Where is Joe Ayres?
Tennessee State Comptroller Justin Wilson is looking at the use of variable rate debt/derivatives/swaps by cities and counties, and the new Comptroller apparently doesn't like what he sees.
Wilson points out conflicts of interest and notes that the complexities of these debt instruments may make them unsuitable for small cities and counties. Wilson's guest column in the Memphis Commercial Appeal is here. Other people such as investor/financier Warren Buffett have pointed out the dangers of derivatives as well.
In addition to the inherent financial dangers associated with derivatives, even a blind man could see the multiple conflicts of interest surrounding Joe Ayres/Cumberland Securities/Morgan Keegan/Regions Bank/TNLoans who provide and market variable rate swaps/derivatives to Hamblen County and other Tennessee cities and counties.
The fox (Joe Ayres/Cumberland Securities) is watching the henhouse (taxpayer debt) and being paid in multiple ways and through multiple entities to do the watching. Click here for a previous post on Hamblen County debt and Joe Ayres. Joe Ayres and his cohorts and companies are collecting, directly or indirectly, fees and commissions and profits through several entities with various connections to the debt issuance process.
The local press doesn't talk about the county's debt. The Trib just selectively reports the information that the county puts out. As a result, Hamblen County residents have to turn to The New York Times or the Memphis Commercial Appeal to read about the questionable actions of Joe Ayres/Cumberland Securities/Morgan Keegan/Regions Bank/TnLoans in Tennessee. Articles have also appeared in the Knox News-Sentinel, the Nashville Tennessean, and other newspapers.
On May 12, the county had CTAS (County Technical Assistance Services) give a presentation on the county's debt. Mayor Purkey, the county's chief financial officer, didn't bring in Joe Ayres (the fox) to review the debt (henhouse) this year even though Joe has always done so in previous years. Where's Joe?
Of course, another problem with recent Hamblen County debt is that it never gets paid off! Over the course of about ten years (1998-2008) NOT ONE PENNY OF THE LAST SCHOOL BUILDING PROGRAM (1998) WAS PAID OFF. Click here for a previous post and a link to Hamblen County's 2008 Audit and pages on debt.
About a year ago, a lot of the county debt was refinanced resulting in Hamblen County owing more after the refinancing that it owed before the refinancing. Deeper and deeper into debt we go.
And yet you have some county commissioners and all the school board members talking about embarking on another, even larger, school building program and even talking about making "interest-only" payments again.
To talk about a huge increase in county debt (up to $80M more) when unemployment is high in Hamblen County and in the City of Morristown, when businesses are leaving and cutting back, when our furniture and automotive-connected businesses are laying off, and when individuals in Hamblen County and across the state are struggling is fiscally irresponsible.
And let's not forget that the debt figures that they are tossing around are the amount of principal only. Most county officials and school board members conveniently ignore the interest costs during building program discussions.
If the county takes on another $80 million of debt for school construction while it still owes about $40 million from the 1998 school construction program ($35 million) and county projects (about $5 million), then the principal owed will be around $120 million. The total cost to the taxpayers (principal and interest) on that $120 million could be $200 million or more--especially if they go the interest-only route for many years. That's $200 million! $200,000,000.00! And that does NOT include the hospital debt for which the county is ultimately liable should hospital debt revenues fall short of hospital debt expenses.
But this is the government. Different rules. Other People's Money (OPM). It's much easier to go into debt with other people's money (OPM) than it is to do so with your own money.
I'd like to know which commissioner has taken out a huge mortgage (1998) and then has thrown away money by making interest only payments for 10 years so that when the debt is refinanced 10 years down the road (2008), he/she owes more than was owed at the start of the loan?
Only a commissioner or elected official who has done this or who would do this WITH HIS/HER OWN MONEY should promote this kind of debt scheme with taxpayers' money.
On May 14 during discussions of Hamblen County's debt fund, a commissioner asked "Where is Joe Ayres?" [Mr. Ayres always used to come to commission during the budget process to explain the county's debt position] There was no clear response to that question from County Mayor David Purkey, Trustee Bill Brittain, or Finance Director Nicole Buchanan.
The question remains unanswered.
Where is Joe Ayres?
Showing posts with label Joe Ayres. Show all posts
Showing posts with label Joe Ayres. Show all posts
Sunday, May 17, 2009
Wednesday, April 29, 2009
April 29, 2009 The Tribune Is Way Too Easy..."Reporting" on Debt Via Press Release
Gotta love it. I blog about the county and city debt and then the Tribune jumps in with not one, but two front-page news articles--- actually they're more like front-page press releases---with the county and city saying everything is just fine while ignoring the real issues with the structure of the city and county debt.
If you ask the wrong question, you'll get the wrong answer. And that's exactly what the Tribune did with the county debt.
The county article was about the county's bond rating. The key questions, however, are NOT about the county's bond rating or whether the county can eventually pay off its debt. The county can pay down its bonded debt; it just hasn't done so for the last 10 years! The county keeps refinancing and passing the ever-growing debt down to another generation. What a legacy "for the children." This county has taken its cue from the feds. Debt is great. Even more debt is better. And handing debt off to the unborn is the best--after all, the unborn aren't here to complain.
The right questions to ask about county debt are: 1) why has the county not paid down one penny of the 1998-2001 county-school bond issues and why has the hospital not paid down one penny of its bond issues? 2) why did the county get into technical, complex, and risky derivatives/swaps? 3) does the county now owe even MORE in bonds than it owed just one year ago? and 4) why in the world does the county let a person (Joe Ayres) who has his finger in every piece of the financial pie provide financial advice that always leads to more fees, more commissions, and more money for Joe?
Who's looking out for county taxpayers? Where's the person who'll stand up and say "Whoa! We've got to get this fox out of the henhouse and start paying off our debt!"
The Tribune ignored the key questions and just provided front-page space for a county press release on bond ratings. Our bond rating may be OK---but why is the county making interest-only payments and why is the county allowing someone (Joe Ayres) to lead us into financial deals that line his pockets over and over and over again? The Tribune never once mentioned that the county's financial advisor-- Joe Ayres -- made national news in the NY Times--and it wasn't a pretty sight.
In the City debt article, Morristown City Administrator Jim Crumley was very defensive. The article on the City's debt was longer, more interesting, and didn't seem as much like a press release, but answers to crucial questions were left out such as: Why did the Tennessee Municipal League (TML) sever its relationship with Bank of America? What other seven municipalities--in addition to Morristown--is Moody's reassessing? Is Moody's going to look at the debt of other municipalities? Why were eight cities singled out for reassessment? If so, why?
And isn't it "convenient" that Moody's report on the City debt won't come out until after the city council elections!
And isn't it convenient the city audit (for the fiscal year that ended on June 30, 2008) still isn't ready and won't come out until after the city council election! Wonder why?
The City pays a tidy sum for an annual audit. What a shame that the City can't see its audit until over 9 months after its fiscal/audit year ended. Imagine trying to prepare a budget for FY 2010 when you still don't have the audited figures for FY 2008! And who knows if anyone has a clue about where the city really stands in the current FY 2009?
How many "bonuses" and "pay raises" and "car allowances" has Crumley single-handedly handed out. Who got what? How much other money has he spent, where did he spend it, and from what line item did he pull the money--without notifying city council!
It's time for the City to pull its financial act together. The Council needs to step up and say we don't just appropriate one big lump of money and hand it to the City Administrator to spend and shift around however he chooses.
Then City Council needs to say to Mayor Barile and Crumley, "Paying attention and asking where the money goes is NOT bad and is NOT micro-managing. It's our job! Questions and oversight by the council provide a system of checks and balances instead of a City Administrator-run dictatorship."
And the City sure needs to get its long-time auditor on-the-stick or have someone else perform the city audit. Did anyone consider letting several CPA's submit proposals to do the audit?
The county used to wait and wait for the same auditor to finish the county audit. When I was elected to county commission in 2002, my first proposal was to eliminate the use of a private auditor and have state auditors perform Hamblen County's audit. The result was two-fold: 1) the county saved a bundle since the state auditors charged less than 50% of what the private auditor had been charging; and 2) with a new set of eyes on the county's finances, a lot of violations of state law and other irregularities that had been going on for years and years were spotted and corrected.
The first year (2003) that the state auditors performed the Hamblen County audit over 27 findings and irregularities were reported. In that year Hamblen County had more findings and irregularities than any other county in the state. [The previous year, the private auditor reported only one finding/irregularity]. Click here for a summary. At long last, a lot of problems were straightened out and processes were improved.
The city and county--despite the Tribune's many press release articles--have spending problems, debt problems, and serious accountability and openness issues.
If you ask the wrong question, you'll get the wrong answer. And that's exactly what the Tribune did with the county debt.
The county article was about the county's bond rating. The key questions, however, are NOT about the county's bond rating or whether the county can eventually pay off its debt. The county can pay down its bonded debt; it just hasn't done so for the last 10 years! The county keeps refinancing and passing the ever-growing debt down to another generation. What a legacy "for the children." This county has taken its cue from the feds. Debt is great. Even more debt is better. And handing debt off to the unborn is the best--after all, the unborn aren't here to complain.
The right questions to ask about county debt are: 1) why has the county not paid down one penny of the 1998-2001 county-school bond issues and why has the hospital not paid down one penny of its bond issues? 2) why did the county get into technical, complex, and risky derivatives/swaps? 3) does the county now owe even MORE in bonds than it owed just one year ago? and 4) why in the world does the county let a person (Joe Ayres) who has his finger in every piece of the financial pie provide financial advice that always leads to more fees, more commissions, and more money for Joe?
Who's looking out for county taxpayers? Where's the person who'll stand up and say "Whoa! We've got to get this fox out of the henhouse and start paying off our debt!"
The Tribune ignored the key questions and just provided front-page space for a county press release on bond ratings. Our bond rating may be OK---but why is the county making interest-only payments and why is the county allowing someone (Joe Ayres) to lead us into financial deals that line his pockets over and over and over again? The Tribune never once mentioned that the county's financial advisor-- Joe Ayres -- made national news in the NY Times--and it wasn't a pretty sight.
In the City debt article, Morristown City Administrator Jim Crumley was very defensive. The article on the City's debt was longer, more interesting, and didn't seem as much like a press release, but answers to crucial questions were left out such as: Why did the Tennessee Municipal League (TML) sever its relationship with Bank of America? What other seven municipalities--in addition to Morristown--is Moody's reassessing? Is Moody's going to look at the debt of other municipalities? Why were eight cities singled out for reassessment? If so, why?
And isn't it "convenient" that Moody's report on the City debt won't come out until after the city council elections!
And isn't it convenient the city audit (for the fiscal year that ended on June 30, 2008) still isn't ready and won't come out until after the city council election! Wonder why?
The City pays a tidy sum for an annual audit. What a shame that the City can't see its audit until over 9 months after its fiscal/audit year ended. Imagine trying to prepare a budget for FY 2010 when you still don't have the audited figures for FY 2008! And who knows if anyone has a clue about where the city really stands in the current FY 2009?
How many "bonuses" and "pay raises" and "car allowances" has Crumley single-handedly handed out. Who got what? How much other money has he spent, where did he spend it, and from what line item did he pull the money--without notifying city council!
It's time for the City to pull its financial act together. The Council needs to step up and say we don't just appropriate one big lump of money and hand it to the City Administrator to spend and shift around however he chooses.
Then City Council needs to say to Mayor Barile and Crumley, "Paying attention and asking where the money goes is NOT bad and is NOT micro-managing. It's our job! Questions and oversight by the council provide a system of checks and balances instead of a City Administrator-run dictatorship."
And the City sure needs to get its long-time auditor on-the-stick or have someone else perform the city audit. Did anyone consider letting several CPA's submit proposals to do the audit?
The county used to wait and wait for the same auditor to finish the county audit. When I was elected to county commission in 2002, my first proposal was to eliminate the use of a private auditor and have state auditors perform Hamblen County's audit. The result was two-fold: 1) the county saved a bundle since the state auditors charged less than 50% of what the private auditor had been charging; and 2) with a new set of eyes on the county's finances, a lot of violations of state law and other irregularities that had been going on for years and years were spotted and corrected.
The first year (2003) that the state auditors performed the Hamblen County audit over 27 findings and irregularities were reported. In that year Hamblen County had more findings and irregularities than any other county in the state. [The previous year, the private auditor reported only one finding/irregularity]. Click here for a summary. At long last, a lot of problems were straightened out and processes were improved.
The city and county--despite the Tribune's many press release articles--have spending problems, debt problems, and serious accountability and openness issues.
Tuesday, April 28, 2009
April 28, 2009 Why Won't the Tribune Report Hamblen County's Debt Mess?
The New York Times ran an article weeks ago about how many counties in Tennessee are being hit with additional debt due to debt swap agreements arranged by Joe Ayres of Cumberland Securities, Joe Ayres of Morgan Keegan, Joe Ayres of Regions Bank, and Joe Ayres of TNLoans.
Yes, the fox (Joe Ayres wearing his many financial hats) guarding the henhouse (taxpayers' pockets) and getting paid big bucks by county governments, including Hamblen.
It's a nationwide story, and, yes, Hamblen County is one of Joe Ayres' many clients. But the local Tribune is quiet. No series of articles. No front-page story. You'd think the Trib would print the NY Times article since the Trib prints editorials from other papers.
Even if the Trib doesn't consider this a story, you can read about what Joe Ayres and his many companies have gotten Tennessee counties, including Hamblen, into by clicking here for the New York Times article.
No wonder Hamblen, after shelling out millions in interest, still owes the same money that it owed 10 years ago. Click here and here.
And is anybody checking out the City of Morristown and its debt?
Yes, the fox (Joe Ayres wearing his many financial hats) guarding the henhouse (taxpayers' pockets) and getting paid big bucks by county governments, including Hamblen.
It's a nationwide story, and, yes, Hamblen County is one of Joe Ayres' many clients. But the local Tribune is quiet. No series of articles. No front-page story. You'd think the Trib would print the NY Times article since the Trib prints editorials from other papers.
Even if the Trib doesn't consider this a story, you can read about what Joe Ayres and his many companies have gotten Tennessee counties, including Hamblen, into by clicking here for the New York Times article.
No wonder Hamblen, after shelling out millions in interest, still owes the same money that it owed 10 years ago. Click here and here.
And is anybody checking out the City of Morristown and its debt?
Friday, April 24, 2009
April 24, 2009 Hamblen County's Chief Financial Officer, County Mayor David Purkey, Finally Asks for an "Objective Appraisal" of the County's Debt
Well, lo and behold, County Mayor David Purkey at long last wants to get an "objective appraisal" of the county debt.
In previous posts, audit documents have shown that the county borrowed $40 Million between 1998 and 2001 and still owed the full $40 Million as of 2007 and 2008. In addition, the county borrowed $28 Million for MH Hospital and those payments have also been---drum roll, please---interest-only!
Just a short ten days later (April 23) County Mayor David Purkey invited the school board to join the county commission on May 12, 2009, in the large courtroom at the courthouse where an "objective appraisal" of the county's debt will be presented. In other words, Joe Ayres probably won't be there.
The Mayor described the May 12 meeting in this way: The UT County Technical Assistance Service (CTAS) will present a final report of a detailed status of the County's debt and potential for additional debt needs. This objective appraisal of our debt situation has been long awaited and should provide the foundation for future discussions.
"Long awaited"? That's a major understatement! It's "long awaited" because the Mayor apparently before never asked for an "objective appraisal" of the county's debt from a disinterested party. Joe Ayres certainly can't be considered an independent financial advisor when he and the many companies with whom he is affiliated (Morgan Keegan/Cumberland Securities/TNLoans) profit from both the size and structure (interest-only) of the county's debt.
Fox guarding the henhouse? Absolutely. Conflicts of interest? Everywhere. Objective financial advisor? No way.
Interestingly, CTAS is encouraging counties to use RFP's (Request for Proposals) when issuing new debt. An RFP asks several firms to present what they have to offer a county instead of automatically going with Joe Ayres or anyone else.
[Using a Request for Proposals process for financial services is the very same thing I finally got the county to do in 2006 for architectural/engineering services. An RFP opens up the process for several companies to offer their services. Most people "shop around" when there is a major expenditure. A Request for Proposals is one way a county can "shop around" to get the best financial product/service at the best value for the taxpayers.]
And the City of Morristown ought to be doing the same thing---getting an "objective appraisal" of its debt and using RFP's when it seeks independent financial advice or issues additional debt.
In previous posts, audit documents have shown that the county borrowed $40 Million between 1998 and 2001 and still owed the full $40 Million as of 2007 and 2008. In addition, the county borrowed $28 Million for MH Hospital and those payments have also been---drum roll, please---interest-only!
Joe Ayres of Cumberland Securities set Hamblen County up with interest-only debt back during the 1998 school building program. County Mayor David Purkey, who also refers to himself as the county's Chief Financial Officer, and several current commissioners--Larry Baker, Guy Collins, Stancil Ford, Doyle Fullington, Herbert Harville, and Joe Spoone--were involved with the 1998 debt set-up.
Recently, conflicts of interest have finally caught up with Joe Ayres/Cumberland Securities/Morgan Keegan and TNLoans (another Joe Ayres entity). See my previous post and read the NY Times article.
Being aware of the county's ever-increasing debt problems, on April 13 I requested complete debt information from the Mayor's Office on the refinancing deals that the Mayor and Finance Director worked out with Joe Ayres in the summer/fall of 2008.Just a short ten days later (April 23) County Mayor David Purkey invited the school board to join the county commission on May 12, 2009, in the large courtroom at the courthouse where an "objective appraisal" of the county's debt will be presented. In other words, Joe Ayres probably won't be there.
The Mayor described the May 12 meeting in this way: The UT County Technical Assistance Service (CTAS) will present a final report of a detailed status of the County's debt and potential for additional debt needs. This objective appraisal of our debt situation has been long awaited and should provide the foundation for future discussions.
"Long awaited"? That's a major understatement! It's "long awaited" because the Mayor apparently before never asked for an "objective appraisal" of the county's debt from a disinterested party. Joe Ayres certainly can't be considered an independent financial advisor when he and the many companies with whom he is affiliated (Morgan Keegan/Cumberland Securities/TNLoans) profit from both the size and structure (interest-only) of the county's debt.
Fox guarding the henhouse? Absolutely. Conflicts of interest? Everywhere. Objective financial advisor? No way.
Interestingly, CTAS is encouraging counties to use RFP's (Request for Proposals) when issuing new debt. An RFP asks several firms to present what they have to offer a county instead of automatically going with Joe Ayres or anyone else.
[Using a Request for Proposals process for financial services is the very same thing I finally got the county to do in 2006 for architectural/engineering services. An RFP opens up the process for several companies to offer their services. Most people "shop around" when there is a major expenditure. A Request for Proposals is one way a county can "shop around" to get the best financial product/service at the best value for the taxpayers.]
And the City of Morristown ought to be doing the same thing---getting an "objective appraisal" of its debt and using RFP's when it seeks independent financial advice or issues additional debt.
Thursday, April 09, 2009
April 9, 2009 County Debt: Fox Guarding the Henhouse
The New York Times has broken the story about Morgan Keegan investment bank and complex debt instruments (bond derivatives) issued by Morgan Keegan for many Tennessee counties and cities.
Click here for the NY Times article. [C.L. Overman of Morgan Keegan is mentioned in the article but would not make a statement. Several years ago Overman was City Administrator for Morristown. Through Morgan Keegan, Overman has handled debt financing and refinancing for the City of Morristown]
Joe Ayres of Cumberland Securities/Morgan Keegan is also mentioned in the article. Joe, the long-time financial advisor for Hamblen County, steered the county into numerous complex bond derivative instruments--like those mentioned in the article--during the 1998 school building program. The debt was structured so that millions of dollars in interest would be paid for years and years before even ONE PENNY would be paid to reduce the principal of the debt.
The school/county debt (1998-2001) totals about $40 Million. Morristown-Hamblen Hospital debt is another $28.7 Million for a total of $68.7 Million dollars of debt.
Hamblen County began accumulating its $68.7 Million of debt in 1998. Ten years later, after paying for financial advice and paying financing and refinancing fees and charges, the county still owes the same $68.7 Million of debt.
Conflict of interest? Churning debt over and over to make commissions and fees?
One Mayor whose town was burned by Morgan Keegan cancelled the town's relationship with Morgan Keegan and said, "We...need[] advice from someone who [is] not trying to sell us something."
In counties and cities across Tennessee, the fox was guarding the henhouse and was getting paid three times for his services. Paid to advise. Paid to handle the initial debt issuance. And in many instances paid a third time when things fell through and the city or county had to refinance to get out of the derivative debt instrument!
And the New York Times broke the news to Tennessee and the nation.
Click here for the NY Times article. [C.L. Overman of Morgan Keegan is mentioned in the article but would not make a statement. Several years ago Overman was City Administrator for Morristown. Through Morgan Keegan, Overman has handled debt financing and refinancing for the City of Morristown]
Joe Ayres of Cumberland Securities/Morgan Keegan is also mentioned in the article. Joe, the long-time financial advisor for Hamblen County, steered the county into numerous complex bond derivative instruments--like those mentioned in the article--during the 1998 school building program. The debt was structured so that millions of dollars in interest would be paid for years and years before even ONE PENNY would be paid to reduce the principal of the debt.
The school/county debt (1998-2001) totals about $40 Million. Morristown-Hamblen Hospital debt is another $28.7 Million for a total of $68.7 Million dollars of debt.
Hamblen County began accumulating its $68.7 Million of debt in 1998. Ten years later, after paying for financial advice and paying financing and refinancing fees and charges, the county still owes the same $68.7 Million of debt.
Conflict of interest? Churning debt over and over to make commissions and fees?
One Mayor whose town was burned by Morgan Keegan cancelled the town's relationship with Morgan Keegan and said, "We...need[] advice from someone who [is] not trying to sell us something."
In counties and cities across Tennessee, the fox was guarding the henhouse and was getting paid three times for his services. Paid to advise. Paid to handle the initial debt issuance. And in many instances paid a third time when things fell through and the city or county had to refinance to get out of the derivative debt instrument!
And the New York Times broke the news to Tennessee and the nation.
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