City Government

Five Voters Are Key To $781 Million Bond Deal

When a mere five electors cast their ballots in the May 21 election, they will determine one of the biggest financial decisions in Idaho history, totaling $781 MILLION dollars.

PREVIOUS WILDFIRE IN THE AREA TO BE DEVELOPED

PREVIOUS WILDFIRE IN THE AREA TO BE DEVELOPED


According to the official ballot language, revenue and general obligation bonds total $325 million and at the estimated interest rate of 7%, homeowners will eventually repay $781,000,000. Ironically, it takes a 2/3 approval which gives total control to just two voters.

At stake is a proposed 7,000 unit housing development north of Eagle encompassing more than 5,600 acres using a law passed by the legislature several years ago called a “Community Infrastructure District.”

The Spring Valley CID was created by the city of Eagle at the behest of M3 Development. At the time, October of 2011, the GUARDIAN pointed out nobody lived in the district. The developer paid big bucks for some homes off Idaho Highway 16 which were annexed into the CID. Only two of the homes are occupied–3 people in one and 2 in the other. They appear to be the only legal voters.

Meanwhile the Ada County Election Office is sending 50 ballots–one for each parcel of land owned by M3–to the authorized agent at the developer’s Phoenix, Arizona headquarters. Clerk Chris Rich told the GUARDIAN he will keep those 50 ballots apart from the other five until the legal issues surrounding electors have been resolved by the various attorneys and perhaps a judge.

The GUARDIAN was concerned about the constitutional aspects of the election process which is an official government election conducted under the consolidated election process by the Ada County Clerk. We contacted state Senator Branden Durst with our concerns about exactly WHO can be an elector and vote. He sought an opinion from the office of Idaho Attorney General Lawrence Wasden. We have circulated that opinion to all concerned.

The informal opinion referred to the constitutional mandate that only citizens of Idaho and residents of the county are allowed to vote. That position seems to be in conflict with the CID law. The law was lobbied by the Suncor (Avimor) developers.

In short, the law allows developers to sell revenue and general obligation bonds on the open market to be repaid by future homeowners. That way the developer doesn’t have to get loans or otherwise fund streets, sewer, water, etc. Each new home sold would have a lien for the cost of development in addition to the costs of taxes, construction, insurance, interest etc.

While there would be virtually no security for bond investors, we were concerned that it would be very easy to market the project as, “Approved by the voters of the district created by the local governing authority.” When in fact, no property owners can vote because they don’t live in the state and the approval–if it comes–was at the whim of 5 renters.

The AG opinion letter to Sen. Durst follows:

Durst response from May 6, 2013

Comments & Discussion

Comments are closed for this post.

  1. A 7% interest rate in todays market would mean the project is quite risky. Still, I fail to see the difference between the developer getting a bank to finance the infrastructure and selling bonds. Project would no doubt be built in phases so exposure at any one time would be much less than $781 million. Bringing investor money into the State is a time honored Idaho tradition and many investors have learned that to their sorrow

  2. Brian Vermillion
    May 17, 2013, 5:18 am

    Unbelievable!

  3. I will gladly pay you next Tuesday for a hamburger today.

  4. Clippityclop
    May 17, 2013, 8:44 am

    If this project were truly viable, encumberance of this magnitude would not be necessary. This project will become a burden on all taxpayers for decades. Shameful. And, I would hope, illegal.

  5. Just another circumventing of the constitution. Where did these renters move in from? AZ… I would question the intelligence of buying a house with these encumbrances. I sure would hate to be the first to buy and be stuck holding the entire Lien until more houses are sold.

  6. Grumpy ole guy
    May 17, 2013, 10:27 am

    Do we know that all 5 of those residents are of legal voter age and registered to vote?

    EDITOR NOTE–Yes, they are all legal. Both families are renting homes.

  7. If the other 50 ballots own the 2 rental units, I wonder what “Rent” is? A low,low price of Yes?

  8. Rod in SE Boise
    May 17, 2013, 1:01 pm

    So, if I got this right, these renters will authorize the CID to borrow money (for streets, sidewalks, and utilities in the subdivision) and thus obligate 7,000 future homeowners to pay it back. The CID is not a government agency of any kind, so there will be no taxpayer risk in paying back the money. Ada County is just conducting this “election” for the CID as a public service. And the Guardian’s question is about who can vote in this “election”.

    The old way was for the developer to borrow the money, have the streets, sidewalks and utilities put in, and include those costs in the sale price of the lot to the builder, who then passed that on to the homebuyer, who financed it over 30 years.

    EDITOR NOTE–Rod, you are close. The CID is actually a government entity, created by the Eagle City Council which has a couple of members. The developer essentially has “no skin in the game.” The risk is shifted from the developer to the investors who depend on future homeowners to repay the debt on the bonds which are sold on the “municipal bond” market. The ballot language also provides a 30 year window to repay. The “revenue bonds” for sewer, water, irrigation are to be repaid out of REVENUES collected . Without a major sale of homes there would appear to be no way to generate enough revenues to pay for the various plants and systems.

  9. Clippityclop
    May 17, 2013, 2:29 pm

    This scheme is all about shifting risk.

  10. Duh! This is how a developer survives when no one is buying houses:

    But it’s not really important… keep your focus on buses for bums after hours… Our community will crumble without a 24/7 bus.

  11. Sounds a lot like the county making loans. Nice loophole. Smart people.

  12. Obviously, the AG letter is spot on correct. This is an easy issue to understand after reading it. I have not looked that closely at the CID law, but I knew something was funky about it when it was passed. It is about shifting risk, shifting cost, and making life seem too good to be true for a few. And, it is. This is a fatal blow to the CID law.

  13. Revenue bonds are abused by urban renewal districts and now this!
    I am just curious if this bond debt is fully disclosed to property purchasers?

    EDITOR NOTE–The answer is, “DON’T KNOW” because no lots have been sold. Supposedly it will be a requirement of sale to disclose the liens.

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