund new civic enterprises where an existing revenue stream that could be saved toward future expenses does not yet exist. That is quite different than relying on borrowing to support existing and ongoing activities, such as maintaining an existing water system, enlarging a library or replacing an aging city hall. What I assume was the largest debt incurred for the benefit of Newport Beach was the series of bond measures in the first part of the 20th Century for improvement of the harbor, which, to the best of my knowledge, were all put to the voters (either of the City or the County) for their approval, starting with Ordinance 135 in 1917 (the result of that one, as announced in Resolution 88 issuing the bonds, apparently being 199 "yes" to 3 "no"). The reason for seeking voter approval may well have been Article XI, Section 18 of the 1879 California Constitution (currently surviving as Article XVI, Section 18a), which required two- thirds voter approval to take on any municipal liability that could not be paid off with income available in the year the liability was created, and a scheme for paying off the debt, in full, in 20 years or less. No distinction was made as to the type of debt, that is, whether it was secured by property taxes or not. As the California Legislative Analyst's Office has observed: "Lang–term obligations not subject to voter–approval were far less common among local governments over a century ago than they are today." In other words, things like Certificates of Participation seem to represent a judicially -sanctioned erosion of the historic idea that local voters (and taxpayers) should have a say in the creation of all major municipal debt, only partially corrected by Proposition 13 and its progeny, under which: "Various types of long–term obligations commonly incurred by local governments—such as lease–revenue bonds, certificates of participation, pension obligation bonds, and pension liabilities and other retiree benefits—have not been held to be debt subject to voter–approval requirements." August 9, 2016, Public Facilities Corp. Agenda Comments - Jim Mosher Page 2 of 2 Item E.2. Review of Annual Financial Statements The table ("2010 COP Debt Service") appearing on pages PFC2-2 and PFC2-8 of the staff report says it is intended to illustrate the remaining debt service payments and balance, but in that it is not completely successful. For example, for the current fiscal year the last column indicates the remaining principal that needs to be paid is $110,595,000, yet the total at the foot of the "Principal" appears to say the City plans to pay $113,655,000 toward that principal. If the remaining balance is really $110,595,000, then apparently the Principal ($3,060,000) and Interest ($7,465,417) payments shown on the 2017 line shouldn't have been included in the remaining total. While there may be public interest in this disclosure of the amounts that remain to be paid, I think there is at least equal interest in the total amounts required to pay off the initial debt. To show that it would have been helpful to follow the totals shown (remaining debt obligations) with a line showing the amounts paid prior to that, so the two could be added to show the full cost. Finally, not being an accountant, I find the "Comparative Statement of Revenues, Expenditures and Changes in Fund Balances" a bit hard to follow without further explanation. In particular, the amounts shown as the total debt service expenditures for 2015 ($10,551,862) and 2016 ($10,531,299) don't match the numbers shown as payments for principal plus interest in the table mentioned above, suggesting there are "fiscal charges" beyond the obligations disclosed in that table. Also, as noted last year, if the balance was held for a substantial part of the year, the investment income of $191 seems extremely low for a corporation fund balance of around $8 million. Item F. PUBLIC COMMENTS ON NDN -AGENDA ITEMS The City website has pages describing many of its Boards, Commissions and Committees. Since the Newport Beach Public Facilities Corporation apparently plays an important role in the City's financial structure it seems surprising there is no page on the City website, at least none I could find, describing what the PFC is, how and when it came into existence, who its members are, when it meets, what bylaws it operates under, who to contact with questions about it, and so on. The PFC agendas and minutes aren't even consistently stored. an at least one occasion they were stored among the BCC materials, while on others one has to look among the Council meetings.