Cities in California that can not use stimulus money appropriated for transportation are selling their stimulus money to other cities for cash. Check it out here.
La Habra Heights, a city of 6,000, has sold its $500,000 in federal funds to the city of Westlake Village for $310,000 cash. Irwindale, population 1,500, also sold its $500,000 to Westlake Village, for $325,000 cash.
Does anyone think that this money was misappropriated? If the money is earmarked for transportation grants, shouldn’t the city have to write a grant to get the money? How is it that they just get money appropriated for something for which they do not have a need? I honestly do not blame the cities, their solution is actually very clever.
I’m sure many cities have higher priorities than transportation. And I would have liked to have seen more direct aid to ailing local governments in the stimulus bill. Still, MTA’s approach strikes me as a bit too creative. What’s next, stimulus money credit default swaps?
I would gladly sell stimulus money credit default swaps, it’s not like we could every default on US treasury bonds. RIGHT? China seems to be getting a little nervous.
Jim adds: Hope n change brothers and sisters. HOPE AND CHANGE.
Update: It’s a little complicated … but the deal’s off … cities cannot sell their stimulus money in California …. apparently they have to use it or loose it.
Several area cities that arranged to sell off federal stimulus funding intended for transportation projects scrambled Wednesday for ways to use the money or trade it, one day after the MTA axed such deals.The cities – La Habra Heights, Irwindale, Bradbury and Rolling Hills – now must either submit so called “shovel-ready” projects to the MTA, or trade their stimulus tax dollars for equal amounts of Measure R transportation funds. The cities have until Friday to do so, said Carol Inge, the Metropolitan Transportation Authority’s chief planning officer.
Oh well … such are the ways of the government. Capitalism is very out of fashion, especially when governments try it.
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Rather hefty discount there, don't we think? Average 36.5% discount tells me there's some uncertainty about the payment (amount, timing, or even if it's going to occur). If this deal ever consumates, Westlake Village is gonna look pretty smart.
UPDATE: After this post appeared, MTA reversed course and invalidated these sales. It now says that the stimulus funds can only be swapped for other county money targeted for transit projects.
The original story has the following update posted to it. So, they apparently reconsidered.
Madoff Math, where you get more for less with Jail Time.
No, seriously now. Behind this curtain we have $500,000 wtih strings attached and in this market place we have bidders that want to upgrade their on hand cash, for a cash upgrade with strings.
It has to be Fuzzy Math.
Part of the catch is that many cities in California have played silly buggers with their borrowing practices. For example, the city of Oxnard borrowed against future revenue by "selling" its streets to a city-controlled financing authority, never mind the 100% overlap between the city council and the newly-minted financing authority. The cities out there are up to their eyebrows in hock, so some of these deals, given their desperate need for spendable (as opposed to "earmarked") cash.
Hmmm. It seems that Obama's idea of "shovel ready" involves shoveling something other than dirt.
Erik is precisely right: they cities getting this money should have had to write a grant explaining exactly what the money was needed for and how it was going to be spent. Just spewing money like it is coming out of a firehose with no accountability is exactly what got us into the mess with TARP I right?