All data and information provided on this site is for informational purposes only.
Entry for June 24, 2007
The City of Loveland appears to be hiding $8 million of real liabilities (debt) as a contingent liability.  Contingent means it may or may not have to be paid contingent on other circumstances.

Is this Enron type book keeping in Loveland or just an honest difference of opinion between experts?

Please read the story at first and feel welcome to post any comments or thoughts you may have here.  If you are the member of a citizen advisory committee, please say so even if you decide to only use a nickname to sign your posting.

As always, city staff familiar with the issue  are especially invited to comment on this important question.

2007-06-25 05:44:57 GMT
Comments (14 total)
The "reimbursement agreements" are public record and should be released by the City Clerk to anyone who asks. The answer to your questions will be answered by those agreements.

If these agreements have no contingencies on whether or not the money will be paid, someone should consider referancing this to the District Attorney for review.
2007-06-25 16:15:41 GMT
Will someone please tell these Bozos to stop saying Loveland has no debt. Thanks for uncovering this important story - WHERE IS OUR LOCAL MEDIA IN ALL THIS????
2007-06-25 16:17:12 GMT
I know people involved in this and have been bighting their nails for a long-time. Here is the issue, Don Marostica and other developers were promised by Council (even maybe himself) that they would be paid when the money was available. This verbal promise alone and follow-up actions have demonstrated the money is not contingent but going to be paid.

Any CPA familiar with GAAP (Generally Accepted Accounting Principles) knows this is a violation. I think some in the city will be relieved this has finally been released to the public. They believe the City Manager will keep it out of the Reporter Herald but there are plenty of free media that will report this story.
2007-06-25 17:08:43 GMT
My God! Is this true? How can they do this to us without a vote or anything? If they claim it is "contingent" than why can't they leave it up to the voters to decide if we want to pay $8 million to developers from our general fund in sibsidies for places like Boisy Village that is already built?

Is the finance director that young man with the pony tail? Oh gees------------
2007-06-25 17:38:04 GMT
It's not a pony tail but a mullet - you know the 80's hair where it is short on the sides and long in the back.

Anyway, Carol, his hair has nothing to do with this issue. Really, the point here is to discover who made the decision to hide debt as contingent liabilities. I read the story and it appears clear to me that the City of Loveland, in a manner similar to Enron, is pretending debt is not really debt.

Carol, you make an excellent point that if it is really "contingent" as reported by staff the Council can simply determine not to pay it. We would find out very quickly what the other parties to these agreements think.

In any event, we should call their bluff when they say it is "contingent" and ask them not to pay it. See how that goes over.

2007-06-25 20:33:44 GMT
I know for a fact that money is owed and not contingent on anything! Any attempts to monkey with it will be met with lawsuits by the builders. The city needs to keep its word to remain cradible in our community.
2007-06-25 23:44:13 GMT
Doesn't the reimbursement constitute a gift of public funds?
2007-06-26 19:31:27 GMT
Again, thanks for uncovering this story. Where is the local print news coverage? Oh, I forget..they have to save the space for more important stories about local lemonade stands and such.
Anyway, re. the issue, I don't have a problem with the City entering into "Oversizing" agreements where the developer puts in, say, a bigger water and sewer line than he needs and the City agrees to reimburse him by tacking on higher costs to another developer when they use the same infrastructure. But I'd like to know how it works. How does the City recover the additional 20% to reimburse the developer? Does it come from regular impact fees (which aren't calculated to cover such "special" circumstances) or do they add on an additional fee. How much of the 20% do they recover in this fashion?
Aside from those questions, it seems like this story (and the Citizens advisory board) exposed a real problem in financial reporting if they are understating debt.
2007-07-02 22:05:35 GMT
Digger, did you see the Council meeting tonight? The staff lied to us at the CFAC meeting when they said there are no terms. I heard tonight the terms are 10 years and the interest 8%. Did any else hear this? I couldn't be sure if these are the new rules they are trying to rush through to protect the city auditors or if that is what the current agreements say. Councilors asked the city manager if the money had to be paid and he answered YES.

Therefore, the recent unknown accounting firm (I mean not among the big four) didn't even have a memo on the last audit and everything passed without a question. How could the auditors have missed $8 million in debt? Is there any legal action or inquiry that can be taken regarding the city auditor's potential neglegence on this issue?
2007-07-04 04:04:25 GMT
10 years max to repay with 8% interest. You are correct.
2007-07-06 22:36:17 GMT
Here is the question, does the $8 million represent Future projects where the developer hasn't yet built the pipes in yet so the city may not already be in "debt" to him/her? Or,have these projects already been built and the city already owes $8 million for "oversizing."
2007-07-08 22:53:24 GMT
I THINK the monies are those already committed for prior 'oversizing'. However, when another development builds next to one that has been built and oversized, the new development pays for oversizing (their share for use of the system) and that money goes to the city and then to the first developer.

The only time a builder waits for payment (plus 8% interest) is when it takes a while for an adjoining development to take place. If an adjoining development is built, they have to pay their share. Otherwise, the streets would have to be torn up and the system resized evertime a new building/business/development gets completed and the system is unable to handle to extra demand.

In the end, all the developers pay for their usage and needs. The first developer may have to wait for future development to take place but they know this going in.

It's a lot easier to do the work up front instead of piece by piece ( and in the long run, it's cheaper).
2007-07-09 22:27:13 GMT
The questions remain:
1. How does the City recover the additional 20% to reimburse the 1st (oversizing) developer?
2. How often has the City had to reimburse the 1st developer, from either the general fund or Capital Expansion Fund, the 20% margin plus interest? b. How much has this cost the City?
3. How much of the current $8 Million "contingent liability" is likely to require City repayment under those terms?

While oversizing in this way is not unusual, my concern is that the City taxpayers might end up with the cost of new streets, etc. that developments are supposed to pay entirely for.
2007-07-16 21:56:05 GMT
Guys, read the new story on the homepage. We were told at our last CFAC that $5 million is current debt and the not yet finished projects account for $8 million so the total is $13 million. I know the Council was mislead when they were told this is all previous stuff.

Keith Reester is the guy who brought this hidden debt issue to our attention.
2007-07-18 16:22:18 GMT
Add to My Yahoo! RSS