One Eye: Fiscal Madness

Did you know that GA super-sleuth, One Eye, is also a financial wizard?  Or maybe just a wizard with an eye for money.  The only eye he's got.

Well, he called yesterday-  apoplectic, stammering, sputtering; I could barely understand a word.

I said, "Calm down, Cyclops.  Get a grip."  

He tried, but failed.  Have you ever tried to converse with a one-eyed hysteric?  I asked him to please send it instead.

This was in my Inbox this morning:

Many people have claimed that I don’t know nutin bout birfng no babies or politics.  However, I do get “follow the money”.

What struck me about the hospital bond vote was the crazy game of Russian Roulette that the minority council members play with the City’s check book and future. They don’t follow the money as much as they just shoot blindly at anyone and anything in the room that is moving.

The City is only one budget cycle removed from being under the thumb of the state appointed receiver. And the council minority did not exhibit much understanding of municipal finance or the budget process in the passage of that one post monitor budget.

The budget on a napkin was priceless. 

Such shenanigans make the analysts and underwriters at the bond houses queasy and have them tacking on interest points and issuing downgrade notices like Pavlov’s dogs.

Since the minority had no clue that their antics were jeopardizing the city’s health and valiantly tried to strip the meager surplus that the Mayor asked for out of the budget, it should not have surprised me that the minority did not seem to grasp the serious nature of the consequences to everyone in Hoboken if the City were to default on the 52 Million Bond guarantee assumed in 2007.

The guarantee is not one of collection, it is one of payment.

The City does not have the luxury of saying to the bond holders, whoops, the hospital closed down and you will just have to wait and get your money when we find out who will buy the site and how much they will pay; that process could take 2-4 years. 

No, the City is obligated to pay the 52 MILLION DOLLARS UPON DEFAULT!  AS IN NOW!

AS IN THIS FISCAL YEAR!

It becomes a liability for the current tax year and payment must be accounted for in accordance with state mandated budget controls.  And I don’t think that anymore Roberts style budget gimmicks would pass muster.

Did anyone in the minority think about what the consequences to the City budget would be in the event that suddenly 52 MILLIION in expenses was added to this year’s budget?

I do. And it scares me.  It truly scares me.

The City would have to reduce expenses by at least 25%, which can only mean drastic cuts in personnel, including police and fire, and closing any non-essential operations such as the library.   Unless it generated money of the City at a profit, then any program or operation sponsored by the City would have to be shut down.  And that would still not be enough.  Taxes would likely rise by 50% in order for the city to meet the sudden 52 Million dollar obligation.

And the irony is that the City could not bond the debt, as the cause of the fiscal crisis was a gratuitous default on an existing bond obligation by the City. Who would buy such junk, if the City could even find an underwriter for anything less than a 25% rate?

If the City did not adopt the necessary budget amendments to balance the budget,  then DCA would be forced to step back in, take over the City’s finances once again and impose a very nasty dose of tax increase medication on a City that would be hemorrhaging property values and residents.

  am no Suzie Orman, but it is really pretty simple. 

Once the City was placed on the hook for the 52 million in bond debt, it became stuck with the hospital, and the staggering debt load, unless the City could find a buyer to take it off of the City’s hands and retire the bond debt. Arguing about who wanted to save the hospital or not in 2007 is frankly irrelevant to the fact that the City does have a bond guarantee of 52 Million that is in jeopardy NOW.

It is not hard to understand, but then again, the minority is led by two people.  One of whom missed $800,000.00 in quarters from the budget one year and demonstrated his belief that a municipal budget can be sketched out on a napkin and voted on right on the spot.  The other made up a whole career and phony resume claiming that that she had advised Fortune 500 companies from her consulting company that has no clients or an office. But is abundantly clear that neither could follow the 52 Million through the budget cycle and understand how it would have to be paid.

Scary game.  Very scary game.

Wow.  No wonder you were sputtering, One-Eye.

Leave the politics to me.

Mason and Russo are DANGEROUSLY incompetent.   They don't have a frigging CLUE what the repercussions are of their political gamesmanship.

Unless they DO.    In which case, the price of 'victory' against the EVIL ZIMMER-THING is wrecking our City- and everyone in it.  Grinding the little people to powder via crushing taxes, a ruined Moody's credit rating, loss of services, loss of City jobs, loss of a hospital,loss of 1,200 jobs,  putting us back under control (again) of a State Fiscal Monitor.

All to defeat the Mayor.

Scum.

Mason  doesn't give a damn.  Neither does Russo, insulated from the actual pain the  rest of us feel by  being Hoboken royalty. Does he even live in the 3rd Ward anymore?  GA hears that no one ever sees him around Church Towers.  So if not, then where is the 3rd Ward Councilman living?  

These incompetents must go. That's the lesson of this frightening moment.

Either through the our election process or by FBI purge.

We have to change the composition of our City Council to a super-majority of people that understand and  CARE about the consequences of their actions. 

Thank you, One-Eye.