Monday, October 03, 2011

Reibman's Folly May Cost $23.5 Million Or More in 2012

Back in 2004, County Executive Reibman proposed a deal under which, in exchange for a quick $1.9 million from Merrill Lynch, County Council would gamble that interest rates on its $111 million fixed bonds would remain more attractive than those with variable rates. It's called a swaption, and you can tahnk the state senate for foisting that upon us. Financial experts in fancy suits from Concord Public Financial Advisors recommended rolling the dice, and kept the campaign coffers for for Reibman.

Peg Farraro, Ann McHale and Ron Angle all voted against this idea, and it failed in a 4-4 vote. But two weeks later, five Council members decided to gamble with your money in a bipartisan failure.

We've lost.

In 2009 alone, the swaption payoff grew from $10 to $14 million. From 2010 until the time that John Stoffa's budget was printed, it had risen to $23.4 million, due October 1, 2012. In the time between the printing of the budget and its release, it grew another $100,000, and now stands at a whopping $23.5 million.

This growing swaption could easily wipe out the County's $2.4 million proposed rainy day fund in the time it takes to adopt a budget. "It could go up that much in a week," stated Acting Finance Director Doran Hamman, not so reassuringly.

In December 2009, the swaption was "only" $10 million.

Contrary to what some think, it is illegal to pay this bill by refinancing debt. Cash talks, and cash only.

At a Council Finance Committee meeting in January, Council members were divided on what to do. Angle suggested it might be time to "cut our losses," but Bruce Gilbert thought interest rates might soon start going the County's way.

They haven't.

Council members are the unenviable position of playing in a high finance gamble with our money on a decision made by their predecessors in 2004. Whatever they do, or don't do, they'll be condemned.

Stoffa has received a proposal to hire a financial expert.

Thanks to Glenn Reibman, Northampton County taxpayers now owes one of those Wall Street banks $23.5 million for a quick $1.9 million in 2004. What's worse, County Exec John Stoffa and the rest of Council are in the unenviable position of being forced to continue gambling. If they do nothing, the swaption might go up even more. If they pay it off and the swaption goes down, they'll look like idiots, too. No matter what they do, they lose.

Did I mention that Concord just happens to be Bethlehem's financial advisor?

In Stoffa's blunt words, "[W]e face a devastating payment of an ill-advised swaption, callable on October 1, 2012."

The County faces another payment, too, $1.8 million for a proposed treatment center in West Easton. I'll tell you about that below.

19 comments:

Anonymous said...

really. 6 years later...still blaming reibman. fact is stoffa could've gotten out of this deal much, much earlier, and considerably less cost.

if reibman made a bad decision on the swaption, that is his fault and his responsibility. however, stoffa sits in the big chair and is responsible for making NO decision.

Anonymous said...

Who's Glen Reibman? Really Bernie... Using that playbook is like you mentioning the Wing-T or Wishbone offense when everyone else is using the Spread or Run and Shoot offense. You can't blame Reibman for Stoffa's inaction the last 6 years!

Anonymous said...

Illegal to refinance? Cash only? Well, unless the county has a hidden suitcase of cash in the courthouse somewhere, that cash is coming out of a bank account. Look up the word re-finance...it means moving money from one bank to another bank, and one hand to another hand. As long as the money moves legally, banks dont care how the "cash" gets to them.

Word on the street is, Bo has a huge suitcase full of cash. Isnt that right Bo? Maybe you should pay for it.

Bernie O'Hare said...

This, of course, is bullshit from one of the Gracedale Goons - Fake Rev Mario Martinez, Jack D'Alessandro, Mary Ann Schmoyer & Tricia Mezzacrappa.

They'll be hearing from me soon in another venue.

You may not refinance a swaption. Doesn't matter whether banks care. The feds do.

I have to wonder about the constant wild accusations about money from these people. It makes me wonder whether that is how they operate.

Anonymous said...

Stoffa and his finance director could have paid this off a few years ago. instead, norco gets hammered with 13 million more in waste and stoffa's finance director is running for office, hoping nobody in lehigh county will notice he is tied to a 9% tax increase and 13 million in waste.

Anonymous said...

Mr. Ohare

If a swaption can not be refinanced. Wouldn't another option be to borrow creating a new debt in its amount to pay it off? This rather than deplete the rainy day fund? I know that sounds like a money shuffle, I just would rather have that insurance of the rainy day funds. Currently the county would get a great interest rate.

Bernie O'Hare said...

I am not competent to answer that. The County needs to hire someone who knows what will be acceptable to the feds.

Anonymous said...

Could you have found a worse photo of Reibman? He looks like Nick Nolte's mug shot without the stringy hair.

Bernie O'Hare said...

If I could have found a worse photo, I would have used it.

Anonymous said...

Bernie O'Hare said...
If I could have found a worse photo, I would have used it.

That made me Laugh out loud, thanks

Anonymous said...

Why make fun of Mr. Reibman's illness. You are really a mean person. shame on you and Mr. Angle, who put you up to it!

Bernie O'Hare said...

I made no fun of Reibman's sleeping sickness. I have criticized his ridiculous swaption idea.

Anonymous said...

Bullshit O'Hare you are like your anti-Semitic friend Ron Angle. You have used this picture for a reason and you know it.

You Angle and Stoffa should be ashamed of this mean spirited attack!

Bernie O'Hare said...

I never even intimated at Reibman's little problem, in which he suddenly nods off in the middle of important meetings. But you go ahead and draw attention to an issue that was on nobody's mind.

Anonymous said...

You are an anti-semitic prick just like your boss Ron Angle. Illness is a very funny thing. May God smite you as you burn in Hell!!

You Angle and Stoffa are lower than low!!!!

Bernie O'Hare said...

Let's see. Writing a post about Reibman costing NC taxpayers $25 MM or more make me an anti-Semite, especially since I use a less than flattering picture that you claim is a dead giveaway of his tendency to nod off at the strangest times.

I think it's a factually accurate post and that you are nutz. Nobody in his right mind could conclude that there is anything remotely anti-Jewish about my post, or that I am smearing his tendency to fall asleep during meetings.

I conclude, therefore, that you are not in your right mind.

Anonymous said...

Stoffa has been nodding off for six years, while the county flounders and he has no illness. Unless you call incompetence an illness.

Anonymous said...

anti-semitism is never funny or clever.

Bernie O'Hare said...

Nor are false accusations.