Saturday, October 08, 2011

The real cost of the street bond

I hope they do get back to me, since this information is important in evaluating the wisdom of borrowing $248 million to take care of our streets. The numbers---$189,249,617 million added to the $248 million---in George Wooding's column in the Westside Observer need to be either verified or refuted by the City Controller, whose statement on page 41 in the Voter Information Pamphlet seems designed to conceal the real cost of Proposition B from city voters.

From: Rob Anderson rmajora@gmail.com
Subject: Bond Interest

Your statement on the two bond issues in the Voters' Guide for the November election is unhelpful in evaluating what those bonds will cost the city over time.

Can you say what the city will pay in interest over the life of each of those bonds? I'd like to see a dollar amount---even if only an estimate---for each of the two bonds instead of the tax rate information. In the state's November 2008 Voter Information Guide, for example, the Legislative Analyst told voters that the annual payments on the $9.95 billion bonds for high-speed rail would be $647 million a year. What would the estimated annual payment be for the street repair bonds?

From: Controller.CON@sfgov.org
To: Rob Anderson rmajora@gmail.com
Subject: Bond Interest

Mr. Anderson:

Specifically which bond issues are you referring to?

Thank you

From: Rob Anderson rmajora@gmail.com
Subject: Bond Interest

There are two bonds on the November ballot, Prop. A is a school bond, and Prop. B is the road repair bond. In your department's statement on Prop. B in the Voter Information Pamphlet (page 41), property tax rates are referred to but the overall cost to city taxpayers after the interest is added to the $248 million is not disclosed. Can you provide me with that information?

From: Rob Anderson rmajora@gmail.com
To: Controller.CON@sfgov.org
Subject: Bond Interest

George Wooding thinks that the interest on the street repair bond could be as much as $189 million over 24 years. Does that sound more or less right to you folks?

From: Controller.CON@sfgov.org
To: Rob Anderson rmajora@gmail.com
Subject: Bond Interest

Thank you. We will get back to you shortly.

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12 Comments:

At 10:42 AM, Anonymous Anonymous said...

Good to see you are verifying your questionable source. Wooding is being very shady since he has no idea what the interest rate will be and he made an assumption that is nowhere near in line with current conditions.

 
At 12:06 PM, Blogger Rob Anderson said...

So why didn't the Controller in his ballot statement tell voters what the full cost of the bond will be? Instead he provided nothing but bafflegab about tax rates, which seems to be deliberately obscuring the issue.

I referred to the state's 2008 voters guide, which gave voters an idea what the $9.95 billion in bonds for the high-speed rail project would cost: "State costs of about $19.4 billion, assuming 30 years to pay off both principal ($9.95 billion) and interest ($9.5billion) costs of the bonds. Payments of about $647 million per year." (page 4)

Depending on interest rates and how long the city takes to pay the street bond off, Wooding's numbers seem reasonable. It's a disservice to voters and taxpayers to not tell them exactly what they're getting into when they vote for bonds. It's a bad deal, especially when you consider how much money the city is wasting on the Central Subway, not to mention the bloated city payroll.

 
At 1:48 PM, Anonymous Anonymous said...

Wooding's numbers seem reasonable.

Wooding is pulling an interest rate at 5.375, which is at least a full point over what SF would expect to get. That's not even close to "reasonable". It's a lie.

 
At 3:14 PM, Blogger Rob Anderson said...

Bullshit. Since a "lie" is a deliberate untruth, why would Wooding lie about this issue? If he's mistaken, let's have your calculations on the cost of this bond based on present interest rates.

 
At 8:27 PM, Anonymous Anonymous said...

Why would he lie? Because he's against the bond measure. Are you that naive?

The interest rate will be between 4-4.25, you can take it from there

 
At 9:29 PM, Blogger Rob Anderson said...

No, that site is for home loans, not municipal bonds. You're a numbers guy? Why don't you give us your number? 4% interest on a 24-year loan of $248 million. My suspicion: you don't want to do that, because it's still a pretty big number, which doesn't make the bond look like a good deal for city taxpayers.

Which brings us back to the question of whether it's a good idea to use bonds for what should be operational expenses.

 
At 5:33 AM, Anonymous Anonymous said...

Somehow in your warped world, Municipal bonds amortize differently than home loans? Interest is interest, or do they do things different on Krypton where you live?

 
At 9:34 AM, Blogger Rob Anderson said...

"Why would he lie? Because he's against the bond measure. Are you that naive?"

Wooding provided his calculation of the cost of the street bond, along with other arguments against bonds to pay for operational expenses. There's no indication that he was lying or trying to fool anyone. You, on the other hand, have provided no numbers and no argument in support of the street bond. And of course you're anonyous, while Wooding put his name on his numbers and his argument.



You come on like a know-it-all but refuse to put up your numbers. What's the problem? You can't fit $248 million into the home mortgage program on the link you provided. Besides, the issue really is whether it's a good idea to borrow money to pave our streets. You think that's a good idea, right?

The other question you could answser: Why didn't the Controller simply tell city voters what the street bond is going to cost, like the Legislative Analyst did in 2008 for state voters on the high-speed rail bonds?

In other words, what penalty will city taxpayers have to pay for the incompetence of their political leadership?

 
At 10:49 AM, Anonymous Anonymous said...

I provided 2 very important numbers

5.375 - the interest rate Wooding claims.

4.25 - the highest level of interest the city would pay

How is that not a lie?

"You can't fit $248 million into the home mortgage program on the link you provided."

You are dumb as a stump. Truncate off 3 zeroes to 248,000, run the numbers, then add the 3 zeros back in. QED.

"the issue really is whether it's a good idea to borrow money to pave our streets."

Another misleading comment - the bond measure, which you clearly have NOT READ - clearly shows that the measure is NOT solely for paving streets. There are capital improvements beyond maintainance. Capital improvement projects are ALWAYS paid for with bonds. Do you think it was a good idea to borrow money to rebuild the Bay Bridge? If you think we needed a new bridge, then you do - because there is no way we can fund the construction without borrowing the amounts needed for a capital project.

"You think that's a great idea, right?"

Absolutely! We are getting money at historically low interest rates to do this work. We can then pay it back with funny money when interest rates go back to double digits. Buy low, sell high - this is basic economics.

I'm impressed with the effort of the HSR people to put an estimated cost of interest, but it's impossible to finger the number. The bonds have not been sold. And the "real" cost of the bonds cannot be calculated until post-mortem when annual inflation numbers are seen. The people in City Hall are smart enough to know that inflation is going to be very very bad, and borrowing now for peanuts is extremely savvy.

 
At 12:56 PM, Blogger Rob Anderson said...

Mr. Wooding sent a response via email:

Dear Mr. Anderson,

Thank you for giving me an opportunity to defend myself.

It is laughable to be accused of being "shady" and a "liar" by someone who is too afraid to use their own name.

First, thank you for defending my figures as I also felt that a 5.375interest rate over 24 years was reasonable given the vagaries of the bond market, the time the bonds would be purchased and San Francisco's possibly declining bond ratings.

This is a direct quote (attached) from Budget analyst Harvey Rose's budget analysis on the street bond report , file #11-0655: "The proposed GO Bond is estimated to have an interest rate of 6.0%, resulting in a total debt service of $437,249,617 over 24 years($248,000,000 in principal plus $189,249,617 in debt financing), or an average annual debt service of $18,218,734 per year."

I also agree with your statement that it is a shame that Ben does not show the public the debt service for the GO Bond as the public has a right to know the entire cost of what they are voting and paying for.

As for "anonymous" a public apology would be appropriate, but I won't hold my breath.

Best Regards,
George Wooding

 
At 1:18 PM, Anonymous Anonymous said...

I'll email Wooding an apology from one of our new bike lanes.

 
At 3:54 PM, Blogger Rob Anderson said...

Mr. Wooding should note that the bike zealots aren't intellectually serious, since they never admit that they're wrong. Why should they apologize for bad behavior when their cause is so great and so just?

 

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