Since moving to a new town three years ago, I have become aware of how municipal bonds are a SUPREME ripoff of taxpayers! I have tried searching internet for this phenomena, and there are only vague references to it; almost all links that show up are about investing in them, not about what a ripoff to the taxpayers they are! Where I live in NY, I found that at least one multi-million dollar bond was passed more than 20 years ago (still trying to find out if it was even voted on; I suspect it was just passed through a backroom deal between a private utility company and the county government officials) to pay for connection of a new group of customers to a municipal water supply. The original bond resulted in 402 property owners paying for this bond, which increases annual property taxes by about $600 per property owner! (the water isn't even fit to drink, so we have to supplement it with bottled water. All together, we are paying equivalent to about $140/month for water!) Cities all over the country use these bonds to pay for things, while passing on the cost to the taxpayers, who are essentially just paying the interest on the bonds, for decades (just like a home mortgage, for the first half or more of a loan, payments almost go exclusively to interest, rather than principal). In my local case, the private company that runs water supply systems all over our county, pretends they are a government entity. The project they passed at least one bond to cover appears to have actually cost about half of what they claimed, meaning the bond was just a cover to pad their budget. I urge everyone here to look at your tax records to see if you are also being ripped of by one or more bond issues of the past.
Rip off of taxpayers by municipal bonds
🗣️ DISCUSSION 💬
I think you're conflating 2 things. One is the existence of the bond, and the other is the mismanagement of it.
The way this is supposed to work is that your municipality wants some expensive things, like new utility infrastructure, roads, bridges, whatever. If they have the funds in their Treasury, they can pay for it that way, or they can issue a bond and saddle future residents with the debt. It's actually preferable, and more fair, to issue the bond, because the Treasury is made up of the tax money people paid in the past whereas the bond is tax money people pay in the future. People in the past may move away and never get a chance to use the thing that was built, but future residents will use the thing AND as you've pointed out, they can see the bond before moving there, so there is a form of consent.
Now mismanagement is awful, but a separate issue. If the municipality got too much bond money and then used it for something else, that's bad and likely criminal.
You are correct, OP is conflating the two issues. But he's not wrong to do it, the way the bonds are conceived and used. My experience indicates the mismanagement ability is intentionally built into the bond as written; it's simply a trick to get taxpayer funds into private hands.
I mean, the theory of a public bond is fine, under an honest and fiscally conservative government.
But in practice, the opportunity for abuse is nearly infinite. Often the text of a bond measure can be summarized as "we establish a $50 million slush fund for whatever the fund managers want" while the title presented to voters reads something like "Safe Schools Crosswalk Act." They've become incredibly brazen over time.
That is what appears to have happened in this case, if it was voted on (or presented to the county as justification to issue the bond). The total amount of the work stated in the bond appears to have cost about half of what the total cost stated in the bond was. And this second bond I found is now beyond the already ridiculousness/outrageousness of the initial bond. I can't wait to see how they justified a second bond for the same, small, group of customers!
In my situation, they told people they would have to pay ~$750 to get connected to the new "municipal" water supply, so most people agreed. However, the bonds appear to have been issued at the same time, and I don't think these people knew they would then be saddled with the additional $600/year for four decades! And I found out that utility type bonds can be issued without people voting on them, which must have happened in this case because I'm pretty sure people wouldn't vote themselves an additional $600/yr in taxes. What is really funny, actually sick, in this case is, even if a property owner didn't agree to pay the $750 to get the water service to their property, they still get about $300/yr added to their property taxes, because they "might" get connected in the future!
This is why local elections are really important. The leaders who approved this bond were elected by the people.