Barbara writes:
>My understanding from the article is that the city MAY seek early
>repayment. This is like you ( if you were Brookfield) getting an
>opportunity to pay
>off your mortgage early -- you aren't "gaining" or "losing" if you do
>this -- you are simply paying the present value of your loan instead of
>dragging it out over several more years.
Is this right? Is this like pre-paying the mortgage, or are we really
negotiating reduced terms AND a pre-payment?
>Let's not jump to conclusions before we see where the risk levels lay.
>Now, what the city decides to do if they DO get an early repayment --
>that will tell the tale of their fiscal responsibility.
I still think it is worse than this. My understanding is that the city built
its spending programs - including NRP Phase II's full funding -- around
income it was supposed to get from loans like Brookfield's.
Now, if Barbara is right and I am wrong, it's possible the city could take
the equivalent principal and reinvest it, and not be egregiously harmed
(although there's probably no way to generate the rate of return it was
getting on the mortgage). But if I'm right and we are actually lowering our
principal, then cash flow will dip even more dramatically.
The bottom line is that the city won't have the cash flow to pay the
spending it obligated. I think that is what Council Member Ostrow alluded to
in his earlier post.
Also, as for waiting to comment and criticize: the Brookfield loan problem
is one of the worst-kept secrets at City Hall. It's true the final
parameters of the bailout aren't yet known, and the politicians haven't
signed off. But based on months of conversations, a bailout is coming and
the Council will be hard-pressed to wriggle out from between a fiscal rock
and a hard place.
So I don't intend to criticize the MCDA and Steve Cramer for entering into a
renegotiation - I think that was a fait accompli. (I do worry how tough we
will get and can get on Brookfield, but I'll wait to see how things go.)
What I do think is fair to criticize - even at this early juncture - is the
policy of highly questionable subsidies, which were questionable at the
time, that come home to roost a decade later when most of the politicians
are out of office or in higher office. (For example, the mayor; I also
believe Cramer was a Council leader when the first Gaviidae loan passed.)
I'm trying to link the Gaviidae (and earlier, Conservatory) loans to more
contemporary subsidies - this time, for glitzy entertainment rather than
high-end retail - that in my mind are also questionable. I admit I'm
guessing how today's subsidies will turn out. But I think history shows
big-time reason to be worried.
David Brauer
King Field - Ward 10
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