Storytelling of Municipal Bonds
The interaction of Municipal bonds
are hard to understand in a large municipality
because of the many laws, many types of
bonds, and number of bonds owned.
Only a few know how the interaction
works within a municipality and
usually these are not the citizens
of the municipality.
I have written about corruption
by saying "and, who knows, possibly at
the City of Marietta, (Georgia). "
The clause 'who knows' is the
key clause in my statement,
because nobody does know.
Now the public has the ability
to see all the bond contracts
and everything else. This is
called transparency. However,
a piece of glass is transparent,
but one cannot see the molecules
interacting in the glass.
Likewise, the public sees all the
bonds, but does not see their interactions.
As a storytelling analogy,
let us say that
Joe is in the taxi business
and has bought
10 taxis intermittently
in the last four years, each
having its own loan.
Now, let us say a bank, named Shark,
provides Joe a low interest, consolidation
loan for 5 of his taxis, but
requires Joe to pay back his loan
in five years. Furthermore, if
Joe cannot pay all the money back,
Shark tells Joe that it will pay
the over-due amount.
Five years pass, and Joe cannot
fully pay Shark. Furthermore, Joe
needs more loans to replace his
taxis that are wearing out.
As agreed, Shark pays the outstanding
amount, but tells
the other banks that Joe is a bad
risk, forcing banks to offer dramatically
increased interest rates to Joe.
Shark comes back and offers
Joe another loan, of course
at a high interest rate, but not as
high as the other offerings.
Shark pre-knows the price point because
Shark is Joe's buddy who provides him the
details of the other offerings.
Joe now starts to realize that if he could
turn the clock back, he should have
paid Shark as planned, even if it meant
a little corruption -- he justifies
his thoughts because he knows it is
difficult for anyone to understand the mess.
At this storytelling juncture,
if you, the reader, are not
asleep yet, then you have surpased
the average voter on wanting to
listen to bond details.
Let us continue, I hope you are
Imagine Joe is a city, loans are bonds,
each year is expanded
to three years, and there are 10 or more
bond stories completely different
from the one just presented.
And to top that off, all the bonds
are interrelated because the bonds
are paid from tax revenues.
This is what a normal large city
has in their portfolio of
activities. The direction here
is this: usually a city
cannot explain the interrelated
details of the bonds even when they
So when I say 'who knows' I am
indicating that few will ever
really know the details of a city's bond
situation, which opens the
door for corruption.
It took four years to develop a
indictment in Miami that was presented
around the year 2000.
Around two years later
the case was still being appealed.
The above scenario about Joe
was founded based on my non-expert
interpretation of a TAD bond in
Marietta Georgia that
will mature in 15 years.
The 15 years begs answer to
the following question:
'Because the problem is 15
years away, who cares?'
I am not sure anybody cares, leaving
an open door for corruption.
Add to that the fact that the statute of
limitation for those involved in
any corruption runs out way before the
maturity date of the bond.
In conclusion, state and national laws
need reform to rein in the opportunities