Small U.S. Towns Caught on Downside of Risky Bond Scheme - NYTimes.com: "Lewisburg is one of hundreds of small cities and counties across America reeling from their reliance in recent years on risky municipal bond derivatives that went bad. Municipalities that bought the derivatives were like homeowners with fixed-rate mortgages who refinanced by taking out lower-interest, variable-rate mortgages. But some local officials say they were not told, or did not understand, that interest rates could go much higher if economic conditions worsened — which, of course, they did."
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This relentless search for easy money by local governments is proving to be costly beyond anybody's expectations. You would think that after the Orange County, CA, bankruptcy in the early 1990s others would taken note, but apparently not. The insistence on building only in CIDs is another free lunch strategy that may be backfiring.
3 comments:
"The insistence on building only in CIDs is another free lunch strategy that may be backfiring."
Indeed. We cannot simply default local government to the private sector via mandatory membership nonprofit corporations. Local government isn't equatable with corporate governance.
Your right Fred P. their is no free lunch most often.
Historically corporate governance used in CIDs has been failing since day one before today’s community association industry was even formed. Too many elected officials have long forgotten that the local, State and Federal government’s responsibility is to "insure domestic tranquility" and "promote the general welfare" objectives of the US Constitution. Instead of primarily generating income or shedding itself of historical responsibilities and roles which is the driving forces for privatizing.
Unlike corporate governance which has no such constitutional responsibility towards the public good and instead only a responsibility to the bottom line. Corporate governance is appropriate for what it was originally intended to do but when it’s applied to CIDs it becomes a disaster. Like the Turkey’s dropped from WKRP’s helicopter it creates endless and unnecessary problems that cannot be fixed and like the Turkeys will crash.
Fred Fischer:
I see this as the fundamental flaw of the current public policy favoring the privatization of local government. Corporate governance has its place, but cannot substitute for traditional public local government by constitutionally bound state political subdivisions.
That said, I do believe the corporate governance model *is* appropriate to condominium associations, which I believe should be regulated more along the lines of real estate investment securities and not as homeowners associations.
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