No Problem, it's Other People's Money

Kim Lefner

When I tell people that San Juan Capistrano has debt of over $153 million, mouths drop open. Much like mine did when the council majority approved increasing that debt at a recent council meeting. Our biggest debts are divided mostly two ways; bond debt is approximately $106 million and Redevelopment Agency debt is approximately $47 million. If you divide this debt by the 11,000 households in SJC, it amounts to $13,909 per household!

Thats such a staggering figure that I wondered if this was typical for a town our size. So I researched the debt of neighboring cities Laguna Niguel and Aliso Viejo to see how we stack up. I couldnt find any debt in Laguna Niguels most recent budget figures. I did find interest earnings of $2.1 million for the year however. And rather than take out a loan (issue bonds) to finance a new City Hall, it looks like they budgeted $1.4 million towards it. Theyre saving for it, rather than borrowing money. Aliso Viejo, with a population of 45,000 has about $7.78 million in debt with an annual payment of $812,000, for a new City Hall built in 2006. How is it, I wondered, that SJC, which is smaller than either of those cities, has debt amounting to approximately 19 times the debt of both of these cities combined?

For answers I looked to those responsible for making the decisions about borrowing and spending; primarily the CFO (Cindy Russell), the City Council and the City Manager. But since there are only nonsensical answers  from those quarters, I am left with my own observations.. Politicians (I count executive staff such as the CFO among these) appear to have a certain mindset when it comes to spending your tax dollars. Maybe its because its other peoples money that the CFO recommends and the City Council approves ever increasing levels of debt spending.

In what could only be considered classic political doublespeak, the CFO actually presented increasing the debt as a monthly savings, presumably because if she is able to lower monthly payments a bit by stretching the debt over a longer period of time, well have more money to spend (even if we are paying millions more in interest by extending the debt). Perhaps this logic is how we ended up owing nearly the entire $9+ million we paid for the Kinoshita Farm purchase of 20 years ago, despite paying over $650,000 per year for 20 years ($13 million thus far). Because the CFO paid interest-only on that debt, we still owe $8 million. Compounding the problem, the note has now come due but rather than paying it off, the CFO advised refinancing it for another 10 years as an interest-only loan again. The council majority with the exception of Councilman Reeve, voted to approve this  spending. At the end of 30 yrs. we will have paid more than twice the original purchase price and will still owe the principal; the Kinoshitas have 30 years worth of tax-free payments of hundreds of thousands per year while not having to pay capital gains on the principal which we still owe them. Sweet deal for them, but not us!

Who would make such an irresponsible decision? Your CFO, Cindy Russell, and City Council members Allevato, Freese, Kramer and Taylor. Other mindsets that allow elected officials to make such decisions are seen in their responses to constituents. When asked why he voted to approve incurring more debt, Mayor Sam Allevato responded (Im paraphrasing here); its better to have your local politicians spend your tax dollars than Sacramento!Then there are the elected officials who suffer from “this is such a good deal I can’t pass it up” thinking that kicks in when buying sale items that you dont need. We saw this in Councilman Kramer’s response to a constituent when his reason for running up the debt was we need the redevelopment agency and “we got a good rate”, as if that somehow justified more borrowing.

I question why we need the redevelopment agency at all. A look at recent redevelopment spending looks more like political favoritism than anything else; giving car dealers $7 million to open dealerships that were prev-iously closed due to lack of business (whats changed? certainly not the economy); giving hundreds of thousands to politically-connected business owners who are still floundering in this recession and who are now going back to the well for more; giving well-connected landowners millions of tax dollars for property that ended up costing far more than what it was worth. These are just a few more recent examples. Upon hearing the amount of SJCs debt and the crazy spending that got us here, friends ask but what can we do?. I encourage everyone to get involved! Attend council meetings and/or send emails to your City Council members at: . Tell them its time to stop papering over debt with more debt.


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