California Treasurer: We will not default on bonds

[newnewthing]

Re: California Treasurer: We will not default on bonds

I will be getting IOUs. I found about $30,000 of unclaimed property and recently filed th requisite paperwork to recover it. According to the FAQs I will be getting paid in IOUs.

Apparently I can use them to pay state taxes though. Cool.

This should be getting interestinger and interestinger.

[grapejelly]

Re: California Treasurer: We will not default on bonds

I keep asking, what about the US Constitution, hahahahaha:

Section 10. Clause 1. No State shall enter into any Treaty, Alliance, or Confederation; grant Letters of Marque and Reprisal; coin Money; emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debts; pass any Bill of Attainder, ex post facto Law, or Law impairing the Obligation of Contracts, or grant any Title of Nobility.

[cjppjc]

Re: California Treasurer: We will not default on bonds

I keep asking, what about the US Constitution, hahahahaha:

Yea good one Gj

[ThePythonicCow]

Re: California Treasurer: We will not default on bonds

I keep asking, what about the US Constitution, hahahahaha:

I think we have now answered Mr. Lincoln's question, as to "whether that nation, or any nation so conceived and so dedicated, can long endure."

[c1ue]

Re: California Treasurer: We will not default on bonds

Medved,

Fair enough.

I have long advocated a revocation of Prop. 13 - and have also believed this current crisis could prove the lever to unstick it.

I also note that there are some politicians like Phil Ting in SF who are openly pushing for it.

In fact there is some sort of goofy rally for this coming up though I cannot remember the web site. I'll try to swing by if I'm in town just to see some angry confrontations.

[vanvaley1]

Re: California Treasurer: We will not default on bonds

Medved,

Fair enough.

I have long advocated a revocation of Prop. 13 - and have also believed this current crisis could prove the lever to unstick it.

I also note that there are some politicians like Phil Ting in SF who are openly pushing for it.

In fact there is some sort of goofy rally for this coming up though I cannot remember the web site. I'll try to swing by if I'm in town just to see some angry confrontations.

Ok, let's revoke Prop. 13 and see what happens? As property taxes go up will this benefit the homeowner near and/or underwater? Will it benefit the thrifty homeowner who has paid the home off? Will it improve the commercial business cycle by increasing the businessmen's tax cost of doing business? Will that cost be passed on to the consumer? Will the consumer that has a home (paid-off or not) spend more on consumption now that additional monies are being spend on property taxes? Will banks balance sheets be more balanced with the additional foreclosures they will inherit from a rise in property taxes? Will the banks be happy about having to pay the additional property taxes now that they own the property? Etc. etc. etc.

To address this problem in California you need a complete and fair rewrite of the tax code that asks all to sacrifice. Otherwise, you'll end up with people protecting their tax turf like Prop. 13, oil subsidies, water rights, etc. This 'special interest' tax turf war will produce nothing but more inequities and more social uneasiness that translates into a lack of consumer and business confidence. You have a federal and state systemic tax turf problem with special interest hoping to hang on and protect their dwindling revenue resources.

You need leader(s) who will seriously look at all the state debt, prioritise it, get rid of the boondoggle babies, and then write a piece of legislation that will make the whole state unhappy because it clearly addresses the revenues needed and comes up with a solution that spreads the tax and expenditure cuts in a fair and meaningful manner across the board.

We don't have leaders like that out here. We have ex-movie stars (B movies at that), lethargic legislators whose principal interest is their job preservation, ideologues sprinkled with some demagogues, and a public that takes their clues of how to participate in government from their legislators.

I'll give up Prop. 13 when I can see that there's no revenue source that's sancrosanct (from pensions to pulpit to 'puts & calls', to bank debt forgiveness, etc.) from taxation and no program that can't be looked at under a microscope including politicians government perks.

Too bad a computer program can't gut it all and come up with a ways and means of cutting through the BS and fixing the 'fix'. Barring that...appoint some disinterested committee that would make recommendations on how to do it: the Vatican, French (insert the country of your choice) bureaucrats, Goldman Sachs, Fidel Castro, E.T., EJ, Hudson, Soros, Limbaugh, etc. anybody but our present group of political groupies groping about trying to figure out how to undo a financial brasserie snap... which was much more difficult in the 50s than today.

[big67]

Re: California Treasurer: We will not default on bonds

IOUs by a state are indeed outright money, albeit at a different maturity.

It's like printing dollars with "not a legal tender till 2010" printed on it in red color.

It is just a funny way to monetise debt: the FED should imitate it creating a TSTR Troubled State Relief program of sort...

[newnewthing]

Re: California Treasurer: We will not default on bonds

Calif. IOUs carry 3.75% APR as determined today July 2.

Also, look at the following cash projections. This is only temporary and assumes the IOUs are redeamed on Oct 1 hence the lines join.

This is a bandaid.

http://www.sco.ca.gov/Press-Releases...ashbalance.pdf

[pwcmba]

Re: California Treasurer: We will not default on bonds

Anyone know what these are trading at if they are trading much yet? Is it 50 cents on the dollar? Where is a good source of information. We need a central marketplace and maybe a futures market for these things.

[rj1]

Re: California Treasurer: We will not default on bonds

And apparently their Treasurer are going to offer their debt to China.

California competing with the U.S. on handing out debt.

http://www.cnbc.com/id/15840232?video=1171039982&play=1

I keep asking, what about the US Constitution, hahahahaha

LOL.

Well, the Constitution hasn't mattered in the past 10 years, might as well make it 11!

[c1ue]

Re: California Treasurer: We will not default on bonds

Ok, let's revoke Prop. 13 and see what happens? As property taxes go up will this benefit the homeowner near and/or underwater?

Actually, it wouldn't hurt those underwater. After all, they're the ones who are paying the max possible rate.

Secondary effect would hurt them as likely housing will continue to fall. But then they aren't repaying the loans anyway.

Will it benefit the thrifty homeowner who has paid the home off?

It won't hurt them - you can always sell and just run with the cash. My heart just bleeds when I hear people whine that I'd have to liquidify the $500K or $1M in their homes due to the taxes going up $10K a year.

Will it improve the commercial business cycle by increasing the businessmen's tax cost of doing business? Will that cost be passed on to the consumer?

What tax on businesses? Check out the tax rolls - you'll notice that business taxes are a distinct 4th (a very distant distinct fourth) behind income, sales, and property tax. As for cost being passed on - well - buying crap is always voluntary no? Certainly some unavoidable costs will be passed on, but then again many won't or can't. No pricing power = no pricing increase.

Will the consumer that has a home (paid-off or not) spend more on consumption now that additional monies are being spend on property taxes?

They ain't spending anyway. So might as well screw 'em for what you can.

Will banks balance sheets be more balanced with the additional foreclosures they will inherit from a rise in property taxes? Will the banks be happy about having to pay the additional property taxes now that they own the property?

The bank's balance sheets are irrelevant - at least the ones who've got the Fed at their back. Property taxes? Like they're paying them now? Again, I fail to see how that makes any difference whatsoever.

Don't get me wrong - I do feel those who own property's pain.

Would you accept a change of Prop. 13 so that maximum increase on property tax assessed value = CPI in a given year?

Because if you don't, then you're just arguing to preserve your own tax loophole.

It is completely ridiculous that assessed property value can only increase by 2% a year when inflation is more than that 90% of the time.

[pwcmba]

Re: California Treasurer: We will not default on bonds

http://www.youtube.com/watch?v=nPv2s...eature=related

Imagine the above comments made about only 150 million - Now in CA its somewhere between 26 and 100 Billion depending on time frame!?!


From Wikipedia-

http://en.wikipedia.org/wiki/History...ity_(1946–1977)

"A statement by Mayor Beame was drafted and ready to be released on October 17, 1975, if the teachers' union did not invest $150 million from its pension funds in city securities. "I have been advised by the comptroller that the City of New York has insufficient cash on hand to meet debt obligations due today," the statement said. "This constitutes the default that we have struggled to avoid."[2] The Beame statement was never distributed because Albert Shanker, the teachers' union president, finally furnished $150 million from the union's pension fund to buy Municipal Assistance Corporation bonds. (President Gerald R. Ford angered many New Yorkers two weeks later by refusing an outright grant to the city, a decision famously, if inaccurately, summarized by the New York Daily News headline "Ford to City: Drop Dead.")"

[vanvaley1]

Re: California Treasurer: We will not default on bonds

Thanks Clue. Gives me something to think on.

[touchring]

Re: California Treasurer: We will not default on bonds

Actually there's a lot of serious talk about a split roll.

All residential property (eventually maybe only primary residences) keep their prop 13.

All commercial property loses their prop 13.

It makes sense, considering the commercial properties charge market rent no matter what they pay in property taxes, so they're just pocketing the difference. There's also properties that rarely if ever change hands like manufacturing plants.

What does prop 13 do? It says in wikipedia "People's Initiative to Limit Property Taxation" to 1 percent of cash value.

So does this mean a house in California that costs $500,000 can be taxed 'only' up to $5000 a year?

[ThePythonicCow]

Re: California Treasurer: We will not default on bonds

What does prop 13 do?

The key thing that Prop 13 did was to limit how much the county assessor could raise the appraised value each year.

If the same person owned the house from one year to the next, the appraised value could only go up a little bit, regardless of the current reasonable resale value.

I had a home in California for a while, which I purchased at $250K, which had risen in estimated value to perhaps $800K at the peak in 2006, but was only paying real estate taxes on perhaps $350K of that value (I forget the exact numbers.) If someone bought a similar house across the street at $800K in 2006, they would have been paying over twice the real estate tax I was paying, as a long standing owner.

If Prop 13 was repealed for residential owners, then many long standing owners would suffer substantial upward shocks in their real estate taxes, resulting in more foreclosures and tax lien sales. A somewhat less disruptive way of repealing Prop 13 would be to grandfather existing owners. New owners could see appraised property values rise without limit, but existing owners would remain protected by Prop 13 so long as they kept the same residence.