(Jim Clark) – Mark Twain once pondered: “Men fight over water but drink whiskey.” If Twain were alive today, he would be at the Territorial Enterprise Newspaper writing about the great Washoe County water fight of 2011.
Last May, the county commission considered a staff proposal to create a “bond bank,” the purpose of which was to borrow money from the public to purchase bonds issued by municipalities within Washoe County.
Yep, that’s right. The county would sell general obligation bonds to the public and turn around and buy revenue bonds from local agencies and charge the same interest rate the county is paying. If there’s a default, all county taxpayers are on the hook for repayment.
As Mark Twain might say: “This is like your dead beat uncle asking you to refinance your house, loan him the money at the same rate you’re paying, and rely on repayment from sales of apples from the orchard in his back yard.”
In addition to the proposal’s irrational legal structure, former Washoe County Commissioner Jim Galloway and other members of the public pointed out at the May public hearing that Reno might pressure the county to buy its junk-rated bonds. Accordingly, the proposal was rewritten to define “municipality” to mean “water authority.”
You see the whole drill is to facilitate the disposition and merger of the county’s Department of Water Resources (DWR) into the Truckee Meadows Water Authority (TMWA).
DWR is a basket case. It once issued $65 million in bonds to build a water treatment facility that never got built. Nevertheless, $26.1 million of the bonds are still outstanding, the proceeds having been used to lay pipe which, of course, is unused because there is no treatment plant. In any case, DWR is a dysfunctional unit that the county wants to get rid of.
The problem is that someone has to pay off the bonds that paid for the “pipes to nowhere.” TMWA is currently running at an annual loss of $9 million, so its bonds would not be particularly marketable in today’s economy.
On November 8, the ordinance, with its new definition, was trotted out for a first reading. Over the objections of Commissioners Weber and Jung, the proposal passed and is scheduled for a second and final reading December 13.
At the November 8 meeting, Galloway and others pointed out a number of flaws. First, the ordinance authorizes borrowing up to $2 billion to refinance just $26.1 million. TMWA finance officer Jeff Tessier told the Reno Gazette Journal that TMWA could also use the county “bond bank” to refinance $370 million in existing TMWA debt and “wouldn’t need to return to the county commission for approval.”
Moreover, the term “water authority” could include a yet-to-be-formed agency for the proposed Truckee River flood control project, which is estimated by the US Army Corps of Engineers to cost $1.6 billion. The proposal is in danger of losing Corps of Engineers financial support because its cost benefit ratio is marginal; and that could saddle Washoe County taxpayers with the entire tab.
In summary, this could end up a $2 billion dollar line of credit backed by helpless county taxpayers. Who are the winners? County administrators, if they succeed in using this sweetheart financing scheme to facilitate offloading the cash sucking DWR; and TMWA since this line of credit allows them to borrow at will; and finally property owners in the Truckee Meadows flood plain who, if this line of credit is ever accessed to pay for the ever more costly proposed flood control boondoggle, could then develop without having to buy flood insurance
Mark Twain once said: “A man who carries a cat by the tail learns something he can learn in no other way.” What do you think the county will learn if it goes ahead with this “bond bank” ordinance?
(Jim Clark is President of Republican Advocates and a member of the Washoe County & Nevada State GOP Central Committees.)