Time to revisit a “Combination Bond” with a little input from the Town Manager.

Oftentimes people will ask about the debt initiative, specifically, the zeroing in on a “Combination Bond.”  We can explain that.  Before Transparent Payson was formed as a group, a fair amount of research went into an underlying proposal before the Town of Payson regarding the development of “Rumsey Park.”  That research lead to the realization of the use of a “combination bond” or “double barrel bond.”  Traditionally municipal bonds come in two flavors.  A general obligation bond, subject to a vote of the electorate, or a revenue bond, that requires no vote of the electorate.  A hybrid bond was then put into place.  That is known as a “combination bond.”

A “combination bond” is structured as a “revenue bond” that requires no vote of the people.  As long as there is sufficient projected revenue, the bond can be issued.  To “back stop” the bond, and reduce the risk of default, the indenture agreement requires that the issuing authority access general funds in the event the revenue falls short.  So, a “combination bond” is a work around to a direct vote of the people, but with identical obligations to the citizens to minimize default risk.   Poke around a bit?  To further lead in the right direction, it is important to note that Arizona Law has a provision that allows for issuance of a “Revenue Bond” specific to a “rec center” for municipalities smaller than 75,000 people.  Finally, given the deed restrictions of the land, it became clear that an alternate form of “back stop” would be required.

All those clues pointed towards only one logical financing method: A Combination Bond.  A method that requires no vote of the people, but subjects them to terms just like a “General Obligation Bond.”  Your money, NOT your vote.

That recognition of a “combination bond” and the realization of the implications was the start of “Transparent Payson.”  By way of example as to the obscure nature of a “combination bond,” conversations with a candidate for State Treasurer, Senator Yee, revealed that she was unaware of the feature.  She quickly realized the potential for abuse by municipal agencies and or towns.  Further conversations with other elected officials suggested most were unaware.  Certainly all that we spoke with directly were unaware.

During that time, Transparent Payson was labeled as “conjecture” and or “speculation” as the financing had not been released.  Town officials maintained that the financing was simply unknown.  That seemed odd.  Generally most people, and certainly professionals discussing multi-million dollar deals, know how to finance or pay for purchases.  What was labeled as “conjecture” was in fact the only logical conclusion on the financing method that COULD be drawn.  That is why the initiative for debt specifically addresses “combination bonds” or “double barrel” bonds and defines those terms.

To gain a better understanding of the issue, various State and Local Representatives were contacted.  The goal was addressing this concern at the State level.  Most did not respond.  Those that did respond by and large disavowed any knowledge of this “combination feature” in the bond process.  Again, most agencies contacted provided no response.  Our correspondence referred to the suggested revision to State Law as the “Payson Provision.”

One of the inquiries regarding the “Payson Provision” was sent to Globe, Arizona.  The Town Manager of Globe forwarded the inquiry to the Payson Town manager, Mr. Garrett.  Mr. Jepson, the Town Manager of Globe, referred to the question as coming from an “Agitator.”  Mr. Garret then forwarded the email to Mayor Swartwood indicating that:

It sounds like he already knows how we are going to fund the Activity Center.

The full pdf is as follows, it may be best to read it from bottom to top, note the dates, for the chronological context.  The header information does not print, so it is embedded in a .jpg format below.

You will note that exchange occurred on 1/8/18.  Also attached is a 01/17/18 exchange with Mr. Garrett where it is confirmed that the financing options have not been “determined.”  Again, best to read bottom to top for a chronological perspective.  Parenthetically, we note it appears “the dark side” may just be the truth?

“Conjecture,” “Speculation,” you can decide what Mr. Garret meant when he said:

It sounds like he already knows how we are going to fund the Activity Center.

Potential for abuse?  Logical conclusion?  The voters will decide in August whether the safeguard against a “combination / double barrel bond” is worth having.

As to the potential of using any other method that would result in a lien on the land?  Mayor Swartwood was kind enough to address that himself:

Direct answer to your question the only recourse to the bond holders is to foreclose on the park which is deed restricted to only be a park.

In the Mayor’s defense, he does state he would not proceed if it was a “remote possibility”  but, he does not rule out use of a “Combination Feature” to preclude that “remote possibility.” He just precludes a lien on the land.   Again, a full copy is attached in .pdf below for context.

Again, the voters can decide the merits of the use of a “Double Barrel” bond without their direct input. 

Your Money, Your Land, Your Vote.