Early voting has begun for the North Miami General Obligation Bond (GO Bond), and the GO Bond Brigade is out in full force.
In addition to North Miami’s own “education” campaign (See nomigobond.com), several political committees (PACs) have been formed to push the GO Bond.
One of those PACs, Our City Our Future, was formed on March 23, 2018 for the purpose of selling this boondoggle to the voters.
The Chairman of this PAC is Jeffy Mondesir, the owner of Randy’s Restaurant and Lounge in North Miami.
The Treasurer of this PAC, Sandra Saint-Hilaire, who, according to her Facebook page, used to work for North Miami City Attorney Jeff Cazeau.
But we’re sure that’s just a coincidence.
Also spotted around town is a big, boxy truck digitally advertising the GO Bond.
In response to a public records request made to the City of North Miami regarding the financing of this advertising, we were told, “Please be advised the City has not procured the services of any digital advertising vehicle for our GO Bond educational campaign.”
We all know that advertising doesn’t come cheap, and SOMEONE had to pay for this truck, but right now we’re all in the dark. Since the PAC’s Campaign Treasurer’s Report for the period of April 1 to April 30, 2018 does not have to be filed until May 10, 2018, we have no way of knowing right now how much money it’s raised, and we won’t know who is behind the funding until ten days after the election.
Isn’t that convenient?
Before you head to the polls, we suggest you really educate yourselves about what this will mean for you and your families. Here are some important facts you should know.
What is a GO Bond?
A General Obligation Bond is one of several municipal bonds (commonly called “munis”) that a state or city can issue in order to raise revenue.
MunicipalBonds.com describes General Obligation Bonds as:
When a state, city or other issuer issues general obligation bonds, this means that the issuer is guaranteeing repayment of the bonds using any means necessary. The full faith, credit, and taxing power of the issuer are backing the bonds. The issuer is going to use any taxation power in its authority to make sure you get paid back, putting the revenues from every type of tax on the hook to guarantee the bonds: income taxes, corporate taxes, property taxes, sales taxes, excise taxes, gas taxes, any tax that can be levied by the issuer. This is why it is called a general obligation bond: the issuer is generally obligated. If the issuer has any problems paying you back, they must raise taxes or come up with the money somehow, some way. The issuer may even have to sell assets to do it.* If they miss a payment, known as a “default”, a judge can order the issuer to take corrective action to raise money to satisfy the bondholders.
In plain English, the City of North Miami (the issuer) will be borrowing up to $120 million dollars for a bunch of ambiguous “possible projects,” and promising to pay back this loan by, in essence, mortgaging the property you own. Let’s be clear, folks, you, your children, and possibly your grandchildren, will be on the hook for this loan for the next 30 years, or as long as you own a home in the City of North Miami, whichever comes first.
This proposition is all well and good as long as North Miami is able to make the interest payments on this debt. However, as Investopedia.com explains:
State law sets the grounds on which local governments can provide and issue general obligation bonds. A general obligation bond may either be a limited-tax general obligation pledge or an unlimited-tax general obligation pledge.
A limited-tax general obligation pledge asks the issuing local government to raise property taxes if necessary to meet existing debt service obligations. However, this increase is bound by a statutory limit. With limited-tax general obligation pledges, governments can still use a part of already-levied property taxes, use another stream of income, or raise property taxes to an amount equating to existing debt service payments to answer its debt obligations.
An unlimited-tax general obligation pledge is similar to the limited-tax pledge. The only difference is that the local government is asked to increase property tax rates to necessary levels — up to a maximum of 100% — to cover delinquencies from taxpayers. Residents must first agree to increase property taxes to necessary amounts required for the bonds.
In plain English, if North Miami fails to meet its obligation, it has the authority to double your property tax rate.
Where does this loan come from?
The short answer is: Wall Street.
If North Miami voters approve this GO Bond, the city will present its debt to municipal bond brokers on Wall Street, such as Morgan Stanley, Charles Schwab, Merrill Lynch, and others. These brokers will then offer the bond to investors (or bondholders), who are looking for low-risk, high-yield returns on their investment.
MunicipalBonds.com explains:
To entice investors to buy a bond, and thus lend money to these institutions, issuers pay interest on the bond. An extra benefit of this interest is that it is usually exempt from federal income taxes and sometimes local and state taxes as well. This interest is usually paid every six months until the date of maturity, when the face value of the bond is paid back to the bondholder. The annual rate of interest paid on the bond is known as the coupon.
In plain English, North Miami residents will be paying the increased property taxes to pay the investors, who won’t have to pay income tax on the interest they earn from your money.
Hmmm.
Who are these investors?
Again, MunicipalBonds.com explains:
According to the Federal Reserve, individual households (individual investors), mutual and money market funds, life insurance companies, property and casualty insurance companies, closed-end investment funds, commercial banks, and foreign investors are the most common holders of municipal bonds. Over the past 10 years, households, commercial banks, life insurance companies, foreign investors and mutual funds have increased their holdings of municipal bonds. In these volatile economic times, investing in these municipal bonds is seen as a safe way to maintain wealth for these various institutions.
Individuals own about $1.88 trillion of the total municipal debt. The most common type of households investing in munis are wealthy individuals in high income tax brackets. They are more likely to invest in municipal bonds because of the favorable tax-exemptions on income from these securities. These individual investors may be more concerned with a steady income rather than returns, a hallmark of the baby boomer generation.
In plain English, large corporations and rich people are hoping to increase their wealth with the interest paid on this loan by the City North Miami with your tax dollars.
Awesome, huh?
This GO Bond is a great deal for investors … on the backs of hard-working North Miami residents whose tax bills will increase.
Can North Miami pay back the loan?
Neighborly.com explains:
On the rare occasion that a muni issuer does default, the problem can often be traced back to issues such as:
- Poor project and resource management
- Overestimated revenues
- Unanticipated costs
- Inflated government salaries, pensions, and benefits that draw on limited funds
- Financial mismanagement and fraud
Wow! Is that a recipe for disaster, or what?
The City of North Miami already has a reputation for fiscal irresponsibility.
According to the most recent Audit Report by the State of Florida, there were 30 findings of deficiencies in how your local government mismanages your money.
The most concerning of these findings are:
- Budget-to-actual comparison reports for all budgeted funds were not always prepared and timely presented to the City Council for the 2014-15 and 2015-16 fiscal years.
- Severance pay provisions in City employment agreements did not always comply with State law and documentation for severance payments authorized by the City Council did not always demonstrate the public purpose for the payment or the basis for the amount authorized.
- City records did not evidence the public purpose served by allowing two employees to obtain larger pension and other benefits by remaining employed for substantial periods beyond their last work day. Additionally, City policies and procedures need to be revised to require City Council approval of employee separation agreements before such agreements are executed.
- Although the City Council contracted with an actuary to prepare a financial impact statement for use in evaluating the fiscal viability of implementing an early retirement incentive program (ERIP), the parameters specified to the actuary differed from those in the ERIP adopted by the City. Consequently, the usefulness of the financial impact statement was diminished and City records did not clearly demonstrate the basis upon which the City Council assessed the fiscal viability of the City-adopted ERIP or how implementation of the ERIP was in the City’s best interests. [See: North Miami: When Good ERIPs Go Bad, Part I]
- City expenditures were not always supported by fully executed purchase orders or contracts prior to payment and documentation was not always available to demonstrate the public purpose for the expenditures.
- The City’s controls over purchasing card (P-card) authorization and issuance, purchasing limits and related usage, and cancellations need enhancement to improve accountability.
- P-card expenditures were not always properly approved, adequately supported, or for allowable amounts and allowable purposes.
- Travel cost reimbursement expenditures did not always comply with City policies and procedures or serve a documented public purpose. [See: North Miami GO Bond: The Mayor and Council really, really, REALLY need your money. (No, really!)]
City officials in North Miami have already demonstrated a lack of responsibility and accountability in managing your hard earned tax dollars. Voters should be very wary when considering whether or not to vote for this GO Bond.
What will happen if North Miami defaults on this Bond?
In addition to the possibility of your tax rate increasing by 100%, if the City of North Miami cannot raise enough revenue to pay the interest to investors, the next step will be to sell its assets*, as mentioned earlier in this column.
What are some of these assets?
In addition to public land owned by the City of North Miami, which may include community centers, pools and parks, city employees could face layoffs and cuts to their pay and pensions. If the workforce is decreased, services will be cut as well. Remember, if North Miami does not have sufficient revenue to pay its bondholders, it must raise taxes or come up with the money somehow, some way.
Either way, North Miami residents will be on the losing end of this deal.
One final thought.
A funny thing happened in the City of Miami a few years back. (And by “funny,” we mean “illegal.”)
In a press release dated July 19, 2013, the United States Securities and Exchange Commission (SEC) announced it had filed charges against the City of Miami and its Budget Director “with securities fraud in connection with several municipal bond offerings and other disclosures made to investors.” After a five year investigation, the SEC determined that then-Budget Director Michael Boudreaux “made materially false and misleading statements and omissions” in order to “mask increasing deficits in the General Fund” when marketing the city’s bond to investors.
Eric I. Bustillo, Director of the SEC’s Miami Regional Office, added, “Miami cannot continue to play shell games with its finances. Investors and the markets deserve complete transparency in assessing the city’s municipal bond offerings.”
More than three years later on September 14, 2016, the SEC issued another press release announcing:
“We are very pleased by today’s jury verdict holding the City of Miami, a recidivist violator of the federal securities laws, and its former Budget Director (Michael Boudreaux) liable for multiple counts of antifraud violations of the federal securities laws. After a two and one-half week trial, the jury took less than a day to decide that the City and Boudreaux had committed securities fraud in connection with their disclosures concerning the deteriorating financial condition of the City during 2007 and 2008 and in three separate offerings of municipal securities in 2009. Based on the jury’s findings, the SEC anticipates that the Federal District Court Judge will also enter a finding that the City of Miami violated a prior SEC order, imposed after a fully litigated administrative trial, prohibiting it from engaging in fraudulent conduct. This was the first federal jury trial by the SEC against a municipality or one of its officers for violations of the federal securities laws. We will continue to hold municipalities and their officers accountable, including through trials, if they engage in financial fraud or other conduct that violates the federal securities laws.”
In a settlement agreement, the City agreed to pay “$1 million to settle securities fraud charges after the city was found guilty by a local jury of playing a shell game to hide its deteriorating financial condition from bondholders,” as reported by The Bond Buyer.
Why is this important?
Because current North Miami City Manager Larry Spring was the Chief Financial Officer (CFO) of the City of Miami at the time this “shell game” was being played. Curiously, he escaped being charged even though the Budget Director’s Office of Management and Budget was directly under the purview of the Chief Financial Officer (who is also an Assistant City Manager).
The same way that former North Miami Beach City Manager Kelvin Baker was never held responsible when then-Public Works Director Marty King embezzled $2.2 million from city coffers – even though he signed the checks that Marty stuck under his nose, Larry Spring signed off on the financial documents his Budget Director prepared, but was never charged by the SEC.
How did that happen? Maybe because Larry Spring quickly got the hell out of dodge in June of 2011, right in the middle of the SEC investigation, telling “the Herald that he’s pursuing private-sector jobs that have started to come his way,” as reported by CBS Miami.
Apparently, none of those “private-sector jobs” panned out since he ended up at the City of North Miami, worked his way up the food chain to become its “CEO,” and then curiously hired another former Miami employee as his “police consultant,” Adam L. Burden.
Even more curiously (although not very surprisingly), three different and completely unrelated sources gave us a bit of inside information. Adam Burden was a City of Miami Police Officer during most of Larry Spring’s tenure as the city’s Chief Financial Officer. As a police officer, Burden was privy to parts of the securities investigation and it seems he was able to tip off Larry Spring when the SEC was getting too close for comfort.
Just saying.
Meanwhile, for Larry Spring … new city, new job, new bond.
What could possibly go wrong?
North Miami residents, please VOTE RESPONSIBLY!
VOTE NO ON MAY 1, 2018!
Stephanie
If we vote no – there will be no money for affordable homes, which our city staff supports and quite frankly, no one can even touch “affordable housing”
https://livestream.com/cityofnorthmiami/events/8174522/videos/173908089
1:25:00
You will hear Bien Ami go on about this “section 8” housing – living next to millionaires, the beauty of living in united states and how “great” living in this country is and blah blah blah blah blah blah.
We had our chance to vote these people out, Keys was voted back in – Desulme was voted back in – Mayor was voted back in…the gobond is only a result of voting these people back in. Period.
Alix Desulme is in his first term as councilman. He was not “voted back in.”
“Thanks for sharing our article from http://www.CoralSpringsTalk.com Very much appreciate it! FYI, Howard is a contributing writer not the editor.
Thank you!”
We all make mistakes Stephanie – Corrected, Bien-Aime.
Never said I don’t make mistakes. Believe me, I make plenty. Always apologize and correct when I do. That’s what being human is all about.
There is a desperate need for some state/federal agency to step into the mess in N Miami and do an in depth independent financial audit! They are spending tax payer dollars at an unprecedented rate. THIS NEEDS TO BE INVESTIGATED!
The spending is absolutely out of control.
Here’s a direct quote:
“I don’t see but some people said that’s gonna decrease the value of the properties in the area but I see (other) area where you have 10 20 story building next to a 2 to a million dollar house that mean I don’t understand and that concept and some people were talking about section 8 they’re scared that section 8 people will come to the neighborhood and me I don’t have any problem and if if I had the pleasure of
being fortunate and I don’t have any problem living next to people was less fortunate than me that’s mean thank God we are in the United State of America there is safety net for those people living in section 8 and and I think the same way people who’ve been fortunate make this country great and those unfortunate maybe the kids their parents did sacrifice their life another for us to be the country that we are
today that’s men it’s a free society and if you feel like you cannot live from next to people from section 8 maybe you need to find (another) country”
Philippe Bien-Aime
Which has nothing to do with the topic of the bond, but thanks for your comment.
Of course it doesn’t Stephanie. These are all separate issues that they tackle one at a time – and that mentality is what will keep north miami where it is. Thank you for your comment as well. It says plenty.
Vigilance always.
🙂 always.
Yo, el nuder! What time tomorrow are you going to come out and knock on doors with us against the bond? We have a 10 to 1 shift, a 1 to 4 shift, and a 4 to 8 shift. Let me know. I assume you know how to get ahold of me. If you don’t you can always ask a friend. Or you can just contact me on here and I’ll check back in a couple hours.
There are plenty of ways to build affordable/workforce housing in the city without a bond issue. Because of land costs, they must be built west of Biscayne Blvd. I can’t imagine city officials wanting to build half as many units just to be east of Biscayne. That would be stupid and irresponsible.
I am shocked that the city is getting away with breaking Florida Law which prohibits taxpayer money from being spent to promote the passage or defeat of a ballot question. What they are doing is illegal, and the city is playing with fire. I think if this bond issue somehow passes, it could be challenged in court.