Thursday, July 24, 2014

Finding a way to pay for a new library, Half Moon Bay


Half Moon Bay Review/Mark Noack, 7/24/14.  "Library dream comes closer to reality. City reviews initial plans for building."

Funding a city library is not complicated, choice of:
Vote A:  2/3 votes, "general obligation" bond, property tax;
Vote B:  1/2 + 1 votes, "lease revenue" bond, general fund
The long-sought dream to build a larger library came a little closer to reality this week as planners showcased conceptual designs to detail how it would look and feel. The question for city leaders now comes down to how to pay up to $26 million for the new facility. Financial experts hired by the city advised elected leaders that issuing bonds would be a necessary step to afford the upfront costs of a new building. San Mateo County has promised to cover about half the costs of a new building, but the city would still need additional revenues to cover its portion.

Gary Kitahata, a finance consultant hired by the city, suggested the city’s best option would be to bring a bond measure before voters. A general obligation bond measure would require two-thirds approval from voters, and local residents would essentially be agreeing to add on a new charge to their property tax bill. On the plus side, the bonds had the lowest interest rate and were the most equitable of all funding mechanisms.

... The alternative was to issue lease revenue bonds, which the council could issue on their own through a majority vote. This would draw money from the general fund, but it would end up costing the city about 20 percent more in interest over the life of the bonds. General obligation bond would have the lowest interest rate, but it would require two-thirds approval from city residents."  Read more.

Note photograph from UMAMI MART, (a food and drink report).

Posted by Kathy Meeh

18 comments:

Anonymous said...

This play is coming to Pacifica. Council and staff will act it out for us. Bring a hanky. It'll be quite moving.

I am not a robot said...

Thanks for posting this article. It makes me understand the funding mechanisms that are being anticipated for the Pacifica library better. With this clearer understanding, my Vote is still clearly NO on either scenario. I do not want additional property tax on my bill, and I don't want the city to borrow at 20% higher rate.

How about getting some revenue in this town through new development, squirreling away money and investing for a return for a few years, and borrowing or assessing nothing from the residents?

Anonymous said...

Am I reading this right? A city council can issue Lease Revenue Bonds to fund a library on their own with just a majority council vote? I realize this option doesn't go on the property tax bill to trigger Prop 218 ballot requirements, but is there really no public vote required? And the only impediment is the prohibitive interest rate? Say it isn't so. Tell me I missed something. That 2/3 vote requirement is the only thing protecting us from these fools and their egos.

Kathy Meeh said...

233, you read it right. I saw the wording and dismissed it as must mean a citizen majority vote (vs a 2/3 parcel tax vote). After a quick search, no further "written in stone" confirmation. Someone else may know, and add clarification.

Here's the CA State Legislature example, Legislative Analyst's Office, see chart. The State may pass legislation which requires "lease revenue" bond funding without registered voter approval. The Municipal Securities Rulemaking Board indicates a "Lease revenue" bond is tied to revenue generation. Don't know how that works with Proposition 218. Too many words to view from that pdf right now. From what limited information I did find, I suspect a vote is required.

Anonymous said...

Thanks, Kathy. I sure hope your suspicion is right because it really doesn't say that in the article. No Pulitzer for that reporter! Any of our local legislative experts know if a public vote is required (simple majority 50%+1) before council can issue Lease Revenue Bonds for a library?

Anonymous said...

Geez people. Do a little googling.

http://www.buycaliforniabonds.com/faq.asp#9

"What is a Lease Revenue Bond (LRB) bond?

LRBs are a form of long-term borrowing to finance public improvements. .... Like a GO bond, an LRB is, in effect, an IOU. Unlike GO bonds, however, LRBs are not backed by the full faith and credit of the State, and may be authorized by law without voter approval."

So it would seem that a LRB can be approved by the city council and doesn't require a vote of the people.

Anonymous said...

A public vote is not required for a lease revenue bond. See http://www.treasurer.ca.gov/cdiac/reports/Guidelines93-8.pdf

Anonymous said...

Oh crap 945! You mean there's a way for council to get their library without a public vote? Another loophole? Pure speculation here, but is the high interest rate on a LRB enough to discourage a city council from a new library and lovely council chambers? Don't bet on it. After the smoke and mirrors, it'll look like the deal of the century.

Anonymous said...

Another loophole. If economic development was a loophole, Pacifica would be booming.

Kathy Meeh said...

945, 954, how many city libraries in CA did you find that were financed that through Lease Revenue Bonds (LRBs)? Isn't our city-county library arrangement generally: 1) the city builds and maintains the facility, and 2) the county provides the funding for employees and basic services?

From your 945, 954 CA Treasury source, "The revenue stream backing LRBs consists of lease payments made by the governmental agency which uses the facility to the governmental financing entity which finances and constructs the facility", namely State Public Works (SPWB), with "annual appropriations from the State general fund". Examples include, "state office buildings, state universities, prisons, and food and agricultural facilities."

And locally, if the county library system doesn't pay to lease the city building, then what? Raise library late return fees, or ultimately does our general fund pay, got money?

Anonymous said...

The article says"The alternative was to issue lease revenue bonds, which the council could issue on their own through a majority vote." Lease revenue bonds do not require 50% + 1 vote of the people. Please correct the caption under the image.

Kathy Meeh said...

748, actually no. Nothing under the caption (my comment) will be changed. You have yet to produce evidence that PUBLIC libraries are being build in CA cities without advance city resident votes.

And "actually", the article indicates planning for the library is moving forward as a result of Measure J, the 1/2 sales tax Half Moon Bay residents voted for in 2012. That 1/2 cent sales tax could be used "to enhance our Library, increase street maintenance, improve senior services, invest in business development and tourism, improve Smith Field recreational facilities, help fund the new Main Street bridge, and improve other general city services." Passage of that "transactions and use tax" sales tax required a city vote of 50%+1, and created a stream of revenue for the city.

Anonymous said...

I don't know how many libraries are built in CA through an LRB (no public vote), but it looks like HMB is considering it as a valid and legal alternative to a general obligation bond which would require a public vote. I don't think anyone is saying it'll happen here, but we need to be aware of these "loopholes" that remove the voter from the process. HMB's Measure J this November could provide some library money and show the public supports a new library, but it won't build them a library. Bonds, general obligation or LRB, are the only way to get it done.

Anonymous said...

We might want to take a look at how Walnut Creek got their new library, which btw they struggle to keep open following the expiration of a ballot measure that paid for extra hours beyond the county allotment. They wanted to replace their aging 1961 vintage downtown library with a modern concept library--one that would be more multi-use for the community with conference rooms, etc. Sound familiar?
From 2001-2004 they applied for a matching funds grant from the state for up to 18 million and were denied each time. In 2005 Walnut Creek voters rejected Measure R a library bond measure for 21 million. In 2006 CA voters defeated Prop 81 which would have funded new and remodeled libraries in CA. Ultimately, Walnut Creek used inter-fund lending, reserves and private donations to build their new 40 million dollar library. After the 2005 bond measure failed, they didn't go back to the voters. Where there's a will, there's a way.

Crabby Paddy said...

Check out the council agenda. Grab some Vaseline, you'll need it. Sewer charges. You know, the money council is mandating we pay so they can "borrow" it to fund their general budget that should be funded with tax revenue and a strong economy. I don't mind it so much, but not with my clothes on!

Anonymous said...

1150 So glad you reminded me of my very favorite part of How Pacifica Works. This council not only has found how to borrow against the sewer fund (which we thought the courts had made safe from such debauchery) but they can also raise the sewer rates so their poor, debauched cash cow won't run dry. It's fucking genius. So much easier than actual economic development--as if they had any real interest in that. And when the uh shit hits the fan in a few years, and it will, these geniuses will have moved on. The passage of time is always the politician's best friend.

Anonymous said...

11:50

Cell block C jail house style.

Anonymous said...

An Oz moment is what it will be.