As every adult should know, a “credit” card is really a “debt” card.
In the same way, a “mortgage” is a massive “debt” owed to a bank, and the interest you pay on said mortgage is your “rent” to the bank for the money. If you don’t own a house free and clear, you are still a renter — renting money from the bank. I won’t get into HELOCs but anyway, debt is debt.
Debt can be useful if you haven’t saved up enough money ahead of time — rainy day fun, savings, etc. Also useful for putting up huge capital-intensive public works projects in a hurry if you expect future revenue to climb. The higher your “credit score” – aka “debt” score of “how good a debt slave are you” score – is, the more debt you can take on.
Cities have credit scores too – it’s called a “bond rating.”
Where are we now? Debt is climbing a wall of worry, but revenue is backsliding with house property values and lower sales taxes and higher unemployment… and this isn’t changing any day now. Debt and compound interest all depend upon ever increasing amounts of fossil fuel extraction, and you KNOW where that’s going. Check out gas prices down the street.
So the real news is, check out all the raw data on Oakland’s bond ratings over at Standard & Poor’s, or Fitch or Moody’s. (As if we trust these guys anyway, seeing as how they rated all the bailed out banks and other cheats quite highly.)
But for what it’s worth, here are S&P’s ratings:
SAN FRANCISCO (Standard & Poor's) March 30, 2011--Standard & Poor's Ratings Services revised the outlook to stable from negative on its ratings and underlying ratings (SPURs) on Oakland, Calif.'s general obligation (GO) bonds and pension obligation bonds (POBs) and Oakland Joint Powers Financing Authority's revenue bonds. At the same time, Standard & Poor's affirmed its 'AA-' rating and SPUR on the GO bonds, its 'AA-' SPUR on the revenue bonds, and its 'A+' SPUR on the POBs. "The rating action reflects our view of management's budgetary actions that have allowed the city to maintain what we consider to be still very strong reserve levels despite the recession's impact on local revenue and resulting successive budget gaps," said Standard & Poor's credit analyst Misty Newland. Management expects the fiscal 2011 general fund will be balanced. The city's fiscal 2011 midyear forecast includes an additional revenue loss of almost $11 million due primarily to lower-than-budgeted parking meter citations, interest income, and billboard revenue. However, this shortfall was partially offset by lower-than-expected expenditures of $6 million. We understand that the remaining imbalance will be offset by a limited amount of one-time revenue and additional projected underspent expenditures, pending approval by the city council in late April or early May. We expect that with these budget revisions, reserves will remain consistent with prior-year levels, which we consider very strong. Fiscal 2010 closed with an unreserved general fund balance of 29.7% of expenditures.
Ratings data and further commentaries – behind free online registration wall:
- S&P: Oakland, CA – $633MM
- S&P: Oakland Jt Pwrs Fing Auth , CA – $504MM
- S&P: Oakland Redev Agy, CA – $804MM
- S&P: Oakland-Alameda Cntys Coliseum Auth, CA – $300MM
- S&P: Oakland Unif Sch Dist, CA – $570MM
MM=million. (Roman numerals for 1,000.) That’s a lot of dough, borrowed based on a presumed ability to repay principal plus interest. The due dates are as far out as 2041AD. By then I guess we’ll have flying cars. Right? Right??
There are other ratings if you search “Oakland” – Port of Oakland, Children’s Hospital, the Dellums State Building and a few others. Enjoy.
It doesn’t matter that democracies always vote in more benefits and projects for themselves without knowing if they can afford to pay them off in the future. We do. And here’s the “nobody could have foreseen this coming” result.
I think the city should lessen its debt borrowings to keep in line with depleting fossil fuels reserves. That way we’ll gently go back down the slope of debt borrowing to the bare minimum — or what nature intended. That would be a class act, but we collectively and individually rarely have the will power to do so.