Has Clackamas County been hustling MAX bonds illegally?
The Clackamas County commissioners met last night, and at last report were expected to meet again this morning. According to this agenda, one of the topics is "Resolution No. ____ Authorizing the Potential Issuance of Bonds to Meet the County’s Obligation to Fund Portland to Milwaukie Light Rail (Dan Chandler, County Administration, and Scot Sideras, County Counsel)."
The reference to a "potential issuance of bonds" is pretty amusing, given the fact that the county has already submitted the bond issue to the rating officers at Moody's, and Moody's issued a rating for the bonds on Tuesday:
Issue: Full Faith and Credit Obligations, Series 2012; Rating: Aa2; Sale Amount: $19,140,000; Expected Sale Date: 9/6/12; Rating Description: General Obligation Limited Tax
Moody's Investors Service has assigned a Aa2 rating to Clackamas County, Oregon's Full Faith and Credit Obligations, Series 2012. The obligations are secured by the county's full faith and credit pledge of all legally available resources, and are not subject to appropriation. Proceeds will finance the county's commitment to Tri-Met for its portion of the Portland Milwaukie Light Rail extension. Moody's maintains a Aa2 rating on the county's rated parity debt outstanding in the amount of $99.6 million, and a Aa1 issuer rating. The outlook on the county is stable.
Which county official submitted the bond offering to Moody's for a rating? And on whose authority? Did the county commissioners agree privately that the bond deal would go forward? Wouldn't that violate Oregon's public meetings law? And when did the request to Moody's go in? Normally, that company does not issue bond ratings overnight. Could it have been a week or two ago?
The highly irregular time sequence also raises questions under the county's own "debt issuance and management policy," which reads in part as follows:
Method of Sale
Clackamas County will offer the debt to be issued on terms consistent with market conditions, the project being financed, current County debt rating, issue size and complexity, and any other relevant considerations. The Board of County Commissioners will approve the method of sale based on the consensus recommendation of the Financial Advisor, the Finance Director and the County Treasurer. The debt issue may either be offered as a competitive sale or as a negotiated sale.
None of the recommendation and approval process could have been done by the time the rating request was sent in to Moody's. At least, it was not done in compliance with the public meetings law.
So how did the county bureaucrats who went to Moody's know what to put in the rating request? If proper procedures were followed, the terms of the bonds, including their size and maturity, could not have been known when the Moody's documents went to New York -- or even on Tuesday, when the rating was issued.
It's truly despicable that the commissioners are racing to get the bonds sold before the September 18 public vote on whether they should be issued at all. But if proper procedures haven't been followed, it might be more than just a disgrace. If old Harvey Rogers -- the bond lawyer who churns out the opinions about Oregon public debt on which the bankers rely -- can't give his o.k., there's no deal.
And regardless of what Rogers may or may not be willing to do, if a lawsuit gets filed that holds up the bond transaction past the opponents' likely victory in the September special election, those bonds may never get sold. Even Wall Street would never go for paper with that kind of cloud hanging over it.