EDITORIAL FOR OCTOBER 23-26, 2015
I’m CAVE MANager Paul Lotsof. A little over a week ago I got a postcard from a man who signed his card “Otis in Saint David”. Here’s part of what Otis wrote:
“Hi Paul, Thanks for your campaign to hammer the Highway 90 boondoggle.” “Keep on investigating the idiots on the clowncil too.”
Otis is, of course, referring to a proposal by El Dorado Benson LLC to build 28,000 houses along Highway 90 and the fact that Benson’s Mayor and City Council members don’t seem to harbor the slightest doubt that such a proposal is realistic. Otis also points out that if you do a little arithmetic, El Dorado proposes to build and sell nearly four houses per day, seven days a week for the next twenty years. I think that this proposal is an outrageous overestimate of the demand for housing in the Benson area and it’s nice that are some people are skeptical even though Benson’s city council is falling for this pie in the sky totally. They think that the Villages of Vigneto are God’s gift to Benson.
As I’ve said previously, if the El Dorado folks want to build thousands of houses on their property I have no problem with that. Let them toss away millions of dollars of their own money and create some new jobs building their modern ghost town. But El Dorado isn’t content to just recklessly spend their own money. They want the city government to assist with the financing. Specifically, El Dorado proposes that the city establish one or more special taxing districts which would have the power to issue bonds and levy property taxes within the districts. What nobody has thought to ask is how much money the districts would borrow. Are we looking at hundreds of thousands or hundreds of millions of dollars or more? We don’t know. Another thing we don’t know is who will get all that money or what they will do with it.
On October twelfth, the council held a special question and answer session featuring two experts. One of them was an attorney named Ken Guckenberger and the other expert was Brian Mark Reader. Guckenberger is an attorney whose job is to advise the city on the formation of the district. He was hand picked by El Dorado and he’s being paid by El Dorado. Reader is a bond expert employed by a securities brokerage firm called Stifel Nicolaus. Both stand to make money by forming the districts and selling the bonds. Both were honest enough to state that if the districts aren’t properly set up and professionally run, the stage could be set for a disaster. Both men used the word “disaster”. First Mr. Reader:
(Voice of Reader): “It’s a powerful economic development advancing vehicle if managed properly and it can be a disaster if not.”
A few minutes later Guckenberger also used the word “disaster”:
(Voice of Guckenberger): “‘The potential disaster if not’. I think that deserves a little comment. Guckenberger then added, “They do go bad. We’ve seen around the country and what happens when they go bad is an interesting question. So you’ve got bond holders who are left holding the bag and they’re not usually happy about that. They’re not very happy about the firms that sold them the bonds and they’re not happy with the bond lawyers either. We’re certainly on the riskier end of the municipal debt spectrum. And that’s something to think about.”
Indeed possible disaster is something to think about.
El Dorado’s Benson Project Manager is a character named Michael T. Reinbold. Reinbold has an impressive background as a big time wheeler- dealer and some of his past dealings could be described as “shady”. In the late 1980s and into the 1990s, Reinbold and his buddies formed several companies for the purpose of building an aircraft maintenance hangar at the Portland International Airport. To finance the project they arranged for bonds to be sold and those bonds were guaranteed by the Oregon State Employees Pension Fund. To make a very long story short, Reinbold’s companies went under, leaving millions of dollars in unpaid bills and the Oregon Pension Fund paying for the losses. In a previous editorial I delved into the details of a lawsuit filed by the Oregon Attorney General’s office. What I was not able to find out at the time was how the case ended. Reinbold saw my editorial on the CAVE Web site and during the council meeting of September 14th he had this response to what I’d written:
(Voice of Reinbold): “The fact of the matter is the Oregon courts ruled in my favor. There are no outstanding issues with Oregon. The cases are settled and dismissed. There is nothing there.”
Did the court rule in Reinbold’s favor? Recently I got the answer to that question in the form of a document from 2005. This document spells out exactly what the settlement with Reinbold provided for. Reinbold agreed to pay seven million dollars. Six million to the Oregon State Pension Fund and another million to pay the legal expenses incurred by one of his ex partners. I’m posting this settlement document on the CAVE web site.
We’ve also learned that Reinbold was involved in a more recent lawsuit, this one involving cable TV service in the City of Maricopa. Members of a homeowners’ association accused Reinbold of improperly signing a thirty year franchise deal with a cable company. The lawsuit claimed that Reinbold had no right to make the deal and that he pursued a conflict of interest because he had an interest in both the development company and the cable company.
Reinbold’s past doesn’t seem to faze Benson’s mayor or council members in the slightest. The Villages of Vigneto are bigger than life and the city must do everything possible to get this wonderful project going at the earliest possible moment.
I don’t know when the city council will establish the facilities districts but when it happens I predict that Benson will become Arizona’s haven for white collar crooks. I feel sorry for the poor fools who will buy the bonds.
I’m CAVE MANager Paul Lotsof and the opinions you’ve just heard are mine and not necessarily anyone else’s. If you’d like a copy of this editorial or you’d like to see the court document on Mike Reinbold’s settlement in Oregon, the place to visit is the CAVE Web Site. We’re at CAVE-FM.com. Click on Editorials. The CAVE web site is also the place to visit to voice your opinions. CAVEFM.com
LINK TO Reinbold Settlement