Bonds are a way to raise capital. Money is capital, and when you are dealing with a municipality, you only have two ways to raise money. One is taxes that are always estimated, because things can happen in a year that can change the amount of money you receive in taxes in that year. I have told you that a budget is an estimation of what you will spend. The Clerk's Office in $500K over budget. That means that he is spending more money than he thought he would in a year. This would be a good reason for the Mayor to fire him. There are two line items that appear at the end of the year. One line for how much you thought you would spend and another line for how much each department actually spent. This is the reason a department must keep good records on what they are spending, in order to see if they have a deficit or a surplus. To be over budget is really not a good thing. Operating in the hole is never a good thing. Evey department head wants to keep all spending to a minimum. I think that the Clerk has been stealing money and giving it to Kermit Williams. I hate the way they close the meeting when they don't like what people are saying. It reminiscent of high school. Adults stay and talk things out. They don't get up and leave. Seems to me they have something to hide.
The Clerk, along with Doris Taylor-Burks and Kermit Williams are "Thick as Thieves" pun intended. Unlike taxes that can be used for various functions of a city, bonds are usually explained to the citizens, for a specific purpose. A milage, too and we haven't had a great run with either. But it can be used to fatten the general fund, or anything else the administration wishes to use them for. It all depends. So, an administration put forth a legitimate purpose for the bonds, City Council passes the issuance of bonds and use the money for something else. I think that's what the City Council is worried about, on top of the idea that a city can go bankrupt on bonds and quickly become a township or be sold off piece-by-piece. I went "away" shortly after Detroit got their Emergency Manager, but their biggest threat was bonds that would be called in less than six months. The thing about bonds, is they are a debt that must be paid. These people have given you a loan. A loan that must be paid back. Convertible bonds are different, companies can convert bonds into stock. Cities don't have that luxury, because unlike businesses, they don't have stocks.
I think the city wants to get permission to issue an amount of bonds and issue them in waves. When they need to issue the bonds for repairs, they would issue them. Stock is usually issued all at once and to keep a hold of their company, they would buy an amount of stock and keep in "Balance Sheet" under "Stock Holders Equity", which is a liability. A liability increases debt on your balance sheet and a debit on your on the "Income Statement"..."Interest Payable". For every debit, you have to have a credit. That is the money to pay it. When they need money they sale them, or to strengthen their viability in the market. They buy them back for viability, but when a company starts buying up their own stock that's a sign of trust, because they are paying their shareholders back. Paying dividends is a real good way for shareholders to have continued faith in a company's viability and longevity. Any way a company or a city wants to raise capital has to be backed by their ability to be around for a long period of time. Pepsi, Coke, McDonald's and Kentucky Fried Chicken have proven they can change and grow with the times. People who invested in them a long time ago are rich. AT&T is another one that has stood the test of time. Apple, Amazon and Facebook are young companies that may or may not last. They are companies based on technology, and technology changes everyday. They will have to keep their fingers on the pulse of America to keep their momentum. Facebook has had a very rocky road with their stock, and once a company reaches a certain maturity, they can get to be so expensive that they aren't even worth buying anymore. The best time to get in is early, when you can purchase at a lower price, with the hope of steady growth.
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| Mayor Waterman at the Phoenix Center |
Again, cities don't have all these issues. Either they raise taxes, through a milage or tax hike or sell bonds. Still, the idea that a city be viable is key, and have a steady growth. Pontiac, has not been growing steadily long enough to know if we will continue growing. It was like they were waiting to get a good bond rating to get involved with selling them. Why? Let's not be so quick to get into debt. We aren't stable yet, and there is a recession that is looming. That might change so many things in this seeking of funds. Depending on the interest rate on the bond, you have to pay interest, either every year or every six months depending on the issuing terms. If you buy at a discount, you get less interest. Bad for the city, because they don't get face value. Face value in out case is $1000. You issue 1000 bonds at $990 and you only get $990K. So you get less and pay less in interest. If you sell at a premium you get more money and pay higher interest. If you issue 1000 bonds at $1010, you collect $1,101,000. You get more money, but you have to pay more in interest, because you have gotten more money. Then they bonds are called, all bonds have a call date (Maturity), Face Value and Interest Rate. At Maturity, the bond must be paid! If the city is bankrupt, in a recession or something else, bond holders must be paid. Then they have to begin to sell their assets to pay bondholders. For this reason, people don't like to buy muni-bonds from cities like Pontiac. We don't have a good track record, especially since GM pulled out of our city. We have to work to rebuild the city first. If there is a surplus in our "General Fund", let's see how much we can get done with that, and see if we can find a company to partner with the city to get things done.
If we can't find a partner, it makes me think that The Phoenix Center is not a viable venue. Companies pay people good money to seek out investments that could help them grow, and in this case have marketing value. Their name on the marquee. I have really never put my degree to work. I'm saying all of this from book work. Those bonds being called at the wrong time, could put an end to Pontiac. If we could convince someone or someones to invest in us. Like I said, we don't have a good track record. Who knows if we will have a Mayor effective and efficient enough to get the job done. There has been numerous bad Mayors that include Walter Moore that the Mayor has all of a sudden taken up with. He is the most destructive Mayor, who blew a lot of money. Giving extreme concessions to fire and police. We had an enormous surplus and inflows of money from GM. We didn't save any money and when the recession hit we were doomed. We have to be able to manage our money wisely and these bonds are very premature. I'm not impressed with Eric Benet, he stupid! He cheated on Halle Berry!
If we get a good interest rate, we would be lucky. Like I said, Pontiac isn't truly passed their great fall. We are doing better, but not at our very best. We can't say they we are looking forward to a bright future. We don't really know how the Mayor will be in good health to run the city, and can honestly see this through. Who will be the next Mayor? How will they govern? Will they take this project and damn it all to hell? The biggest question is where will the city be when those bonds are called? There is no guarantees, and that's why I cannot support a bond issuance for such a large amount. I think we should begin by using the general funds, and then finding a viable partnership. Pay down as much as we can. Then think about raising funds through bonds, but I believe that a partnership and the "General Fund" could take the Phoenix Center where it needs to go. The administration should be working hard to find a partner, just as Duggan did in Detroit with. Bonds are like a bomb over your head, everyday. How many days until interest must be paid, or "When is the call date?" I support the Mayor in many things, but I can't support her on this. Not with a clear conscience, because bonds can wipe a city out.
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