Letter: Meaningless $44.5 Million Debt

by MissionViejoDispatch.com on January 30, 2012

In the late 1990s the City of Mission Viejo approved an $85 million bond issue, including principal, interest and fees for attorney’s, bond sellers, consultants, and accountants. The money was used in a redevelopment project to build two parking garages as part of the Shops of Mission Viejo renovation in the late 1990s. In a Register article, City Treasurer Cheryl Dyas reported the outstanding debt on the mall bonds was $25.4 million as of June 2011.

But in the article by Register Watchdog staff writer Teri Sforza, Dyas asserts that the debt doesn’t qualify under the legal definition of “outstanding long-term debt for Mission Viejo’s Redevelopment Agency because they were issued by a joint-powers authority formed by the City and its redevelopment agency.

So Mission Viejo’s “outstanding long-term debt” is only $2 million carried specifically by the redevelopment agency. The City’s total indebtedness for all activity of $44.5 million is an “irrelevant” number, she contends. The Register’s Sforza agrees, calling the number “meaningless.” Her original article reporting $2 million was under the column banner of OC Watchdog.

Indeed, redevelopment agencies statewide have been abolished by the California Legislature and Governor Jerry brown, with the concurrence of the California Supreme Court. It ended 60 years of mismanagement and faulty accounting, according to State Controller John Chang after auditing 18 California redevelopment agencies (not including Mission Viejo). Cities cited or designated as blighted mostly affluent commercial areas as well as inner city areas in true decline. Mission Viejo citizen activist Larry Gilbert explores the Mission Viejo Crown Valley corridor in a video to question its designation as blighted.

The City of Mission Viejo may consider the true mall debt as irrelevant, but the two parking garages are real world concrete, rebar and mortar financed by bonds purchased by a private investment entity which will want to get paid. It should be noted Dyas came aboard in 2011, more than a decade after the mall bonding.

Will the private investors be content to write off the debt if the state does not allow continued funding for existing redevelopment and/or other city taxing bodies? I don’t think so.

The City paid for the garages, but turned owner over the Simon Properties, the mall owner. If the city debt is irrelevant, will Simon Properties be required to pay off the bonds. I hope so.

Allan Pilger

Epilogue:

A wife catches her husband in an amorous embrace with another woman.

The husband looks at his wife and says, “The main question is whether you believe what you see or what I am about to tell you.”

I keep this little parable in mind as another citizen activist watch dogging over Mission Viejo City Hall.

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{ 7 comments… read them below or add one }

Joe Holtzman January 31, 2012 at 5:18 am

I tell you what:

I will personally pay off the “supposed reported RDA $2.0 million debt”, if I am then paid the balance of the REAL debt associated with this “total, all encompassing fiasco.”

Think of it this way–I give you two bucks today, and tomorrow you give me forty six bucks–”such a deal.”

Nancy Brown January 31, 2012 at 9:33 am

If that amount of money is meaningless, then maybe Sforza wouldn’t mind re-payment coming from her paycheck?

Larry Gilbert January 31, 2012 at 11:28 am

Sadly one of our MV citizens bought the $2 million debt figure and praised our city leaders in his letter that was published in the Jan 27th Register.
Although I immediately responded to Teri Sforza challenging the data in her initial Watchdog Report, which led to her later amendment, my follow up Letter to the Register is yet to be printed. In my rebuttal I offered to” pay off the $2 million total as reported in exchange for the city successor agency permititng me to receive the tax increment proceeds to pay off the $46 million of bonded indebtedness created by our redevelopment agency.”

As stated by the article author Allan Pilger we created RDA debt that is not transparent unless you ask the right questions of staff.President Reagan’s “Trust, but verify” is still sound advise today.

Should you view our videos of the alleged “blight” area let me apologize for cutting down part of the commentary in the part 2 You Tube. The camera audio is very sensitive and with the high wind some of the dialogue was inaudible.

Allan Pilger January 31, 2012 at 12:40 pm

Actually the Register letter writer Larry mentioned took the $2 million figure down to zero and praised the City of Mission Viejo for staying out of the redevelopment mess that plagues Santa Ana and other cities.

Obviously Mission Viejo is knee-deep in redevelopment, passing several measures last Wednesday to try to preserve redevelopment money set aside for low-income housing.

The letter indicates how bureaucratic revisionism leads to even worse misinformation–all benefiting the City Hall perspective.

Stephen Masek January 31, 2012 at 11:13 pm

I was stunned when I read that letter in the OC Register claiming that the debt was zero. My first reaction was that I had no idea the debt had been paid off, and I wondered how it could have happened without me knowing about it. Oh well, so much for the benefit of the doubt. Perhaps the writer was mistaken, or perhaps he was stating how he wished the city had behaved.

What I have yet to hear is how the city now plans to pay off all of its debts. I’ll not be holding my breath.

Larry Gilbert February 1, 2012 at 12:14 pm

Re Mr. Masek: The new MV “successor agency” will receive “tax increment” from our RDA project area that is to be used to pay off the outstanding Bonds and legal services.

Allan Pilger February 2, 2012 at 2:07 pm

The total redevelopment debt of $44.5 million is very relevant. The thought that the state would withhold redevelopment tax increments from bond payments is ludicrous. The debt is very real–and payable.

Without the tax increments most cities would default on $100 billion in bond payments, which probably would be enough to turn Wall Street upside down once again. No way.

Also the city treasurer’s curious comment reminded me that in the original bond issue, about half of the $3 million in annual bond payments would come from the City’s share of retail sales taxes, or 1 percent of total sales.

Part of the City’s propaganda in past is boasting about total mall sales tax receipts while neglecting to mention the first $1.5 million in the city shares goes to pay off the bonds instead of going into the general funds to pay for city services.

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