Mayor's $100 Million Loan Proposal Hits Snag in City Council
San Diego Mayor Jerry Sanders' plan to borrow $100 million from Bank of America to fix streets and crumbling buildings has hit a snag. The city council didn't approve it. KPBS reporter Alison St John
San Diego Mayor Jerry Sanders' plan to borrow $100 million from Bank of America to fix streets and crumbling buildings has hit a snag. The city council didn't approve it. KPBS reporter Alison St John has more.
The $100 million private loan needed six votes to pass, but only five of the eight council members supported it. They are eager to see potholes filled and leaky roofs fixed. The interest rate is good -- 3.5 per cent for the first two years. But Councilwoman Donna Frye balked at the interest payment in the third year -- it jumps from $3.5 million to $20 million.
Frye: I'm worried about what looks to me like a close relative of financing structures that caused the problems with the sub prime markets.
Frye says the loan reminds her of the mortgages that got so many homeowners into trouble.
But Mayoral spokesman Fred Sainz says the city should be back in the public bond market long before the higher payments come due.
Sainz: Comparing this to subprime borrowing is really kind of like comparing apples with zebras, we have the absolute ability to refinance this at any time as soon as we re-access the bond market.
Sainz says the city released its 2006 audit last month and officials hope Standard and Poor's will restore its credit rating this summer.
The council will take another look at the borrowing plan in two weeks. Donna Frye is the only council member who objects to the loan, but two other council members, Toni Atkins and Tony Young, are more concerned about whether their districts will get a fair slice of the pie.
Alison St John, KPBS News.