By Paul Ehrlich
Re “The Important Overall Picture”
In a recent essay in thefrontpageonline.com, George Laase tried to paint a gloomy picture of our debt if the proposed school bond is adopted in June. He uses his own criteria to do this and misuses Fitch, a credit rating agency, to “prove” his point.
First, he takes the total debt service and divides it by Culver City’s population. Here is the fatal flaw in his argument. Culver City citizens do not pay taxes to pay off the General Obligation School Bond. Property owners do. This is an important distinction. That is, commercial, industrial, and vacant property owners must also be counted in as who the taxpayers are.
Okay, so what do Fitch and other credit rating agencies actually do to rate municipal bonds? They use seven major indicators, measuring them relative to similar governments:
1) Debt as a percentage of Fair Market Value.
2) Debt as a percentage of per capital income.
3) Debt service (principal plus interest) as a percent of property tax revenue.
4) Debt service as a percent of per capita income.
5) Debt service as a percent of General Fund revenue.
6) Debt service as a percent of General Fund expenses.
7) Debt service as a percent of Operating Fund expenses.
Mr. Laase asked if the School District’s credit rating leaped to one of the highest credit ratings. This is just like asking someone how he/she would feel if someone’s “FICO” (personal credit) scored higher. Clearly this would be a joyous positive event. This would mean that we could continue to borrow money, if needed, at very low interest rates.
Please join me in voting “Yes” for Measure CC in the June 3 election.
Mr. Ehrlich may be contacted at PMSHA@aol.com
