Is the City of Stockton municipal corporation really Bankrupt?
No. Absolutely, 100% not.
But upon further examination, this is not quite the correct question to ask regarding the financial state of City of Stockton.
The correct question is…
Which financial statements are being used in the Stockton bankruptcy proceedings, and which are being hidden or exempt?
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An Introduction To Financial Terrorism
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The following text is an excerpt from a future book that I am writing, where the City of Stockton CAFR was my main learning tool. You are absolutely free to share and re-post without limitations the following information with no restrictions, with the understanding that all rights are reserved for my future publishing. Due to the timing of current news, I feel this information should be given to the public for immediate consideration, and that we should fight the current falsified string of bankruptcy that is sweeping the nation at dyer consequences. If we don’t physically stop this one falsified bankruptcy then others will certainly follow, as well as the pain and suffering caused to the people and creditors of governments. While many of those creditors are banks, many are also smaller companies, construction corporations, pensioners, ect… all of which will be defaulted upon through a completely fraudulent bankruptcy declaration based upon a lie of omission of financial data.
This is the perfect timing for City of Stockton or any other supposedly failing City, County, District, or State to hire/implement Walter Burien and his TRF program into their venue – a complete audit and restructure of the accounting laws and a complete financial audit of any municipal corporation (city, county, State, districts, etc) by the demand and vote of the people (the true authority of the land). Stockton is hiding well over a billion dollars in liquid investments from the people by omitting those fund balances from their limited budget report, and is fraudulently claiming bankruptcy within the complicit actions of the bankruptcy court while ignoring the full audit of City of Stockton – the Comprehensive Annual Financial Report (CAFR). This is the greatest possible moment to date to show the lie of obfuscation that is the budget report – to not only raise awareness of the CAFR investment wealth of all governments across America (none of which are even close to bankruptcy despite their public outcry), but also to charge those perpetrating the lie with criminal charges of fraud and misconduct of taxmoney while in the public trust.
Once again, this is not a “publication” of this information, but instead an excerpt from my future work in book form. I retain all rights, but permit any and all reproduction of this information for the greater good and in order to give the people the learning and evidential tool to squash this deception before it starts on a national level, and before the pension system is pilfered. Naturally, the length of this presentation is due to the inclusion of a large section of the printed Stockton Comprehensive Annual Financial Report (CAFR), followed by my layman’s explanations of what the real financial situation is in City of Stockton. The reader should consider this a full immersion into the CAFR and into the world of completely corrupt government accounting practices, and a lesson on the very purposeful obfuscations and word trickery of government financial reporting by government corporations. This is total CAFR understanding, and with over 200 pages of financial and statistical gobbledygook, the length of this article is necessarily long, even for my standards! The reason for this fact is both to help the reader by not referring to another report but instead including the facts within, and of course to accurately present the true financial position of City of Stockton for the purposes of being presented as evidence into the court of public record so as to stop this current lie by that City. I will personally introduce this CAFR and essay into evidence of the court if someone will support my efforts.
Please share, re-post, and start acting – for with this teaching tool, you can stop your own government entity from fraudulently declaring bankruptcy and in fact show that any City, County, District, or State has enough “reserves” and “investment funds” to completely pay off all of their bonded indebtedness tomorrow, and still be well in the black. The entire country could literally be out of debt tomorrow on the State and local level. In other words… the whole government could be free of debt tomorrow, if the people would rise up and demand that the laws be changed to do so with current assets. Do not let this opportunity to both learn and expose the lie go to waste, and thank you for reading…
Note: **This is an unedited draft by the author. Anyone interested in helping me to publish this as of yet self-published work, as well as two other books that I am writing, please do contact me.
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Chapter 1:
The Big Bankruptcy Lie…
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Stockton, California has been in the news lately.
The “City of Stockton“, a municipal corporation, is claiming to be broke. In fact, the Stockton corporation was recently approved by its own City Council for Chapter 9 bankruptcy proceedings, and now is in the news again…
(Reuters) – A U.S. federal judge on Monday approved the city of Stockton’s petition for bankruptcy in a case that sets the stage for a lengthy battle between bondholders and the California pension system.
In a case being studied by other cash-strapped American cities including Detroit, U.S. Bankruptcy Court Judge Christopher Klein’s decision was a setback for bondholders and insurers who had resisted the California city’s bankruptcy filing. Stockton is the largest U.S. city ever to file for bankruptcy…
The decision on Stockton marks the start of a lengthy restructuring of the obligations that currently overwhelm its finances, which were crippled by the housing crisis and recession.
Investors in the $3.7 trillion municipal bond market are concerned that if Stockton is able to avoid paying bondholders in full without cutting pension payments, other cities will pursue a similar strategy as they struggle to cope with budget shortfalls…
In a lengthy preamble to his ruling, Klein delivered a stinging rebuke to the so-called capital market creditors – mainly the insurers for bondholders who own hundreds of millions of dollars of Stockton debt – who had opposed the bankruptcy filing.
He rejected the arguments of bondholders and insurers that Stockton was not truly insolvent when it sought Chapter 9 bankruptcy protection last summer and that it had improperly failed to seek relief from its pension obligations…
Bob Deis, the Stockton city manager who is largely responsible for managing the bankruptcy process, called the judge’s verdict a “vindication” of the city’s position.
He criticized the “scorched-earth” legal strategy of the bond creditors as a waste of time and money, and said the city had already spent $6 million to $7 million on the mediation and legal costs…
Throughout his two hours of comments, the judge made it clear that he thought the city had done everything it could to avoid bankruptcy. He noted that sharp cost-cutting had begun years ago, and that 77 percent of the city’s budget was devoted to already-diminished police and fire services.
Klein agreed that further cuts in public safety and other services were not options.”
(Source: http://www.reuters.com/article/2013/04/02/stockton-bankruptcy-idUSL2N0CO1AU20130402)
In another article, the amounts were disclosed:
The city made $90m in cuts to city services to pay its bills, reducing the police force by 25 per cent and the fire department by 30 per cent. But it still faced a $26m shortfall on its $512m annual budget heading into the 2012-13 fiscal year. It filed for bankruptcy protection in June of last year (2012)…
In a proposal the city issued in May 2012, during the mediation process that preceded the bankruptcy filing, it suggested paying the bondholders 17 or 18 cents on the dollar of its debts, leaving bondholders to face a collective loss of up to $136.6m.
The city did not seek any concessions from Calpers before declaring bankruptcy, a decision city officials must defend in court this week.
The city argued that CalPERS is not a “creditor” in the same sense as the bondholders, and, because of state law, has no power to renegotiate its liabilities outside of a bankruptcy proceeding.
“Referring to Calpers as a creditor is a misnomer,” said Bob Deis, Stockton’s city manager, during cross-examination on Monday. “It’s more a conduit . . . They don’t create or generate money. They take money from us, they invest it, and they give it to our retirees.”
Mr Deis testified that Calpers is “front in line to all other creditors”. If the city had tried to leave the Calpers system, it would have faced a $1bn liability, and a legally binding claim placed on all its assets.
(Source: http://www.ft.com/cms/s/0/88378fc0-95ee-11e2-b8dd-00144feabdc0.html#axzz2PcQb2sxP)
And the official declaration of bankruptcy is highlighted here: http://www.caeb.uscourts.gov/Stockton/Default.aspx
Now, from these articles we have gleaned some very important information – all of which will be greatly expounded upon here.
We know that City of Stockton Municipal Corporation’s City Manager – an appointed (not voted) official – is claiming poverty within its public budget report in the midst of massive undisclosed and misrepresented investment funds that are only disclosed in the purposefully unmentioned CAFR report – much like the rest of the country’s city’s, districts, counties, and state government corporations; all wealthy beyond the public’s imagination. And we know that the judge presiding over this bankruptcy case is also not taking into consideration that actual audited financial statements of this City – it’s Comprehensive Annual Financial Report (CAFR) – and that this judge is very likely and openly lying under oath when he felt that “the city had done everything it could to avoid bankruptcy” even though the large City investment funds shown only in the CAFR could be liquidated to pay off any and all debt owed to bondholders and pension obligations.
Wait a minute… Stockton is a corporation, you ask?
Well, yes! The “City Of Stockton” was incorporated on July 25, 1850 under the general laws of the State corporation of California. And its corporate charter was adopted in 1923.
Link to Stockton City Charter –> http://qcode.us/codes/stockton/view.php?topic=the_charter_of_the_city_of_stockton&frames=on
Within its corporate charter, Section 300 states:
The municipal corporation now existing and known as the City of Stockton shall remain and continue to exist as a municipal corporation under its present name of “City of Stockton.”
The City of Stockton shall have the power to make and enforce all ordinances and regulations in respect to municipal affairs, subject only to the restrictions and limitations provided in this Charter, the Constitution of the State of California, and the Constitution of the United States. It shall also have the power to exercise or act pursuant to any and all rights, privileges, powers, or procedures heretofore or hereafter established, granted or prescribed by any law of the State, by this Charter, or by other lawful authority, or which a municipal corporation might or could exercise under the Constitution of the State of California and the Constitution of the United States.
The enumeration in this Charter of any particular power shall not be held to be exclusive of, or any limitation upon, the generality of the foregoing provisions.
The City of Stockton shall continue to own, possess, and control all rights and property of every kind and nature, owned, possessed or controlled by it at the time this Charter takes effect and shall be subject to all its debts, obligations and liabilities.
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In this presentation, we will be looking at the fiscal year 2010 Comprehensive Annual Financial Report (CAFR) of the municipal corporation called “City of Stockton” – because the “City” has been purposefully negligent of its own corporate charter. It has broken its own laws and rules by not delivering its own required CAFR for fiscal year 2011 even close to on time… even as it declares a budgetary shortfall and bankruptcy. How can the people, as represented in the bankruptcy courts, know “City of Stockton’s” financial situation if there is no audit for public viewing? And how then can it declare bankruptcy without presenting its financial statements for public and legal scrutiny, and for the declaration of bankruptcy?
The corporate charter is very clear about this:
SECTION 1901. Fiscal Year.
The fiscal year of the City of Stockton shall commence upon the first day of July of each year or such other time as may be fixed by ordinance.
This charter also requires the Comprehensive Annual Financial Report (CAFR), referred to here as the “annual financial statement”:
SECTION 1910. Annual Financial Statement.
At the conclusion of each fiscal year, a comprehensive Annual Financial Statement shall be prepared in sufficient detail to show the financial condition of the City’s funds for the preceding year. Such Annual Financial Statement shall be prepared in accordance with generally accepted accounting principles.
Generally Accepted Accounting Principles (GAAP) are the uniform commercial codes that all government corporations follow according to State and Federal laws. Uniformity is key in this type of government organized crime, as these reports are considered the full audit of government – for the over 230,000 local, state, and federal corporate governments and other incorporated government entities across the United States.
GAAP even gives out awards for the best presentation of a CAFR. “City of Stockton” corporation received a “Certificate of Achievement for Excellence in Financial Reporting” for its 2009 CAFR report, presented by the Government Financial Officers Association (GFOA) – just one of many 100% non-governmental organization (NGO) private associations that, chances are, the financial officers of your own city hall are members of.
As soon as practical after the close of the fiscal year, an Annual Audit shall be made of all accounts of the City. Such audit shall be made by a firm of certified public accountants selected by the City Council. The audit shall be made in accordance with generally accepted audit standards for audits of public agencies.
Note that fiscal year 2011 for “City of Stockton”, beginning June 1, 2010 and ending June 30, 2010, has long since passed. The audit referred to in the charter above is in fact the audit of the City’s Annual Financial Statement (CAFR), and this is referred to within the CAFR itself. Thus, an audit has not been publicly released as is required within the regulations of the corporate charter of “City of Stockton”. This is malfeasance. And this newer CAFR is absolutely necessary in any so-called bankruptcy proceeding. Without it, there is no accounting of government investments and true wealth, as the annual budget report is nothing if not a wholy incomplete and hand-selected presentation of only small parts of any government’s actual holdings and investments presented in the full CAFR report.
Now, since we cannot view the 2011 CAFR due to its obviously poor, inept, and likely purposefully deceptive city management (Bob Deis), we can only pull up the last (fiscal year 2010) Comprehensive Annual Financial Report for the corporation known as “City of Stockton” and see what this corrupt government corporation is hiding from the public in this bankruptcy proceeding…
Link to Stockton CAFR –> http://www.stocktongov.com/government/departments/adminServices/finRep.html
On page V we find a cover letter addressed to the “Honorable Mayor, Members of the City Council and Citizens of the City of Stockton, California”. The letter is dated February 16, 2011 – which is a reasonable time-frame for the collection of all financial data from which to create, independently audit, publish and release the CAFR for a municipal corporation. 6-8 months after the fiscal year end is an average time-frame for a CAFR to be released. For “City of Stockton”, however, they are about 12 months late!
Quite convenient, wouldn’t you say?
The cover letter states:
“The Stockton City Charter and California state law require that the City of Stockton, California (City) publish a compete set of financial statements presented in conformance with generally accepted accounting principles (GAAP) and audited by a firm of licensed certified public accountants. Pursuant to that requirement, it is with pleasure that we submit the Comprehensive Annual Financial Report (CAFR) of the City of Stockton for the fiscal year ended June 30, 2010.
The Governmental Accounting Standards Board (GASB) establishes the formal accounting standards for all local and state governments in the United States and Canada, and its counterpart in the private-sector is the Financial Accounting Standards Board (FASB). Both GASB and FASB require that financial transactions follow generally accepted accounting principles, referred to as GAAP…
INDEPENDENT AUDIT
The City Charter, Article XIX, Section 1911 requires each fiscal year that an independent audit be made of all City accounts by certified public accountants. The City of Stockton’s financial statements have been audited by Macias Gini & O’Connell LLP, an independent firm of licensed certified public accountants…”
Note here that these uniform standards are created by 100% private associations (GASB, FASB, GFOA, GAAP), which are delegated this authority by congress. Also note that the same accounting standards and practices are used by both the United States and Canada. This should alarm you. In fact, the GASB and FASB, as well as other non-governmental organizations and associations have been recently talking about creating an international accounting standards platform through the United Nations. This should really, really set your alarm bells a-ringing. For this is globalism knocking at your door – using your own taxpayer money!
Page VI of the CAFR continues:
PROFILE OF THE GOVERNMENT
“The City encompasses 60 square miles and has an estimated population of approximately 292,133 making it the 13th largest city in California…”
GOVERNMENT STRUCTURE AND TYPES OF SERVICES
“…The current Charter under which the City operates was approved by the voters in November 1922. This Charter, enacted in 1923, changed the City from a commission form of government to the current City Council – City Manager from of government. The City Charter has been amended over 100 times since its original approval in 1922.
Under the Council-Manager form of government, policy-making and legislative authority are entrusted to the City Council. The mayor and representatives from six districts are chosen by city-wide election for staggered four year terms, with a two term limit. The City Manager is responsible for carrying out the policies and ordinances of the City Council, for appointing department heads, and overseeing the operation of the City. The City Manager, City Attorney, City Auditor, and City Clerk are appointed by the City Council…”
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Question: If something has been amended over 100 times, is it still what was “approved by voters” almost 90 years ago? Me thinks the answer to be no…
It is important for people reading this to understand the difference between a democracy and a legislative democracy.
In a democracy, the people would read and vote for the laws that their delegates (congress/councils) create.
In a legislative democracy, the people vote for congressmen who create or have created for them by other entities, NGO’s, and other forms of corporate associations the laws and then vote on these laws themselves – often without reading them – on behalf of the people (as representatives of the people, not delegates of the people).
In other words… the people of Stockton (or anywhere in America) do not vote for the laws that bind them or their government corporation. This is stated above by: “policy-making and legislative authority are entrusted to the City Council“. The council votes, not the people – despite the people, in fact.
The power of the people is concentrated within their representatives, and is sucked and drained more and more with each passing year… And yet ironically the people still believe that they have “a voice”.
Even more disturbing is the described role of the “City Manager”. The City Manager is APPOINTED by the City Council and Mayor. Simply stated, the people do not elect this office. The people elect the City Council – and the elected Council then appoints the City Manager without voter approval. But this unelected official – an employee of the “City of Stockton” corporation – then appoints the corporation’s “department heads” and “oversees the operation of the City”.
Remember, the role and position of City Manager was created by a 100% private association almost a century ago in an attempt to bypass the written law and adhere to a “higher” law. Voting public not needed!!!
This is legislative democracy…
Almost the entire structure of Federal, State, and local/district government has been handed over to appointed officers (employees) and private associations by this legislative democracy process. Most government functions are now written and administrated by 100% non-governmental private associations. Even the electoral college process of electing the President of the United States is handled by the 100% private associations called the Democratic and Republican “Parties”. The people do not vote for president in any way. The president is elected by 538 electors appointed by these private corporate political parties and according to the constitution, with the full consent of our representative congress.
And just like the corruption of the “City of Stockton” government goes for the most part unseen, so too does the fact that the president of the United States corporation is not elected by the people. Over 100 million votes are cast in America for president every 4 years, and not a one of them count towards the actual election of that office. One can only conclude that this information is kept as a big open secret by government, as billions are spent keeping up the appearance of the “popular” election process every four years.
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“In reality, when the voters of North Carolina voted this past November, they were actually voting to pick this slate of electors instead of voting directly for the president and the vice-president.”
–Elaine Marshall, Secretary of State of North Carolina,
speaking at the 2012 Electoral College ceremony.
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Learn more about the Electoral College, here: LINK- https://realitybloger.wordpress.com/2012/12/24/understanding-the-2012-electoral-college/
Likewise, the Comprehensive Annual Financial Report is the best kept open secret from the general population within all individual governments – and even from the majority of council members and local government workers (employees).
I chuckle every time a councilman contacts me to help them not only locate their own City CAFR, but to even begin to read and comprehend what is printed within its pages. It is important to note that most government workers, including many councilmen, are nothing but useful idiots (some even innocents) when it comes to the CAFR and the well-oiled extortion racket that takes place right under their noses. If they are only shown the budget report by the City Manager and the Mayor, and are then told that they may only utilize the figures inside of that budget report as opposed to the full CAFR report, then it is difficult to claim that they are in on the game or even benefiting from the lie. I’ve personally shown CAFR’s to several wide-eyed councilmen who were beside themselves when they found out that all debt could be paid off tomorrow with plenty left over – the standard financial position of most if not all governments, including City of Stockton. Trust me, the look of amazement when I show these CAFR figures and graphical information to a councilperson outside of the organized criminal gang; that look in his or her now wide-with-surprise eye sockets is worth the trouble to show them. Their crash back down to reality when they understand they can’t do much about it without losing their council-ship in the next rigged election is another story, and their inaction because of this is certainly uniform throughout… In this way, I suppose – the fact that they are not screaming at the top of their lungs about this to the people they represent – makes them just as complicit as the rest.
In point of fact, Stockton’s legislative process is in no way “democratic” at all… And it certainly isn’t a republican form of government as set out within the original constitution for America.
Section XII of the Stockton City Charter states the following about the City Manager:
SECTION 1200. Nomination.
The Mayor shall nominate one (1) or more candidates for Council consideration for appointment to the position of City Manager. The City Manager shall be appointed by the Council for an indefinite term and shall not be removed from office except by a vote of a majority of the members of the Council; provided, however, that the City Manager shall not be removed from office within twelve (12) months from the date his or her duties are assumed, except for incompetence, malfeasance, misfeasance, or neglect of duty…
(Note here that the “people” cannot vote out the City corporation employee called the City Manager, only the council and Mayor can. Again, legislative democracy where the people truly have no voice.)
SECTION 1201. Chief Administrative Officer.
The City Manager shall be the chief administrative officer of the City. He or she shall be responsible to the Council for the efficient administration of all the affairs of the City placed in his or her charge by or under this Charter. Without limiting the foregoing general grant of powers, responsibilities and duties, the City Manager shall have the following powers and duties:
(a) Except as otherwise provided elsewhere in this Charter, the City Manager shall appoint all officers and employees of the City; and, when he or she deems it necessary for the good of the service, the City Manager may, subject to the above-mentioned limitations, suspend without pay, demote, discharge, remove or discipline any City officer or employee whom under this Charter is appointed by the City Manager…
(b) Except as otherwise provided elsewhere by this Charter, the City Manager shall direct and supervise the administration of all departments, offices and agencies of the City;
(c) The City Manager shall attend all regular and special meetings of the Council… but not to vote…
(d) The City Manager shall be responsible for the faithful execution of all laws, provisions of this Charter, and acts of the Council which are subject to enforcement by the City Manager or by officers who are under the City Manager’s direction and supervision;
(e) The City Manager shall prepare and submit the annual budget to the Council in accordance with the provisions of Article XIX of this Charter;
(f) The City Manager shall recommend to the Council for adoption such measures and ordinances as the City Manager may deem necessary or expedient;
(g) The City Manager may make and execute contracts and authorize expenditures of less than twenty thousand ($20,000) dollars, or in such amounts as are established pursuant to SECTION 2002 of this Charter, on behalf of the City;
(Note that the term “on behalf of the City” really means on behalf of all the people of the City – and that includes you.)
(h) The City Manager shall submit an annual report on the finances and administrative activities of the City as of the end of the preceding fiscal year to the Council at a public meeting to be held within thirty days following receipt of the Annual Financial Statement. The annual report, which shall be personally certified by the City Manager to be accurate and complete, shall contain a statement indicating:
(1) Whether the revenues budgeted for the preceding fiscal year were actually received, and an explanation concerning any material differences between the total revenues budgeted and the revenues actually received;
(2) The extent to which expenditures budgeted actually were incurred, and an explanation for any material variance between budgeted expenditures and actual expenditures;
(3) The amount of the financial reserves of the city;
(4) All other information which, in the opinion of the City Manager, is necessary to provide an accurate and complete picture of the fiscal status and condition of the city. The report shall be in a form which is susceptible to confirmation by audit. It shall be made available to the public in the Office of the City Clerk.
(i) The City Manager shall make such other reports as the Council from time to time may request concerning the operations of City departments, offices and agencies subject to his or her direction and supervision; shall keep the Council fully advised as to the financial condition and future needs of the City; and make such recommendations to the Council concerning the affairs of the City as he or she deems desirable or as requested by Council;
(j) The City Manager shall appoint such advisory boards and committees as may be necessary or desirable to advise and assist in the work of the City Manager; provided, however, that the members of such boards shall not receive any compensation.
(k) The City Manager shall exercise such other powers, and shall perform such other duties, as are specified in this Charter or as authorized or required by the Council.
Three accountants are sitting outside of the mayor’s office waiting to be interviewed for City Manager. The first one has a brilliant resume’ and decades of experience, dressed in an expensive suit and over-shined shoes. After a short question and answer session, the mayor asks the accountant one final question: What does 1 + 1 equal? The experienced and honest accountant states that the answer is of course 2. The mayor then tells the man: Thank you very much, we will be in touch.
The second and slightly less experienced accountant goes through the same interview process, and answers the same 1 + 1 question as well with the answer of 2. Thank you very much, we’ll be in touch.
The third gentleman was nowhere nearly as qualified as the other two candidates, and was dressed just barely adequately for this interview. His shoes were not shined and his hair uncombed. His past work history included the most corrupt and disreputable firms imaginable, as well as the mafia. His answers to the interview questions were less than favorable, and a slight odor arose from his garments. And so the unimpressed but keen mayor asked his final question: What does 1 + 1 equal? The man gave pause for a moment, and then stated fervently: What do you want it to equal?
The mayor then smiled, stood up to shook hands, and said: Can you start Monday?
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Chapter 2:
You Are A Customer Of Government
With Services At The Barrel Of A Gun
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The 2010 CAFR report for City of Stockton corporation continues:
“The City provides a full range of municipal services. These services include: public safety (police and fire), community development, community revitalization, public works and street maintenance, parks, recreational services, libraries, water utility, sanitation services (wastewater and stormwater utility), solid waste disposal and recycling, and general administrative services.
Certain community development/revitalization activities and infrastructure construction are provided through the Stockton Redevelopment Agency, a legally separate entity. The City Council sits as the Stockton Redevelopment Agency’s board, and the Agency functions as a department of the City.
This report includes the financial activity of separate legal entities whose activities the City controls. these entities include:
- Stockton Redevelopment Agency, and
- Stockton Public Financing Authority
A component unit (stand-alone) report is available for the Stockton Redevelopment Agency on the City’s website.”
As we explore further into this CAFR report, we will see that many of these “services” as referred to above are actually what is called “enterprise operations” – businesses for which the citizens and taxpayers are not anymore “people” or body politic of the government but are indeed “customers” of the government for-profit corporation. And these services are actually not a choice in some cases, but instead are a “service” at the barrel of a gun via a government approved and investment held monopoly and/or trust. For indeed, if you do not pay your fees and taxes, a lien can be placed on your home or property and it can be taken away through legal and eminent domain confiscation.
Remember… property tax is an exaction.
An “exaction” is defined as legal “extortion”.
Exaction is a legal “civil right” of the people.
Do you understand???
To grasp how this is true, I’d like to introduce you to one of the most difficult to comprehend concepts for any citizen of the United States. As 14th amendment “persons”, we often misunderstand the definition of what a legal “right” is, as rights are granted to persons as revocable privileges. This is called a “political” or “positive” right, having nothing whatsoever to do with “natural”, “God-given”, or “negative” rights.
A natural or negative right simply means that you have the right not to have privileges, services, laws, and other tyrannies forced upon you. Thus, a free man would consider himself to live under God’s law or in nature, and his duty to his fellow man is to simply do no harm to him or his property. So a negative right is simply the freedom to not have rights forced upon you.
Enter government…
Political rights are positive in that they require an action to be taken against you, whereas negative rights are those reserved to say no to the same action. With the protections these rights afford as granted by government, the citizen must also accept the pains and punishments that government also grants as your positive “rights”, all of which can only be acquired in a contractual nature. Examples of these are the enumerated codes which allow the right to drive, the right to vote, and the right to free speech – all of which are political, governmental, and revocable rights (privileges) granted to its contracted 14th amendment citizens, who volunteer and consent to be contractually obligated under these rights.
Sounds confusing, doesn’t it?
In a moment you will understand with perfect clarity, I assure you.
These political rights are written in U.S. and State CODE, the legal codes of government. When considering these codes, government does not refer to men as natural beings, but rather as corporate “persons”. Whereas a natural man can only have natural rights, the fictional person attached to man is a corporation and can only have political rights granted by the government. This “person” is the name on your driver’s license, your social security card, and any other contracts with government, banks, etc. The person is your citizen. When in breach of contract or in violation of DMV or other government codes, it is this fictional person that is in violation or breach. The man attached to the artificial person is the surety for this dualistic relationship, and the courts must establish this connection in order to force positive rights upon you – like the right to pay fines and taxes and the right to go to jail.
Obviously, the use of the words positive and negative can be misleading here…
Black’s law 2nd Edition defines surety as:
A promise to fulfill a contract. Or a party who will take the liability for the original party in a bond.
And it defines the word person as a “thing”, not a living man:
A man considered according to the rank he holds in society, with all the rights to which the place he holds entitles him, and the duties which it imposes. A human being considered as capable of having rights and of being charged with duties; while a “thing” is the object over which rights may be exercised.
Interestingly, the word “impersonate” stems from this legal title of person.
Bouvier’s Law Dictionary, 1856 defines the word “personate” as:
TO PERSONATE, criminal law. The act of assuming the character of another without lawful authority, and, in such character, doing something to his prejudice, or to the prejudice of another, without his will or consent.
And in Black’s Law 2nd Edition:
Personate: In criminal law. To assume the person (character) of another, without his consent or knowledge, in order to deceive others, and, in such feigned character, to fraudulently do some act or gain some advantage, to the harm or prejudice of the person counterfeited.
In this way, the modern term “identity theft” can be explained. For when a thief steals your identity, he steals your artificial person – the contract name on your credit cards and bank accounts. He doesn’t need you (the flesh and blood man) in any way, and needs not even know what you look like. The thief can take upon himself your person (identity and character) without your knowledge or consent, thereby showing the complete separation of a man and his artificial person (identity) that he is a surety of. And while thousands of dollars are being drained from your various personal accounts, and while credit cards are used to purchase products from all over the world (and the world-wide web), the natural man may remain clueless of the theft of his corporate person (identity) for many days, weeks, or months. And yet the debt and punishment will by law assume the man as being responsible for his artificial person as surety, not the thief.
It is this person/identity that Black’s Law Dictionary also attributes to both the natural man’s “character” and his “status”.
And if you think about that for a moment, you understand that a man’s public status and character is defined by the actions of his artificial person – his “STRAWMAN”. Let’s take the credit rating agencies as an example. These databases keep track of the “credit status” of all persons, though they know nothing of the circumstances of the natural man who is the surety of that person. For it is not the man that has credit, but the fictional person attached to the man – the artificial character of that man.
Thus, the credit rating agencies can only measure the very limited participation of the corporate person within the corporate world of commerce (via the Social Security Number, etc.), but can never truly measure the actions or true intent of the man himself. And so while thieves and con-men may work extra hard to keep a high credit rating for themselves even as they steal, cheat, and commit illegal identity theft of other persons, their own credit score may show that they have perfect credit (character) as corporate persons. And these credit-rating agencies will recommend the worse criminal elements out there as being wholly trustworthy by whomever seeks the measure of the character of that man through a glimpse at his artificial person – his credit report. This is the paradox of the business world, where good men fall pray to a system set up to honor bad men, simply because the measure of those same men is determined by a literal lie – by their artificial persons.
Now apply this to government, where government investment held corporations give government municipal corporations (Cities) and Pension Funds excellent credit ratings based on their character and good faith and credit – allowing them to borrow or create “bonds” based on that character of being a public agency. The only problem is that the good faith and credit of government is supposed to be within the people it represents. But this is just not the case, and instead we have government extorting public funds from the people and into the investment schemes it promotes and regulates. And it is alowed to create much more money in bonds than it has the legal ability to pay – not unlike the very reason the 2009 mortgage crisis happened, where loans were made to people who could in no way afford to pay them.
The only difference is that government has used the good character of the people to procure bonds (loans) that, though it has the ability to pay off at any time, it restricts itself from doing so by hiding and restricting the public funds into investment funds that cannot be used to pay off debt.
In this authors opinion, this is the ultimate form of identity theft – the theft of the good name of the people of America!
Bouvier’s goes on to define just what a person is that can indeed be impersonated:
PERSON. This word is applied to men, women and children, who are called natural persons. In law, man and person are not exactly synonymous terms. Any human being is a man, whether he be a member of society or not, whatever may be the rank he holds, or whatever may be his age, sex. A person is a man considered according to the rank he holds in society, with all the rights to which the place he holds entitles him, and the duties which it imposes.
2. It is also used to denote a corporation which is an artificial person.
3. But when the word “Persons” is spoken of in legislative acts, natural persons will be intended, unless something appear in the context to show that it applies to artificial persons.
The 14th Amendment created just such a context, ensuring that all natural men are also artificial persons called “citizens”.
Bouvier’s details how the natural man is attached to the person/citizen in commerce by defining surety:
SURETY, contracts. A person who binds himself for the payment of a sum of money or for the performance of something else, for another, who is already bound for the same. A surety differs from a guarantor, and the latter cannot be sued until after a suit against the principal.
2. The surety differs from bail in this, that the latter actually has, or is by law presumed to have, the custody of his principal, while the former (surety) has no control over him. The bail may surrender his principal in discharge of his obligation; the surety cannot be discharged by such surrender.
3. …in general a creditor may resort to the surety for the payment of his debt in the first place, without applying to the principal.
So as a contractual citizen acting as a person in commerce, you are responsible for your persons actions and debts, and are contractually obligated while acting as an artificial person to submit to all of the positive rights that government forces upon you.
Let’s look at what this means…
As stated above, property tax is involuntary and paid by all “persons”. This and most all other taxation schemes are literally extortion by government from the people as citizens. But government calls this taxation scheme by another word… exaction.
Exaction is a legal “civil right” of the people, as defined in US CODE here:
42 USC § 1981 – Equal rights under the law
(a) Statement of equal rights
All persons within the jurisdiction of the United States shall have the same right in every State and Territory to make and enforce contracts, to sue, be parties, give evidence, and to the full and equal benefit of all laws and proceedings for the security of persons and property as is enjoyed by white citizens, and shall be subject to like punishment, pains, penalties, taxes, licenses, and exactions of every kind, and to no other.
An “exaction” is simply defined as legal “extortion”.
Not all rights are necessarily beneficial to men, and every action has a reaction. As we can read above, the civil “right” to be exacted, taxed, punished, and put in pain is equal (an equal right) with the rights of life, liberty, and property.
In other words, the right to own property is no more paramount than the right to have that property stolen away by government via the takings clause of the 5th Amendment. It is your positive right to have your property and money exacted from you. If you carried natural rights as an artificial person, then this taxation and confiscation would be a choice by you and an offer by government instead of a required demand as it is today.
The right of freedom is no more powerful than the right of punishment, pain, and penalties – for in legal language the word freedom literally means “to obey the law”, and the opposite reaction is punishment, pain, exaction (extortion) and incarceration.
And the right to representation is no stronger than the right to be taxed and extorted from without any representation.
Rights are not at all what I grew up thinking they were. And I’m betting right about now you are feeling the same way. In truth, only natural mankind has rights, and can accept or deny what he wishes. Everything else is artificial and contractual, especially if derived from government, and is truly what I call services at the barrel of a gun.
And as a person/citizen in a legislative democracy you have no natural rights, any more than you do as an employee of McDonald’s Corporation. You’re freedom is only as tangible as what it is to obey the law/rules of the corporation, and to receive the good and bad benefits and entitlements that comes with that freedom to obey.
Do you understand that the general people have no real representation in government, and that the only real people in America are the politicians who act on your behalf and are exempt from their own laws???
–=–
Chapter 3:
The Government Investment Scheme
–=–
Now let’s see just what happens to all of your hard earned tax-money within these municipal corporations by understanding the investment standards and practices of this City.
The most important lesson for you to learn today as applied to the supposed bankrupcy of City of Stockton or any other government entity – all tax and enterprise money collected by government is first and foremost diverted into local, State, and Federal investment funds, even if it will be spent the very next week.
The second most important lesson?
Most of these funds are reported in the CAFR, but not in the budget report – which is just a small portion of the CAFR.
And the budget report is what is being considered in this bankruptcy court!
Continuing with the 2010 CAFR:
(Page XI) RESERVE POLICIES
The City Council has adopted policies establishing minimum target levels of unassigned fund balance to be maintained in the various funds. These target amounts protect the City’s financial exposure to severe unforeseen emergencies and economic uncertainties, and are an important component of the City’s long-term financial management. The following are examples of such policies for different funds:
General Fund: 5% of appropriations for catastrophic events and 5% for economic contingency/budget uncertainty.
Measure W: 25% of anticipated annual revenue; and
Municipal Utilities: Six months of operational expense.
DEBT POLICIES
The City’s debt policies are reviewed by the Debt Policy Committee and adopted by the City Council. These policies are the Capital Financing and Debt Management Policy and the Policies and Proceedures for Land Secured Financing.
Remember, the City Manager creates these committees and appoints their leaders (heads), who in turn write these policies… as the councilmen twiddle their thumbs and pretend to be important upon their thrones. The City is required to keep a small percentage of future taxpayer and debt obligations – usually 3-6% of the “budget” – which in and of itself is not a bad policy, at least for the taxpayer services they provide. But by calling these fund balances a “reserve” and labeling them as “restricted” funds for future obligations and “debt servicing”, they do not need to report those funds on the budget report, as they are not to be considered in the spendable cash on hand of City of Stockton corporation for the annual budgetary needs of the government and people.
The budget report is simply an edited and cut down version of the full report called the CAFR. Same books, but the budget excludes most of the investment wealth within governmental and non-governmental (enterprise/customer-based) funds. Consider the budget as the City’s checking account for the last year, and the CAFR as the City’s combined checking AND SAVINGS ACCOUNT for the last 162 years…
INVESTMENT POLICIES
The City adopts an investment policy annually that provides guidelines for the prudent investment of the City’s cash balances. In late 2006 with the support of the Budget, Finance and Economic Development Committee, the City Council authorized the Administrative Services Department to contract for investment portfolio services. Effective July 1, 2007, the City entered into an agreement with Chandler Asset Management for management of the City’s long-term investment portfolio. Both the City’s long-term investment portfolio management and daily liquid cash requirements are overseen by the Department of Administrative Services.
And the City Manager oversees, creates, and appoints this department, its head, and the committees that control and audit it. Clearly we can read here the “City of Stockton” has lots of investments that are “long-term” – and they are not capital assets (buildings, equipment, land, etc.). No, these are liquid investments…
CASH AND INVESTMENTS
The California government code and City policy stipulate how the City’s temporary idle cash is to be invested, and outlines the policies to assist in maximizing the efficiency of the City’s cash management system while meeting the daily cash flow demands of the City. The average rate of return on investments not held by fiscal agents for the fiscal year ending June 30, 2010 was 3.29%. The estimated effective rate of return on investments not held by fiscal agents for fiscal year 2010-11 is 2.35%. As of December 30, 2010, the market value for the City’s operational reserve and liquid portfolio investments, excluding cash for fiscal agents, totaled $208.5 million.
Additional information on cash management can be found in Notes 1 and 2 in the notes to the financial statements.
What? $208 million dollars in just some liquid asset investments – and that’s not including cash?
How can a corporation claim bankruptcy if it has $208.5 million dollars in liquid assets at market value? Could I also declare bankruptcy if I don’t tell the courts or the people about my savings account and liquid investments?
But that ain’t all folks! For we are just scratching the surface when it comes to the hidden wealth and investment totals of “City of Stockton”. And wait until you see the accounting tricks they use uniformly throughout all governments to hide all of these investment totals!
Let’s keep reading…
(Page XIII) BUDGET CONTROLS
The annual budget serves as the foundation for the City’s financial planning and control. The City adopts a budget on an annual basis, and maintains a system of budgetary controls. The objective of these budgetary controls is to ensure compliance with legal provisions as to the recording of revenues and expenditure of the revenues.
In accordance with the City Charter, the City Manager prepares and the City Council adopts a budget prior to June 30 for each subsequent fiscal year. Each department is given expenditure targets based on projected General Fund resources, and is required to develop operational plans within these targets to accomplish Council goals. The budget is submitted to the City Council for review 45 days prior to the beginning of each fiscal year.
There you have it.
The government departments are told to work within the “General Fund” and its resources. The General Fund is the main investment fund where most incoming tax and enterprise (customer) monies are transferred into before quickly being diverted to other investment funds for other specific purposes – which cannot be used for general purpose operating expenditures as required to be used by the departments mentioned above.
So to be clear… tax-money is removed from the General Fund and placed elsewhere so that it is restricted from being used for taxpayer obligations.
And it is invested in long-term accounts never to be utilized for the benefit of the people (taxpayers)…
So this is telling you that the budget report only tells the Council and the people about taxpayer money earned through taxation as revenue, and it tells of the spending (expenditure) of that taxpayer revenue for taxpayer obligations and debt. But again, the budget report only refers to the General Fund and some other investment funds, ignoring many of the other enterprise (non-governmental) investment funds that are only listed in the CAFR.
And the government officials must only use the General Fund to ballance the “budget”.
This would be like me giving you an almost empty cup of water and telling you to fill up three other cups of equal size and proportion. Since I already removed most of the water and put it into restricted cups out of sight from the budget committee so that they cannot be used to balance the budget, the committee headed by the City Manager that is in charge of this whole scheme pretends to not have enough water and tells the council (the people represented) that they must approve a bond measure or default on their debt. Meanwhile, millions of gallons of water sit in 100’s of different investment cups that are never reported to the budget committee or to the people.
This is the way all governments work, by law, as recommended by private NGO associations that your elected and appointed officials are members of. And this is happening in every-City, County, State, USA.
Please also note the word “annual” when referring to the yearly budget report. One of the biggest distinctions between the CAFR and the Budget report is that the CAFR is a full accounting of all finances for the entirety of the time that the City corporation has been open. But the budget only focuses on a yearly basis, and what happens within that year. So in the budget report, last years profits are not necessary to include within this years budget, for the budget is only accounting for this year. And this means that the council and Manager are not “required” to use the fund balances of today that were gained yesterday, for they are not part of the “budget”. Yet another obfuscation tool to hide the real wealth of the City. This is also why you see so many graphs and reports in the CAFR making it so confusing – for the current assets must be separated from the past assets so as to create a hand-selected budget from the CAFR. Remember, the budget is only a small selection of what is already written in the CAFR. They are of the same body, but the budget report has no arms or legs, the tentacles of investment capital that are only shown in the CAFR.
CAFR (Budget Controls) Continued…
Budgetary control is at the department level within each City fund, and revisions to increase appropriation authority above a given department’s original adopted budget require City Council approval. Fund Transfers within like categories of the same department require a City Manager approval.
Now you might understand why so many elected City Council members are not familiar with, don’t care about, and don’t use in their jobs the Comprehensive Annual Financial Report. They are mostly on a need to know basis!
Stated above, only the “budget” is considered by the council. The investment accounts which are these “funds” do not require the City Council’s approval for “fund transfers” – only for appropriations for increases of a “department’s original adopted budget”. And so again we see that the City Council is nothing more than a signatory for the whims of the City Manager and his control over all things investment and CAFR. They are about exactly as useful as the United States Congress is – passing legislation without reading it, while knowing that it was written by private associations like the American Legislative Exchange Council, which represents corporations, not people.
And every two or four years, the people of the “City” line up in droves to vote for the next politicians to take their natural rights away and pass laws that serve no purpose other than to tax them and force more exaction upon them – by creating so many ordinances and rules that most people break the law every day without even knowing it!
And the more money extorted, the more money can be invested…
–=–
(CAFR, Page 3)
Management’s Discussion And Analysis (MD&A)
Financial Highlights
–=–
The MD&A is generally a misleading statement by the management of the corporation – in this case the “City Manager” – placed at the beginning of the CAFR so as to throw most people off of the scent of where the real money is hidden within. This CAFR refers to it as the “narrative overview” of the CAFR info.
Of course the narrator is the City Manager, who got us here in the first place!
It is this author’s general opinion that the MD&A is placed into the CAFR to obfuscate and confuse most unofficial readers of the CAFR. The financial information given here is severely contradictory as to what the actual totals are for fund balances and net/gross assets. Such things as “future liabilities”, “Debt Servicing”, and “depreciation” are what I call “creative accounting” – tricks and word magic used to cause the illusion of debt in the midst of large-scale gains in investment fund capital. For the totals presented within this MD&A are the totals that were tallied after this “creative accounting” was applied, in graphs and illusions many pages below this section that do not fairly represent even closely to the actual investment totals of government. And these false totals are presented here at the beginning, covering up the true nature of the massive investment schemes played out by government in the background. These tricks will be talked about in depth as we go through this CAFR…
One of the first items to pop out is this sentence:
“On May 26, 2010, the City Council declared a State of Emergency and directed the City Manager to take appropriate and lawful measures to achieve a balanced budget for fiscal year 2010-11…”
Now I don’t know about you, but that just sent a chill up and down my spine. Remember what happens in a City Council-declared State of Emergency?
What this spells out in so many words is literally financial martial law, where the “laws” are suspended in order to address and combat the emergency.
And the people of Stockton have no clue about this outrageous power that was granted to this City Manager almost a century ago by now-dead relatives and former unwitting “citizens”.
The “Financial Highlights” section continues:
“The assets of the City of Stockton exceed its liabilities at the close of the 2010 fiscal year by $1,136.4 million (net assets). Of this amount, $1,015.1 million is invested in capital assets, net of related debt and 219.4 million is restricted for specific purposes (restricted net assets), leaving a deficit $98.1 million (unrestricted net assets).”
(To be clear… the City Manager states here that $219.4 million equals a $98.1 million deficit, simply because this money is legally “restricted” for other projects in other investment funds other than the General Fund. THIS IS CREATIVE ACCOUNTING!!!)
“The City’s total net assets decreased by $50 million compared to 2009 total net assets. This is the third year in which the City’s net assets have declined. While business-type activities reported a slight decrease of $4.0 million, governmental activities reported a decrease of $46.0 million that amounted to 92% of the total net asset decline. The key drivers in the governmental activities decrease are the $27.0 million increase in net other post-employment obligation (OPEB) retiree health insurance liabilities, $17.2 million in additional net asset deficits incurred in the other insurance and benefits internal service funds, and 1.8 million in deficits in other areas of governmental activities. The continuing downturn of the economy, depressed housing and construction markets and reduced consumer spending have challenged the City’s ability to generate revenues sufficient to meet its employee and retiree benefit obligations.”
Note to taxpayers: This last paragraph should infuriate you. But in case you just don’t get it from reading this gobbledygook, your taxpayer money is being drained into the pension fund system. The government tells you that this is for the benefit of the employees of the City corporation, but the taxpayers receive absolutely nothing in return for their involuntary funding of these pension funds. And the taxpayer money portion that is invested or “matched” into the fund cannot be claimed by the employees for whom it was invested for in the pension system. Taxpayer money stays in the government pension funds even if the employee is fired or quits. Employees have no equity in this money, and neither do the taxpayers who were exacted for it.
Please understand that this states the problem is not that the City owes current or past pension payments to the State Pension Funds, but instead owes money in FUTURE years as “future liabilities” which, by law passed both Federally and State-wide, must be paid into the pension system today so that it can be invested for the future. This is tomorrows debt forced to be paid today (this fiscal year).
Does it make sense to you to go broke today so that investments for tomorrow can be made today? It does if you are a greedy pension trustee or comptroller making profits from this pre-funding model!
Please note that in my documentary, “The Great Pension Fund Hoax”, I covered this pre-funding scheme with the Federal Post Office, which has been borrowing every year to cover the expense of pre-funding its pension obligations and is now in financial trouble and collapse. I maintain today as I did in 2010 when that film was made that this effort is a purposeful attempt to falsely claim bankruptcy for these government entities by the Federal government – whom at any time can eliminate this pre-funding requirement as they created it in the first place. This is just one tactic being used to drive illusionist distress and cause for “financial estates of emergency” in governments that are not in any way in financial trouble. Make no mistake, pre-funding is government’s financial weapon of terrorism.
Notice that the last sentence above states that the downturn in economy, depressed housing and construction markets, and reduced consumer spending have challenged the City’s ability to generate revenue to meet its pension obligations. This is a serious lesson to be learned. Firstly, the government should not be hurt or even effected by the “economy”, as it is supposed to be solely dependent upon taxpayer money by its consenting citizens to fund it and make it bigger or smaller depending on the size of the population. But in modern times, government literally is the economy.
These obligations are taxpayer obligations. The employees pay their contributions automatically out of their own paychecks. The obligation is the matching and higher contributions given by the employees employer – which is government. And what funds government? Taxpayer money. This scheme has played out the the point that just the CalPERS pension fund in California has net investment assets of over $250 billion dollars market value as of last year.
So of the $50 million in decreased assets (deficit), $46 million was strictly due to:
“…additional long-term liabilities related to City employee and retiree benefits, worker’s compensation and other related liabilities.”
“The City reports $75.8 million in net OPEB obligation this fiscal year.”
So it’s not $46 million, its $75.8 million?
And the actual $46 million is not really a current liability, but instead is one that is due in the future with future assets – but by law is being required to be paid today with only current assets?
Sounds like a financial weapon to me…
“The City’s governmental activities report pension assets of $130.7 million for fiscal year 2010. Proceeds of the pension obligation bonds issued in 2007 prepaid the annual required contributions to the California Public Employees’ Retirement System (CalPERS). The increase of $2.3 million in pension assets during the year is due to contributions exceeding annual pension costs, and investment earnings exceeding the amortization of pension assets. Department contributions also fund the pension obligation bonds debt service.”
So we go back to the bond thing. Instead of paying future liabilities with future assets, we borrow money through a municipal bond to pay those future liabilities today.
This is the a look into government’s love, addiction and profiteering from debt.
–=–
Chapter 4:
Debt Servicing: The Promotion of Indebtedness
–=–
So what is this term we keep seeing, called “Debt Service”?
Simply put, it is the servicing of debt! Pretty simple, really. But hard to comprehend because it is completely illogical to the average man – but is the perfect crime for those who benefit in government and in the private sector…
You see, the government is very interested in debt.
It likes debt very much!
Debt is profitable for government, since government borrows for the most part from itself and pays itself back with taxpayer/customer money. It does so despite the fact that it has more than adequate assets to pay for anything it wishes to do today. Instead it creates “Debt Service Funds” to place your taxpayer money into and invest it. It then holds on to that money and services (pays) future debt payments with that money. Thus the money can be labeled as “restricted” funds that cannot be used for other purposes without council approval.
Generally, governments will have more money (liquid assets) in their investment funds than they hold in debt from revenue bonds – the money they borrow from their own future taxation and revenue collections as collateral. Thus, the money just sits in an investment fund and either collects interest or capital gains, and is used by the State commingled funds to invest in Federal securities and international investments to build up the international markets and corporations. We will discuss these State Treasurer’s Investment Funds further into this presentation.
But this begs the question…
If the City keeps taking out loans against future revenues gathered from the people for the City, how will the City ever get out of debt?
This is perpetual debt – creating revenue bonds which take today what would otherwise have been earned (taxed) tomorrow. This would mean that any revenues collected tomorrow, would still be paying for yesterdays bonds, creating the necessity to create more revenue bonds as a “loan” from the future revenues that will be earned the day after tomorrow, which will have to be used to pay for today’s bond (loan) debt.
And this vicious circle is perpetually drawn with every signature of the Mayor and City Council’s pen, keeping the people in an increasingly hopeless state until, like in “City of Stockton”, the economy goes bad, corporations move away, and unemployment skyrockets.
Mismanagement of a City will do that to an economy…
And so we are subject to a government that seeks to put its citizens into debt for future assets instead of paying off all of its debt with today’s assets and never-ever needing to borrow from itself again.
To put this squarely into your comprehension, the City continuously collects revenue and places it into “Debt Service Funds” and “Internal Service Funds”. But this money is invested and thus restricted for this sole purpose of paying future debt, and cannot be used for anything else. Once placed into these restricted investment funds, this tax money is now only able to legally be used to pay for future liabilities as (bond) debt payments. In other words, while millions or billions sit in these investment funds, the debt gains interest and more debt is piled upon old bonded debt because the money that would otherwise be used to pay off all of this debt is legally restricted solely for the purpose of making amortized debt payments for decades to come. If the total balance of the debt to be paid today was $100 million, and the “Debt Service Fund” has $125 million in it today, the government is not allowed because of purposeful legal codes to pay off all of its debt today, but must invest that money in order to allow the interest to accrue over 10-30 years and only make scheduled payments. Government cannot bypass the interest charges (usury) applied to its contracted bonded indebtedness to itself, creating a continuous and uniform flow of profitable interest across the board.
And of course, even with enough money sitting in these funds to “service future debt”, that money cannot be used in lieu of borrowing more money to be serviced later. So government cannot use restricted funds but must borrow and service that bond debt instead. Again, government by its own rules and codes literally cannot pay off its debt, but is instead required to pay the full interest over many decades and be stuck with that “future liability”. This will become a very important part of our “creative accounting” later on – and the best and biggest way that government hides its wealth from the taxpayers… the biggest con of all! Stay tuned…
Again, government loves to be in debt, and creates bonds for this purpose – both to restrict current assets in order to invest them, and to perpetually keep the books (budget) in the red so as to create the false “creative accounting” illusion that the City has no money to pay for today’s budgetary needs.
And you vote for this representation at every election…
And each year new and more creative taxation (exaction) methods and bonded indebtedness are created to extort the taxpayer base in order to flood more money into the government investment scheme – because all the money gets transferred into “restricted” investment fund balances, which cannot be used to pay down or pay off that debt, only to service the amortized payment structure under contract agreement.
Remember, as a general rule, government borrows from itself (other governments and funds).
CAFR continued:
“As of June 30, 2010, the City’s governmental funds report combined ending fund balances of $258.7 million, a decrease of $3.5 million, or decline of 1.3%, from 2009. This is composed of decreases of $5.1 million in General Fund, $1.5 million in Capital Improvement Fund, $33.1 million in Redevelopment Agency Fund; offset by increases of $12.9 million in the Public Facilities Impact Fees Fund and $23.2 million in Other Governmental Funds.”
But wait a minute, just above the City stated that it had only $208 million in investment funds, excluding cash.
What gives?
How many “other” governmental and non-governmental funds are there in City of Stockton corporation?
You will find contradiction after contradiction in these financial statements. These contradictions are designed to confuse you and send you away frustrated and unsatisfied, in the hopes that you will just give up trying to read another CAFR ever again.
Do not let that happen. Remember, we are still reading from the Managements Discussion and Analysis section of the CAFR, and haven’t even begun to explore the actual hidden wealth that is excluded even from this section of the report, and that of the “creative accounting” mentioned above.
Your logical and reasonable conclusion is to start reading this report from the top down, as would make sense with any document or novel that wishes to tell a true story, and build to upon that story until total clarity is reached by the climax and end of that writing.
But the CAFR is not designed in this way, for the CAFR is specifically designed to mislead the reader at every turn. The CAFR is not intended to be read by the average citizen.
The CAFR is split into several sections that are completely dependent upon each other for total comprehension of the subject and figures at hand, and yet are completely separate and out of order within the report. Again, this is a purposeful subterfuge with the goal of confusion and utter frustration in your mind.
Stay tuned, for this purposeful obfuscation will turn into clarity when all aspects of this CAFR are considered and explained in layman’s terms.
In fact, the CAFR goes on to state here on (page 4) that this is the case; that this MD&A is incomplete and must be explained in greater detail within the other sections of the CAFR.
It states:
“This Management’s Discussion and Analysis is intended as an introduction to the City of Stockton’s basic financial statements. The basic financial statements are comprised of three components: 1) Government-wide financial statements, 2) Fund financial statements, and 3) Notes to the financial statements. In addition to the basic financial statements, this report includes other supplementary information.”
Hmmm… so these are only the “basic” financial statements. So there must be more “advanced” explanations in here too, right?
“Government-wide Financial Statements“
“Government-wide financial statements are designed to provide readers with a broad overview of the City’s finances and information about the activities of the City as a whole, in a manner similar to a private-sector business. The Government-wide financial statements include 1) the statements of net assets, and 2) the statement of activities. Both of these government financial statements distinguish functions of the City that are principally supported by taxes and intergovernmental revenues (governmental activities) from other functions that are intended to recover a significant portion of their costs through user fees and charges (business-type activities). The governmental activities of the City include public safety, public works, libraries, parks and recreation programs, and general governmental services. The business-type activities of the City include the water utility, wastewater utility, stormwater utility, central parking district, golf courses, as well as the solid waste operation.
The government-wide financial statements include the governmental activities of the Redevelopment Agency (Agency) and the Stockton Public Financing Authority (SPFA).”
Ah, so there are two financial statements being presented in the same Comprehensive Annual Financial Report?
We have one for governmental services to taxpayers and one for government’s businesses (enterprises) where the people are customers of government.
Now why would governments across the country put out more than one report? Wouldn’t it be the most logical course to simply place all assets into one easy to read statement so that one and all of the citizenry can easily comprehend the massive investment wealth and transfers of that wealth, that build up the corporate structure of America and the world and allow government to expand its organized crime into foreign lands even as its own people are starving and destitute, and while those governments are now declaring bankruptcy – all in the name of FREEDOM???
Oh, I see… government doesn’t really want the people to know what it’s doing with their hard-earned taxpayer money, and so government creates many sets of financial accounting books, only showing the taxpayers the governmental funds and balances while keeping the “non-governmental activities” – here referred to as “business activities” – and their fund balances out of the public’s comprehension. No wonder this darn report is so confusing. The people aren’t meant to grasp what it says. If they did, they’d probably get very angry and revert back to the good old days of hanging criminals in the public square from the nearest tree.
And so we now know that government not only keeps two sets of books – the budget report and the CAFR – but we also now know that government also keeps two kinds of people – one as a taxpayer for governmental activities that are funded by taxpayer money and shown in the budget report as non-profit ventures for taxpayers; while at the same time, those same people as taxpayers wear another hat as “customers” of the government corporations in their for-profit “business activities”, which are not necesarily reported on the budget report because they are not funded by “taxpayers”, but by “customers”.
You see, government has created legal trusts and monopolies on what it calls its business-type activities. Water, sewers, storm-water, parking, golf courses, solid waste operations, and many other “services” are what taxpaying “customers” have come to expect from their government. In fact, all of these infrastructure assets of government were built with taxpayer money. But they didn’t stay in the taxpayer budget as governmental activities, and instead were placed by government into non-taxpayer funded “business activities” called enterprises. In this way, government now has the only water, sewer, and other utilities available to the taxpayers, and has the legal authority to charge “service” fees and collect for-profit revenue for their monopolistic utilities and other for-profit businesses.
Lotteries and alcohol monopolies are other forms of this organized crime. What used to be in prohibition and run by the mob is now a legal organized business enterprise of government.
And if the “taxpayers” don’t like it… well, too bad. They must pay their bills to these utility and business/service monopolies of government as “customers” of government – wearing both hats at the same time – or they might find themselves without power, water, gas, or other necessities of life. And they might even suddenly find themselves without a roof over their heads, since government allows itself to steal a forced customer’s home if they don’t pay their “service” fees and bills. These services, which are essential services provided by the government corporation – and which are essentially “essential services” provided at the barrel of a municipal police department’s gun – have little to no competition. Therefore, these private “separate” for-profit business entities are free to raise their rates and fees at their own whim. No competition equals no choice. And no choice equals no quality control. For the government writes the laws which control the uniformity and quality of the services provided by its own utilities. And so the taxpayers – as “customers” – can only complain to the very owners, operators, and regulators of these government monopolies – their own government.
And the controlled media portrays “off-grid-ers” as lone nut-balls that might just crack one day, hoarding food and water, utilizing the sun for power, getting their own water from a homemade well, and having the nerve to quote the constitution for America – the land now covered by the United States corporation and its may jurisdictions, which legally protects these municipal corporations like “City of Stockton” and allows them to do exactly what it is doing now – declaring bankruptcy while hiding 100’s of millions of dollars in business-type investment funds and assets.
–=–
Chapter 5:
Government-Wide Financial Statements, Or,
How To Hide Half Of Your Wealth In One Single Report!
–=–
So let’s go forward into the report to (Page 40) and take a look at the Government-wide financial statement as it is described here.
This graph is split up into three sections – Assets, Liabilities, and total Net Assets.
The total Net Asset section is the difference between the Assets and the Liabilities sections. This is basic addition/subtraction accounting.
On the surface this seems like a basic accounting chart of what this corporation is actually holding in net assets. But when we look closer, we can see our first good example of “creative accounting”, designed to hide the actual value of the current assets as of this particular day, June 30, 2010, as reported on this end of fiscal year chart.
In other words, this chart is designed to show exactly what the balance of this government’s assets were on this particular day – June 30, 2010. This is the purpose of the CAFR – to show current asset balances as of the end of a single fiscal year, which covers all previous years as well for a total accounting of wealth and investment. Future assets to be received and future payments to be made should not be considered, since this is supposed to be an accurate look at the financial position of this City as of, no sooner than, and no later than June 30, 2010.
So let’s see what it says…
Under the ASSETS section we can see such things as cash and investments, restricted cash and investments, interest receivable, loans to property owners, pension assets, capital assets, ect. In other words, these are the assets that “City of Stockton” was either in possession of or had loaned away and will get that money back with interest in the near future. This is not future assets in the form of revenue that will be earned or fees to be charged, but are the actual current assets for this day at the end of Fiscal year 2010. Note that “loans” can be called in at any time, and so their value is included as a current asset – real assets that are on loan.
Now let’s look at the LIABILITIES section, and see if any of that “creative accounting” is taking place.
Under this section, we have accounts payable and already accrued expenses, already accrued payroll and benefits to be paid, already accrued interest (on bonds), and pension obligations for the year. Note here that these items are fairly reported current liabilities for this fiscal year, and I have no issue thus far with City of Stockton’s reporting of its actual current liabilities.
But there is one other thing in this LIABILITIES section that is perhaps the ultimate deceit when it comes to government financial reporting. And every government uses this trick of creative accounting to hide trillions of dollars across the country.
That creative accounting trick is what is listed here as “Long-term liabilities“.
——————————————————————————–
“Total Assets”………………………………………$2,096,730,000
“Liabilities…”
“Due within one year“……………………..$33,048,000
“Due in more than one year“…………$796,458,000
“Total liabilities”……………………………………..$960,302,000
“Total Net Assets”…………………………………..$1,136,428,000
(Total Net Assets after all current and future liabilities are subtracted)
——————————————————————————–
There it is – creative accounting in the flesh! Do you see how this works? Let’s break it down so that everyone understands this corruption.
Remember, this Comprehensive Annual Financial Report (CAFR) is a statement of current assets as listed for the end of fiscal year, June 30, 2010. Thus, the assets listed are supposed to represent the actual fund and any other balances of assets for that particular day. The assets section reflects the capital assets and cash and investments of “City of Stockton” that were either held by the City, invested elsewhere, or are loaned to other entities as of June 30, 2010. Therefore, they are real, tangible liquid assets in the fact that they can be called in and cashed in for their listed “market value”.
The “Liabilities” section represents money that is, in the very short term (within a month), already designated due to transactions within the fiscal year of this CAFR report for either debt payments or current liabilities.
But the “Long-term liabilities” section represents payments that will be made in the future – some of it 30 years or more into the future!!!
And yet, here they are listed along side the current liabilities. And here they are affecting the reported totals of the current net assets of the City on this date. These future liabilities are not tangible or liquid. In fact, they do not even exist yet. They are no different than your own personal future credit card or loan payments. And most importantly, these future liabilities will be paid with future assets – what government refers to as (future) revenues.
But when we look at the assets section, we can see that no “long-term” assets or “future revenues” have been listed to offset those future liabilities of debt payments.
Remember those debt servicing funds that are restricted to paying future liabilities? While those fund balances are actual current assets held by the City of Stockton in liquid investments, these “future liabilities” are in no way a part of the “assets” of today.
To clarify this creative accounting even further, let’s consider your own checking account…
1) Let’s say that you have $10,000 in your checking account. This is your “current assets”, and what you make your budget from.
2) Now lets say that you have a car payment of $500 due this month. This is your current liabilities.
3) On your budget, you know that after all current liabilities are paid, your Net Assets are $9,500 dollars. This is your total net assets for this day. These are your “current” assets.
4) But let’s say that it is tax time, and you are reporting to the IRS (a private corporation of government) your net assets. What will you do so that you don’t have to pay taxes on your $9,500 of income that you earned (your revenue) that is so obviously sitting right in your checking account and so easily verifiable by the IRS (or by looking at government’s CAFR)?
5) The answer is to do exactly what government does… except in your case, it is illegal and you will be fined and go to jail for your own version of “creative accounting”.
6) And so you create future liabilities that can be added to your current assets today by taking your future car payments and adding those to your current assets. Brilliant!! At $500 per month, it will take exactly 19 payments at $500 dollars to equal your total loan (bond) amount of $9,500 dollars. And so you take your future car payments and report them as “future liabilities” to the IRS, which brings your current net assets that you are reporting as of today on your IRS form down to $0 dollars.
In effect, you have just reported to the IRS that you have no money in your checking account – despite the fact that it is holding $9,500!
7) If you wanted to gain even more legal benefit from this creative accounting style like government does, you could claim other future liabilities such as future home loan payments, future electricity, water, and gas utility payments, future movies you are going to see, etc. And so you could report to the IRS that you have an extra, let’s say $80,000 of debt payments as future liabilities.
8) And just like “City of Stockton”, you could also declare bankruptcy based on your future debt while completely hiding your current $9,500 dollars of assets, and of course, any savings or investments you might also be holding.
Welcome to government’s world of creative accounting. Or you could call this extremely well-organized but legal crime.
The only difference between government’s creative accounting and your own personal ability to do the same is that you will personally go to jail for defrauding the government as the surety of your tax ID (person), while government wont. Government is a limited liability corporation.
After all, government isn’t going to punish itself, no more than a king would, and no matter how much the taxpayers/customers cry foul.
But then, the appointed City Manager is just doing his job according to State and Federal CODES, and according to the corporate charter of “City of Stockton”. They might even use the excuse that the voters voted for the charter and for the Council almost 100 years ago (without mentioning it had been amended over 100 times), lending credibility and support to this whole criminal scheme.
But we can’t just blame the City Manager for this crime of omission and creative accounting, for the City Council and the Mayor are also complicit in this legal, organized, uniform, criminal activity. After all, the Council must sign their name to these CAFR reports. The Council must approve what the City Manager and all of his appointed departments and department heads do. And it was the council that just approved plans for Chapter 9 bankruptcy proceedings for their own municipal corporation.
What is it government tells us… ignorance of the law is no excuse…
Be it purposeful or ignorant, the City Council and Mayor of “City of Stockton” have approved and signed their names to a fraudulent scheme to defraud the people who reside in “City of Stockton” in bankruptcy proceedings and to its bondholders.
Well I say to the Council and every City official involved, “Ignorance of the people to your organized crime and lies by omission is no excuse”.
The people should collectively throw you all in jail for fraud – from the court judge to every offending appointed and elected officer of Stockton Municipal Corporation. And then tomorrow, the people of Stockton can pay off all debt and never have need for a bond again.
Oh, but we need to show that the money and investments are there to do this. Ah yes…
So, if we were to properly report the Government-wide Net Assets, removing the creative accounting of “future liabilities”, the graph would look more like this:
——————————————————————————–
“Total Assets”…………………………………………$2,096,730,000
“Total liabilities”…………………………………….$130,796,000
“Total Net Assets”…………………………………..$1,965,934,000
(After all current liabilities are subtracted from current assets)
——————————————————————————–
Conclusion: “City of Stockton” is hiding at least $829 million dollars worth of cash and investments via its “creative accounting” of the Net Assets in its Government-wide financial statements.
In other words, to hide its current physical assets of today (June 30, 2010), City of Stockton is using future (virtual) payments to hide current (actual) assets without including the future revenues (taxation and fees) that will pay for that future debt.
To put this into perfect clarity: If every person or household in America were able to utilize this type of financial reporting, using future car, credit card, and mortgage payments as current liabilities to hide their current assets, then probably 70-80% of all Americans would qualify to declare bankruptcy. And if you added the “national debt” onto this as a future liability, and for that matter all other taxation and “customer” fees and charges that will be charged to us in the future, and if we the people were allowed to report that future taxation as a liability without reporting the future assets we will earn that will actually pay for those future liabilities, then that figure would rise up to about 99% of all people in America that are legally bankrupt according to the Government Accepted Accounting Principles (GAAP) as referred to in this CAFR report.
Do you think this is a coincidence… that only the 1% would not be bankrupt and would be able to pay for the national debt? Do you really?
–=–
Noting that we were just looking at the actual financial statements of City of Stockton, we will now Go back to (Page 7) within the MD&A.
But please not that what is reported in the MD&A (Manager’s Discussion and Analysis) as compared to the actual financial statements within the CAFR 35 pages away is what the Manager tells the people after such “creative accounting” principles have been implemented within the financial status of the City. In other words, the MD&A is on of the last sections to be written, for the Manager cannot lie to the people and the council until all of its investment wealth is hidden by such things as “future liabilities”. And this is why understanding of the entire structure of the CAFR is so important, and why one should not be fooled by the “discussion and analysis” of the City Manager…
And this is why a bankruptcy proceeding should not be allowed to proceed on the word of an appointed and corrupt City Manager and without full disclosure of the CAFR.
1 + 1 = ???,???,???
We are now reading the “GOVERNMENT-WIDE FINANCIAL ANALYSIS” section back within the Management’s Discussion and Analysis.
Here, we find something else very interesting…
This graph is entitled “City of Stockton’s Net Assets”. It shows the difference in net assets between fiscal year 2009 and 2010. And though in its budget report, “City of Stockton” claims to be in a deficit, we see a different picture presented on the government-wide statement.
In the “Assets” section, current and other assets went up by over $104 million dollars, while capital assets gained in total value by over $88 million, for total assets of over $192 million more than fiscal year 2009. Does this sound like the City is in financial trouble?
But wait, we must also consider the “Liabilities” section and subtract those from the current assets.
So let’s take a look at these liabilities and see if we find any creative accounting going on here as well…
Long-term Liabilities also increased by over $304 million dollars.
And so total liabilities increased by over $241 million dollars, thanks to the “creative accounting” of future liabilities.
And so, because of this creative accounting, the “Total Net Assets” of “City of Stockton” corporation are being reported here at a decrease of over $50 million dollars compared to fiscal year 2009. That’s current assets being effected by future liabilities without consideration of the future assets that will pay for those future liabilities.
Once again, we can see the lie. This corporation has turned a $192 million gain in current net assets into a $50 million loss in current net assets. And you ain’t seen nothing yet!
Continuing on (Page 7) the CAFR also explains to us how to understand this little morsel of accounting trickery:
“Net Assets of the City”
“Net Assets serve as a useful indicator of a government’s financial position. In the case of the City of Stockton, assets exceed liabilities by $1,136.4 million ($1.1 billion) at the close of the fiscal year, which is a $50 million decrease, or 4.2%, from 2009 total net assets. Of this decrease, $46.0 million is attributable to governmental activities (taxpayers) and $4.0 million to business-type activities (customers)…”
Isn’t it funny how the major deficits always seem to occur within the taxpayer budget, as opposed to the for-profit business ventures and enterprise operations (business-type activities) where taxpayers are “customers”?
Here we see that creative accounting being put to use again in a blanket statement. Remember, this 46 million “deficit” and decrease was due from future liabilities of pension payments that must be paid today. These types of statements are criminal and disturbingly deceitful once we actually look at the true financial statements that they refer to.
Assets exceed liabilities by over $1 billion means the City had a loss of $50 million – how Orwellian can you get?
Continued…
“Capital assets… (e.g. land and easements, buildings and improvements, infrastructure, intangible assets and equipment)… traditionally account for significant growth in the City’s net assets. The City uses these capital assets to provide services to the citizens; consequently, these are not available for future spending. Although the City’s investment in its capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be liquidated to reduce these liabilities.”
Did you catch that?
What a perfect system of organized legal crime!
This just told you that your taxpayer dollars are used to pay for the “capital assets” (buildings, equipment, and such) that are used to provide taxpayers the “services” that the government provides and reports in its “business-type activities” financial statements. And yet, the “resources” collected by these for-profit sub-corporations of “City of Stockton” can and will not be used to pay for their construction or purchasing. No, that debt that was accumulated by “City of Stockton” to build these capital assets must be paid out of the “taxpayer” base – the “governmental activities” revenues that are collected as taxation. The fees and other forms of revenue that are charged to taxpayers as “customers” of these government businesses and utilities who utilize and profit from these capital assets (buildings, vehicles, etc.) are not used to pay for their construction or purchasing.
Is this clear?
Imagine if the taxpayers collectively paid for every single product that is purchased by Walmart and subsequently placed back on the shelves of Walmart to be re-purchased by the taxpayers as customers of Walmart. And also imagine that the taxpayers collectively paid for the construction of each Walmart building (capital asset) with their collective taxation (property tax, sales tax, etc.). And then imagine that these taxpayer monies were not in cash, but instead, all of this was purchased with future taxation in the form of debt as “revenue bonds” to be paid out of the taxpayer revenues that will be collected in the future.
Of course, that will mean that taxes will have to be raised in order to pay for future regular governmental taxpayer services because most of the future taxation has already been pledged (in reserved or restricted funds) to pay for the debt accrued for the taxpayer funding of Walmart (capital assets).
Now imagine that when the taxpayers go shopping at Walmart, none – I repeat, NONE of the money collected from the taxpayer customers for the purchasing these products of Walmart corporation or any sub-corporate hubs of Walmart and its products would actually go to the paying off of the taxpayer debt that was used to construct and stock those Walmarts and their shelves in the first place.
Replace the name Walmart with the name City of Stockton non-governmental business-type activities, and your imagination just became a reality!!!
Carrying on with the CAFR:
“An additional portion of the City’s net assets, $219.4 million or 19.3%, represents resources that are subject to various external restrictions on how they may be used. These two segments of capital assets and restricted assets amount to more than 100%, reflecting the fact that, in aggregate, the City’s resources are entirely committed in capital assets or are restricted in their uses. The net result is a deficit $98.1 million in unrestricted net assets for the City.”
There you have it… “City of Stockton’s” taxation revenues (taxes collected) are entirely committed to paying for its capital assets (for-profit enterprises) or are restricted for other future liabilities.
Welcome to Walmart sir, may I help you find what you are looking for?
Yeah… how the hell do I get outta here?
Well sir, you could leave our wonderful Walmart enterprise, but you’ll soon discover that wherever you move to; no matter what city, county, or state you choose, you’ll find a friendly Walmart there to greet you and take your money for the collective. Have a nice day!
No matter where you go… no matter how free you may think you may be… you will always be in debt to the corporation and its sub-corporations. Sales tax, property tax, gas tax, licensing fees, tickets and citations, and a host of 100’s of different taxation methods will always be there to greet you wherever you go, just like those Walmart greeters.
And you’ll certainly find that “the City’s net assets… are subject to various external restrictions on how they may be used”, and that your hard earned money taken by taxation will not necessarily be used to benefit you the txpayer.
–=–
Moving through the MD&A, we see page after page of bad news. Decreases here, lost revenues there, less interest earnings here, bad conditions there, and more taxpayers paying less taxes everywhere. Instead of reading these to you here; like a 1950’s science fiction story that is oh so unbelievable with our new knowledge of this Manager’s creative accounting methods, I’ll just leave you with this thought…
If a business is doing that badly on behalf of the people… why in the hell do the people keep supporting it and bailing it out with bonds?
We wouldn’t do that with Walmart!
Though we did do it with the banks…
–=–
On (Page 21) we see a perfect example to prove the point that future liabilities will be paid with future assets.
The CAFR states:
“The Redevelopment Agency Fund total fund balance deficit of $6.2 million at the end of the fiscal year includes $12.4 million in restricted fund balance for ongoing and future capital projects, $2.7 million in committed fund balance, and a deficit unassigned balance of $21.3 million. The deficit unassigned fund balance is a result of the prior year’s level of available cash of which was dedicated for the Marina project of which was completed in this fiscal year and its asset was capitalized. The deficit unassigned fund balance will be funded by future property tax increment revenue to be received in future years.“
We must ask again, why is a future liability that the City admits will be paid with future assets being reported as current liability against current assets?
And perhaps you might have noticed that the City is reporting that it has a $6.2 million dollar deficit, while in the same sentence stating that it has $12.4 million, $2.7 million, and $21.3 million in current liquid investment fund balances. What this is really stating is that the Redevelopment Agency Fund has $46.4 million dollars in investments (enough to cover any deficit), but that money is legally bound by restrictions to be used for other things that don’t even exist yet. This money is restricted for “future projects” that will represent “future liabilities” but that aren’t real yet… Now that is what I call creative accounting!
Now, let’s talk about Proprietary Funds, more often called enterprise funds and service funds.
“Proprietary Funds”
Proprietary funds consist of enterprise funds and internal service funds. The proprietary funds’ financial statements provide additional detailed information than found in the Government-wide financial statements. Both presentations are accounted for on the full accrual accounting basis. Each funds’ financial transactions, both near-term and historic, is provided in the statement of net assets and the statement of revenues, expenses and changes in net assets.
Wait, wait, wait a minute here. We already found two reporting methods… first we had the limited “basic financial statements”, and then we had the more broad view in the “government-wide financial statements”, so now you’re going to tell us that there is an even more detailed report also included within the Comprehensive Annual Financial Report? Come on, really???
Yep. It’s written right there, in black and white:
“The proprietary funds’ financial statements provide additional information than found in government-wide financial statements”.
So then… what we just looked at was incomplete? It wasn’t really a “government-wide” overview of all funds in government?
Nope.
You see, ‘City of Stockton” just gave you a big clue as to the difference between what it reports to the people in the budget and what it actually holds in its funds as reported in the CAFR. Do you see the magic word…?
The word “accrual” means the adding together of interest or different investments over a period of time. Here, the City states that the balances on these enterprise and service funds are now going to be reported even better, for they will be reported based on the accrual method of accounting. It then states that accrual accounting means that the fund balances are shown for both the current fiscal year and for all of the years prior to that fiscal year (near-term and historic).
In other words, it is the full accounting of that fund since its inception in the 1800’s.
Imagine checking your bank account balance without considering over 99% of all past transactions on your account. There would be no starting balance to go by, so how could you know the balance after your current transactions? Answer: you wouldn’t. Unless you had a second or now third set of detailed record books (financial statements) that you keep out of sight from public consuption.
And so now we finally see a full disclosure of all facts pertaining to something tangible in the CAFR. We see that even the fund balance sheets have more information and creative accounting within them, meaning that the figures used in the “Government-wide” financial statements are pulled from these totals after their own creative accounting was already applied! This is the importance of having multiple methods of reporting, all of which “trickle down” into the next statement after having been stripped of some of the vital information each time it falls into a new, less accurate report, until finally it falls into the hands of the public in the budget report and the people have no clue what the hell happened to all of their hard earned taxpayer money.
And now we see the purposeful obfuscation and confusion set into place within the CAFR to drive people away without reading further into it further and discovering things like this truth in reporting.
It then states that this complete historic accrued information can be found in the “Statement of revenue, expenses, and changes in fund balances”. But this graph isn’t here on this page or even the next ten pages. Instead, this chart is in the back part of this long CAFR, where hopefully no uninformed citizen will get far enough past the pitfalls and roadblocks of the MD&A and the Government-wide financial statements to comprehend what this chart even says.
So we must jump from (page 22) to (page 150) to begin to see the actual full accrual basis accounting of “City of Stockton’s” investment fund balances. And these proprietary and other funds don’t actually even appear until (page 166) of the CAFR! Surely most people would have given up trying to understand all of this by page 40, and would have just been confused when skimming through these complicated charts in the back of the CAFR. And this is exactly the goal of government accounting.
But if you’ve gotten this far into this presentation, then I’ve got to figure that you must want to learn how to read the true financial accounting of government, and how to quit being government’s bitch!
–=–
Chapter 6:
How Investment Funds Changed The World
–=–
What is a fund, anyway?
To understand this question, we must go to a different section of the CAFR report. On (Page 44) we find the section called and describing the “Fund Financial Statements“. This is not the actual detailed financial statements, but rather an explanation of what these funds are and what is within them. You see, it is beneficial to descriptively report these investment funds in a separate report, though still within the full CAFR, so as to utilize more creative accounting principles approved by government. By separating the more detailed descriptions and charts form the other financial statements in the CAFR, the basic financial statements can then report through the budget report to the people only the final balances of these funds, after all creative accounting tools have been utilized to hide the actual current balances of the funds themselves with long-term liabilities, depreciation, capital losses, and other misleading restrictions – utilization of the “trickle down” waterfall effect.
For our purposes, and so as to understand the fund structure of all governments, let’s consider the fact that government only really has one bank account. But this one account is sub-divided into many different partitions – very much like a single disk drive can be partitioned into multiple separate storage spaces, though all of these are still on the same single disk. Or, for those not so computer savvy, we can picture it like a single office space that can be partitioned with “cubicles”, each work space accomplishing different or separate tasks for the operations of the whole office space., but still all happening within one single space (account).
And so government takes all revenues from (taxpayers and customers) and first places that revenue into its General Fund. Let’s consider the general fund the entryway to a house. From this fund we have access to all other hallways and rooms in the house, and so government can transfer anything it wishes from the General Fund to any other fund, or room in the house. It can then close the doors to those rooms and hang a sign on the doorknob that says “reserved” or “restricted” for something else, or “assigned” for future debt and liabilities (debt servicing). These doorways are often one-way doors into these fund account partitions, and once the transfer is complete, the money stays in that fund account “storage room” and is invested into the many stock and bond markets available to the government by State and Federal laws until the day it is actually spent. Sometimes, these funds can be locked away for a very, very long time… in 30-50 year bond or loan contracts or other types of investments. And as we’ve discussed, government has passed laws that force those bonds to be paid in scheduled amortization payments that cannot be paid off early.
But when these funds are reported publicly to the people each year, many of the hallways to these storage rooms are blocked off from public viewing. Creative accounting is used here to hide the true value of these fund partitions, so as to create the illusion of a deficit on the annual budget report to the people. Meanwhile, the unobtrusive and clear view of all of these partition fund rooms can only be found in the Comprehensive Annual Financial Report. Of course, most people are to busy working three jobs in order to support the rising taxation that keeps being placed on them to keep this organized legal crime syndicate called government going with its investment schemes, not to mention the increased utility and other service fees that the government corporation has monopolized and passed legislation to allow increased and ridiculous rates, service charges and fees for these essential “services” at the barrel of a gun.
It is also important to note that the funds we are talking about here – the ones that the City of Stockton is hiding from the people as it declares bankruptcy – the government does not consider these investment fund fair market values as a taxpayer money surplus. This is a critical point to comprehend, for the entire investment scheme is dependent on this law.
These fund balances certainly sound like they are a taxpayer money “surplus” as they appear in government “investment funds”, which can and should be used for “governmental” operations to support taxpayer needs. This would be a logical conclusion by most people, and this illusion of government is most people’s opinion. But then, most people aren’t organized legal criminals out to create massive investment wealth at the expense of other people. We have to remember that part as we look into these fund balances. And we must not ever create empathy towards government that any of this is not well-organized criminal behavior. We must be ruthless and keen, not giving in to feelings that innocence of any kind has taken place. When another man lies to you, especially one who has been place into the public trust, under no circumstances should your trust ever be given again to that man.
Interestingly, it is Walter Burien’s plan to change and create new laws so that no trust is needed within government. For intent is only as good as the law which requires it. Thus, removing these creative accounting standards of practice and exemptions from law and making the actual person (politician) in public trust responsible and punishable for any and all criminal activity they commit, no criminal would even think of entering into government. Imagine a world like that…
Much of this stated investment fund revenue is not in the taxpayer realm or used for “taxpayer services”.
A “Golf Course Fund” for instance, benefits the golf course alone when put into financial application. A golf course is a private sub-corporation of the main “City” or “County” municipal corporation, which is often called an “enterprise” operation. It usually charges a fee for the use of its infrastructure – thus it is operating in a for-profit capacity, collecting fees from the taxpayers who funded it’s construction. Stadiums and sports arenas are other examples of this taxpayer-funded infrastructure that is often sold or placed into public private partnerships with private corporations, who in turn benefit from what the taxpayers paid for and built by charging fees for use of our own infrastructure.
Government has “governmental” and “non-governmental” functions, referred to in the financial statements as business-type activities. Government municipal corporations run two types of businesses; one as the corporately chartered government for the citizens/taxpayers using taxpayer money (where tax surpluses are put into governmental funds and invested but are restricted in their use – meaning they are no longer surpluses in a legal sense), and the other as a for-profit enterprise corporation that sells products and services to people, who also just happen to be taxpayers. These two forms of “government” are separate, and therefore, they are reported separately within the financial cornucopia of financial and budgetary statements. This perpetuates the lies of government by omission. And this is why “City of Stockton” is declaring bankruptcy – a lie by omission made legal by Federal and State Government Accepted Accounting Principles (GAAP).
“Governmental” is defined as taxpayer activities.
“Non-governmental” is defined as non-taxpayer business activities.
The difference?
Government funds are for “taxpayers”.
Non-governmental funds are for “customers”.
Governmental funds are non-profit.
Non-governmental funds are for-profit.
How do you hide profits in a non-profit government? You keep those profits within investment funds. Just as you will never profit from your stock or other investments until you sell that stock, government never shows a profit because it never actually liquifies its investments. Instead, it borrows against the equity of its own investments, and loans credit to other municipalities and corporations through combined governmental agencies for which it mutually invests these gains. This is how government borrows from itself. And this is how your not-for-profit government hides massive profits legally from the public’s comprehension.
And so, huge deficits are shown on the budget report in governmental funds while the non-governmental, enterprise and business-type funds are flourishing. But these enterprise and service funds are not designated for the benefit of the taxpayers, only for the non-taxpayer funded infrastructure and enterprise operations that sell “services” to anyone who buys them as “customers”, not just the taxpayers of the “City”, “County”, “District” or “State”.
Thus, while there may indeed be a bit of a taxpayer money surplus in the governmental funds, government does not necessarily consider the non-governmental funds in that equation as “taxpayer surplus”. As these investment funds are reported at the fair market value of the investments they hold, the coinciding investment returns are also not taxpayer money surpluses. Government earned that money, not the taxpayers. And those surpluses are actually only “potential” surpluses due to the fact that they are reported mostly as investments that are usually restricted or designated to future liabilities and are reported again at fair market value of investment. These are liquid investments, but are not tangible unless liquidated. Thus, they would need to be liquidated before they could be used as a cash (taxpayer) surplus. So the balances of these funds are generally transferred between funds without being liquidated, and they are locked up in the little partitions never to be used to truly benefit the taxpayers.
They are used to increase governments capital assets – to build and improve the already existing business-type, for-profit, customer-based infrastructure that charges fees for its use. All other funds, as reported on the budget report, go to public infrastructure like free roads, parks, snow removal, and other non-fee based services provided by the governmental (taxpayer funded) portion of the City, County, State, District, etc…
Government knows that it must always be perceived by the people (citizens) as a non-profit entity through media and through its budget report, and so the financial accounting is obviously made confusing and almost impossible for the average taxpayer to understand what the heck is happening in these financial reports and within the government’s for-profit ventures. Investment funds were the answer to this dilemma, as these funds could be designated as restricted funds and off limits to taxpayers for budgetary obligations, thus used for other purposes besides taxpayer services.
And perhaps the most important concept to understand here is that with the snap of a finger, any investment fund can be created by any government for any legal purpose. In other words, new partitions can be placed any time they want and any amount of tax money can be placed within.
What this really means that at any time where the government has an actual legally designated surplus of taxpayer money (unrestricted funds), the government can literally create a “liability” account that is then credited with this tax surplus – removing it from the unrestricted fund balance of the General Fund and partitioning it off as a restricted fund for future use (unrealized future liabilities). And so in one easy and painless step, any taxpayer surplus (current asset) can be instantly transformed into a future liability through the use of this investment fund structure, even if no liability yet exists.
We will discuss this in more detail later. But a good example of this would be the City of Stockton investment fund called the “Redevelopment Fund”, where money is held and restricted for future governmental and non-governmental buildings to be built, even as the homeless population in Stockton increases daily from foreclosures and just general economic depression.
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Now that we have a fairly clear distinction and understanding of this investment fund structure, and the difference between governmental and business-type activities, let’s take a look at just how much investment wealth is sitting in these government funds for “City of Stockton” corporation:
Now instead of going to the actual fund financial statements, let’s take a long trip to the back half of the CAFR again, to (Page 143). Here, we find the section called “Required Supplementary Information“, which is followed by many pages of charts showing the “Combining And Individual Fund Statements And Schedules“.
On (page 147) we read:
“BUDGET“
“Enterprise and internal service funds are accounted for on a cost of service (net income) or capital maintenance measurement focus. The City is not legally mandated to report the results of operations for these fund types on a budgetary comparison basis; therefore, budgetary data related to these funds has not been presented.”
Proving what we have learned thus far, we see here an admission by the City that it is not required by Federal and State law to report its non-governmental business-type activities (enterprises) with regards to any profits (gains) in the revenues it collects to the taxpayers on the budget report. In other words, City of Stockton will not dip into its own private enterprise funds to help support the taxpayer budget or the taxpayers themselves. It is declaring bankruptcy on its selectively reported budget and future liabilities – not these enterprise funds and their liquid investments and current assets.
The report then goes on to say:
“If expenditures exceed appropriations, the City Manager is authorized to transfer budgeted amounts between line items within any fund. During the year, the City Council approves supplemental appropriations and, by resolution, has also authorized the City Manager to transfer fund balances to applicable appropriation accounts, or to transfer between funds, when necessary to continue purposes approved by the City Council in the current year, adopted budget, or subsequent action. Amounts reported as final budget in the Schedule of Revenues, Expenditures, and Changes in Fund Balance – Budget and Actual – on a Budgetary Basis include amendments authorized throughout the year.”
Wow! So much was said here in such unclear rhetoric. Let’s break this down in common people-speak:
This contrived statement just told you that the Council has the authority to transfer amounts within these restricted funds in any way it sees fit. And so the Council may at any time use any governmental or business-type funds to support any deficit or pay of any debt that it legally can. This is simply stating that the rule-makers can change the rules. The Council is only tied by its own chains (statutes). And so, full circle, an amount equal to or greater could in fact be transferred back into the General Fund by one of the customer-based business-type funds today for the so-called deficit that is being reported in the budget report of “City of Stockton” corporation. And suddenly, the City would be out of debt.
And yet, the City Manager, the Mayor, and the City Councilmen from municipal corporations all over the country will continually use the excuse that their hands are tied; that the fund balances are restricted for their declared purposes, and that they will not transfer funds from business-type funds to budgetary governmental funds to benefit the taxpayers and the budget deficit or to avoin bankruptcy by paying off all debt.
Can you believe that government actually passed laws that force City’s to sustain and “service” debt instead of paying it off?
Do you wonder what would happen if a City suddenly decided to break the law and actually pay off all bonds and other debt and be free and clear of all of this bureaucracy and create a thriving economy without the need for most taxation as it exists? Would they go to jail for breaking the law?
Even Orwell must be turning over in his grave…
It then tells us that, during the 2010 fiscal year, it has indeed re-appropriated and transferred fund balances between funds when the City Council approves such transfers and re-appropriations.
And finally, it reaffirms that the financial statements regarding the Fund Balances are reported in two ways… one regarding the Budget report and one regarding the Actual balance of the funds after these transfers and re-appropriations are conducted with the approval of the council.
He who has the gold makes the rules…
We find the same language about Debt Service Funds:
“Formal budgetary integration is not employed for the debt service funds because effective budgetary control is alternatively achieved through bond indenture provisions.”
Though hard to understand, this is a fancy way of stating that through creative accounting practices, “City of Stockton” does not report to the taxpayers an easy to comprehend line item as to how much investment wealth is within these Debt Service Funds.
Perhaps this is a good time to explain what the term “Debt Service” actually means.
Imagine if you will that you have $100,000 in your savings account, earning a measly 2% interest rate.
Now imagine that you have $50,000 worth of credit card and other debt, which probably isn’t too hard to conceive for most Americans now days. And let’s pretend that you are paying an interest rate on your credit and debt of an average of about 15% per year.
And finally, let’s say that you have set up your savings account with that $100,000 in it to be a “Debt Service Fund”, specifically for your $50,000 worth of credit debt.
Now, over the next 30 years, you will be paying only the minimum payments required to pay off your debt. And you’ll only be using your Debt Service Account (savings account) of $100,000 in order to pay that debt.
Here’s what would happen…
Over a 30 year amortization payment schedule, on your $50,000 of debt (revenue bonds and loans), you will make monthly principal and interest payments of $632.22, for a total of 360 payments of that 30 year time-frame. By the time you pay that loan (bond) off at the end of that 30 year period, you will have paid a total of $227,599.92, with the interest paid totaling $177,599.92.
But to offset this insane interest, you have set up your debt service account. So let’s see what happened with this investment fund (your savings account)…
Over a 30 year amortization payment schedule, on your $100,000 savings account which you have designated solely as your “Debt Service Fund”, you will earn monthly interest of approximately $200 per year, for a total of 30 years. By the time you have paid off your debt using this savings account, your savings account would have disappeared sometime between 10-15 years into the debt servicing period (the 30 years of debt) – unless you kept adding money into that account (debt service fund).
If you would have left that savings account alone, allowing it to accrue interest at 2% per year, the most that investment fund (savings account) would have earned was $82,200 in interest, for a total principle and interest on your debt servicing fund of $182,207.84 after 30 years.
While the interest rate differences might be exaggerated in this example, this is a perfect example of what Debt Servicing accomplishes.
When government services a debt, it invests municipal corporation assets for future payments on that debt, instead of paying off that debt today!
And once again we must be clear that the profiteer of all of this interest is wither another government agency or a bank or corporations that is funding the bond. So in no way do taxpayers benefit by this legally binding process of debt servicing, and if it isn’t obvious to you by now, this is legal organized crime that extorts from all the people of the United States.
In the example above, you personally could have paid off your $50,000 debt with $50,000 of your $100,000 savings account balance (total of all fund {partition/storage room} balances of one account), and still would have had $50,000 to use for taxpayer services.
So why would any logical and sane person (or government) wish to service a debt over many years when it could pay off that debt today with its available funds?
Ah… understanding the answer to this question gives us an understanding of the whole government investment scheme.
You see, government promotes debt. In fact, government has a virtual love affair with debt. It hides its assets from the taxpayers in its projected budget report specifically for the purpose of creating more debt – because that gives government the perfect excuse to increase taxes and, in the end, attain even more debt through municipal bonds and other tax-based instruments!
The goal is to show that the budget for taxpayer services is continuously in a deficit, despite the fact that each year governments grow in scope and size within their capital assets and investment funds as shown in the CAFR, and thus this charade shows that government is 100% justified in the taxpaying citizen’s eyes for government’s rampant and continual raising of the citizen’s taxes. And through coercion and legal theft tactics called foreclosure and eminent domain, the government gets what it wants. It will simply take your home if you do not pay your taxes.
And it is important to note that for this game to be played out, governments must continuously promote “economic growth” as the excuse for the need for more revenue. Expansion requires taxation. Thus, you will never hear a government state that it has achieved perfection and now must just maintain what capital assets it already has. Instead, it will tear down and continuously rebuild and improve buildings and infrastructure that do not need to be torn down or improved.
In short, government can never be satisfied, for satisfaction would put a halt to increased taxes and to the entire investment scheme.
Are you starting to understand the game?
Are you getting angry yet?
If not, let’s continue on (Page 148) of this CAFR report, and get a further explanation of the purposeful incompleteness of the budget report. Still under the “BUDGET” section we read:
“Budgetary Basis of Accounting”
“The City adopts budgets each fiscal year on a basis of accounting, which is different from accounting principles generally accepted in the United States of America (GAAP).
The Statements of revenues, expenditures and changes in fund balances have been prepared on the modified accrual basis of accounting in accordance with GAAP. The schedules of revenues, expenditures and changes in fund balances – budget and actual – on a budgetary basis have been prepared on the budgetary basis, which is different from GAAP.”
LOL! Now I don’t know about you, but just this one sentence would make me fold up this report and place it gently into my nearest incinerator. No wonder the good taxpaying people of America don’t read these things!
What this paradoxical statement is uniquely attempting to tell you is simply that the budget report is reported to the taxpayers differently than the other financial statements as they appear in this CAFR. Statements are reported, though they are modified to again obfuscate the true net and especially the gross asset presentation – which is A-OK with your 100% private association rules of government accounting called GAAP. And the schedules are presented in two forms – budget report totals and actual totals – but are presented to the taxpayers only on the budgetary basis, which is again not according to GAAP. As confusing as this sounds… rest assured it is absolutely designed to confuse you.
The report goes on:
“Certain funds of the City contain capital projects, grant projects, loan programs or other programs that are budgeted on a multi-year or project length basis. The amounts of the projects and programs budgeted on a multi-year basis are significant compared to the items budgeted on an annual basis; therefore, a comparison of budget to actual for the fund would not be meaningful. As a result, such funds are excluded from budgetary reporting.”
And finally, we have the admission here by government that future assets are not reported on the budget report, despite the fact that future liabilities are reported and will be paid by those future assets (funds). And we see here that there is indeed an admitted and “significant” difference between an annual report on these funds (as in the budget report) and that in the progressive past and future “multi-year” reporting of the entirety of these future asset funds (CAFR).
And with that conclusion, we have reached the “comprehensive” presentation of “City of Stockton’s” investment fund balances for the end of fiscal year 2010.
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Chapter 7:
Fund Financial Statements…
Where All The Money Is Hiding
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Starting on (Page 151), we get a glimpse of the actual foundation of this government corporation – the comprehensive disclosure of its investment funds.
Please remember… these are all in one account (investment fund) that is partitioned into the following individual funds for the purposes of restricting these monies for specific purposes other than taxpayer obligations and needs.
First up:
NONMAJOR GOVERNMENTAL FUNDS (taxpayer or governmental-type):
Type 1 – SPECIAL REVENUE FUNDS – “Special revenue funds are used to account for specific governmental revenue sources that are restricted, committed or assigned to expenditures for specified purposes other than debt service or capital projects.”
Special Grants Fund – $196,000
Solid Waste and Recycling Fund – $2,139,000
Gas Tax Fund – $181,000
Measure K Streets Sales Tax Fund – $4,450,000
Measure W Public Safety Tax Fund – $814,000
Special Assessments Fund – $10,435,000
Low- and Moderate-Income Housing RDA Loans Fund – $51,760,000
Community Development Block Grant (CDBG) Programs Fund – $32,585,000
Neighborhood Stabilization Loan Program Fund – $7,843,000
Housing Grants and Loans Program Fund – $1,490,000
HOME Program Fund – $24,580,000
Emergency Communication (Fund) – $0.0
City Administration Building Fund – $1,815,000
Development Services Fund – $1,116,000
Other Special Revenue Fund – $5,344,000
.
Type 2 – DEBT SERVICE FUNDS – “Debt Service Funds are used to account for and report financial resources that are restricted, committed, or assigned to expenditures for principal and interest on long-term debt.”
Redevelopment Agency Debt Service Fund – $12,405,000
Stockton Public Financing Authority Debt Service Fund – $4,092,000
.
Type 3 – PERMANENT FUND – “The Permanent Fund reports resources that are legally restricted to the extent that only earnings, and not principal, can be spent. Permanent Fund resources help support designated arts, recreation, library and public safety programs.”
Miscellaneous Fund – $2,002,000
.
TOTALS – ALL NONMAJOR GOVERNMENTAL FUND BALANCES:
TOTAL FOR 2010 – $163,247,000
TOTAL FOR 2009 – $140,012,000
TOTAL INCREASE/DECREASE IN ONE FISCAL YEAR – $23,235,000
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In the midst of economic depression, recession, compression, and everything else –sion, here we have the investment funds of City of Stockton making investment gains of over $23 million dollars. Does this sound like a bankrupt corporation to you?
After the descriptions, we have two charts that show net assets for these funds both individually and as a group of “Nonmajor Governmental Funds”. The amounts listed above for each fund are for the second chart entitled,
“Combining Statement of Revenues, expenditures and Changes in Fund Balances – Nonmajor Governmental Funds For the Year Ended June 30, 2010 (with comparative totals for the year ended June 30, 2009)“
This chart shows the fund balances as compare to the totals of last fiscal year, and lists either the gain or deficit compared to the last reported Net Asset totals for each fund balance.
If we look at the “BALANCE SHEET” chart directly above this chart, we see that “City of Stockton” reports actual total fund balances at $176,566,000 – over $13 million more assets than what was on this chart. They just can’t help themselves can they…?
We also see that over $24 million of the liabilities affecting these fund balances are in the form of “Debt Servicing“, which as we remember is in fact a long-term, not current liability.
Creative accounting strikes again!
And so we must also add this to our total current total of net assets bringing these fund balances to over $200 million dollars in liquid investments.
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(Page 166) brings us to the listed “NONMAJOR ENTERPRISE FUNDS” (business-type investment funds):
Solid Waste Enterprise Fund – $-141,000
“To account for residual activities as a result of final transition and outsourcing of garden refuse collection services.”
Downtown Marina Enterprise Fund – $-231,000
“To account for resources and activities associated with the improvement, operation and maintenance of the Downtown Stockton Marina Facilities.”
Golf Courses Enterprise Fund – $318,000
“To account for resources and activities associated with the improvement, operation and maintenance of the Swenson and Van Buskirk golf courses.”
.
TOTALS – ALL NONMAJOR NONMAJOR ENTERPRISE FUND BALANCES:
TOTAL FOR 2010 – $-54,000
TOTAL FOR 2009 – $477,000
TOTAL INCREASE/DECREASE IN ONE FISCAL YEAR – $-531,000
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At first glance, this seems like a strange chart. Why are the enterprise operations doing so poorly?
Of course the answer is as it always will be the creative accounting of “non-current liabilities“…
The “Combining Statement of Net Assets” chart on (Page 166) shows us that noncurrent liabilities are in the form of “loans from other funds“, meaning that this government is loaning money to itself and creating a liability to be paid back to itself, and are listed as:
Downtown Marina Enterprise Fund – $500,000
Golf Courses Enterprise Fund – $764,000
If we once again take these long-term liabilities away, suddenly we see a whole different picture.
If $1.264 million in “future assets” that will pay for $-531,000 deficit of future liabilities are added together, then we technically have “future net assets” of $733,000.
If I take $100 dollars out of my savings account and place it into my checking account, do I really owe myself $100 dollars?
If you are government, the answer by law is yes. And you create a liability that can be used to obfuscate even more fund balances. Imagine if I told the IRS that I owe myself money so I can’t pay the IRS… LOL!
But in order for us to see the full picture, we must remember one of the most important concepts in the universe…
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“For every action there is an equal and opposite reaction”
–Sir Isaac Newton
–=–
So what is the opposite reaction to one government fund borrowing money from another fund in the same government corporation out of the same investment accounts (savings account)?
These loans will be paid back!
This means that while one fund is showing a deficit, the other will show an asset – just not on the budget report! When one asset investment fund borrows assets from the other, no assets have been lost – for those assets will eventually be paid back!!!
In other words, while one fund reports a liability in the form of total loan payments to be paid in the future, the other fund should be reporting an asset in the form of those same loan payments being received from the other fund back to it.
Remember, these funds are like one giant checking account that is partitioned into individual sections of the whole. Together, these funds are just pieces that make one government as a whole – separate but equal…
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(Page 169) brings us to “INTERNAL SERVICE FUNDS“
“Internal service funds are a type of proprietary fund used to report any activity that provides goods and services on a cost-reimbursement bases to other funds, departments, or agencies of the primary government and its component units, or to other governments.”
It is important to define the legal term “proprietary” here before we move on.
Origin: 1400–50; late Middle English (noun) < Medieval Latin proprietārius owner, noun use of Late Latin: of an owner, of ownership. See propriety
Source: Random House Dictionary, © Random House, Inc. 2012.
UNITED STATES OF AMERICA – …5. The United States of America are a corporation endowed with the capacity to sue and be sued, to convey and receive property…
Source: Bouvier’s Law Dictionary, 1856
COLONY – n. 1. A company [i.e. legal corporation] or body of people transplanted from their mother country to a remote province or country to cultivate and inhabit it, and remaining subject to the jurisdiction of the parent state; as the British colonies in America or the Indies; the Spanish colonies in South America.
Source: Webster’s 1828 Dictionary.
So when the government corporation of “City of Stockton” (a sub-colony of the United States colony corporation), or any municipal or other government corporation refers to these funds as “proprietary”, they are referring to them as property – and to the municipal corporation as owner of that property. And so the funds that support those “proprietary properties”, which government calls “component units”, are set up as investment funds to fund government owned capital assets with rightfully taxpayer monies, and then charge those taxpayers fees to use those so-called “public” properties. They are not people-owned, but are municipal corporation-owned.
Now, let’s have a look at these proprietary funds and the “component units” they serve, without serving the people…
(Page 170)
“The City’s Internal Service Funds include:
General Liability Insurance Fund – $-3,526,000
Worker’s Compensation Insurance Fund – $-32,511,000
Employee Health Insurance Fund – $-6,024,000
Retiree Health Insurance Fund – $-75,854,000
Retirement Benefits Fund – $10,845,000
Other Benefits and Insurance Fund – $-3,541,000
Vehicle Fleet Equipment Fund – $10,423,000
Computer Equipment Fund – $4,909,000
Radio Equipment Fund – $1,974,000
Other Equipment Fund – $258,000
.
TOTALS – ALL INTERNAL SERVICE FUND BALANCES:
TOTAL FOR 2010 – $-93,047,000
TOTAL FOR 2009 – $-47,353,000
TOTAL INCREASE/DECREASE IN ONE FISCAL YEAR – $-45,694,000
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These funds, utilized to internally service proprietary component units of the “City”, are surprisingly in a deficit. But really, this is no surprise at all…
Listed again here as future or “noncurrent” liabilities, we see compensated absences, self-insurance claims and adjustments, Capital lease obligations, bonds payable, and net OPEB (pension) obligations.
Total long-term or noncurrent (long-term) liabilities are reported here for 2010 at – $248,986,000.
Total for all liabilities, including current and noncurrent liabilities are reported at – $272,328,000.
And so the legitimate “current” liabilities that actually affect the fiscal year’s total net assets for these proprietary funds is actually – $23,342,000.
Therefore, the actual value of net assets as of June 30, 2010 for “City of Stockton’s” proprietary fund balances equal a positive balance instead of a deficit of $203,292,000 – the difference between the reported net assets (including long term payments) and the actual current net asset balances of these funds.
And so we see the continuous creative accounting lie being uniformly told throughout this entire report.
It is important to note here that this chart also reports future assets as “noncurrent assets”. But we must understand the difference between these two types of noncurent descriptions. For liabilities, this noncurrent description means future payments to be made on future debt, and in no way represents a current liability against current assets. Inversely, a noncurrent asset is an actual asset held by this government that has been loaned out or invested with other governments or within its own books (transfers between funds). Therefore, a noncurrent asset represents an actual asset that is either restricted in its use or is being held by some other entity. It is a tangible asset. In this case, of the $143,414,000 in “noncurrent” assets listed under this category, $132,173,000 of that amount are listed as “pension assets”.
Therefore, since these assets are within the pension fund system and invested in tangible assets, securities, or bonds, they are included on the net asset balance as real liquid assets that have restrictions of availability for the immediate future. But understand that these represent real liquid assets, whereas future liabilities represent future payments made with future earned investment return or collected revenues. One is tangible and the other is intangible. One is an asset and one is a ghost.
Other future assets or “noncurrent” assets include restricted assets (cash and investments with fiscal agents), advances to other funds (which are all the same [partitioned] bank/investment account/fund, government making loans/bonds to itself and then charging itself/taxpayers the interest), differed charges (insurance or other payments that have not been made to the corporation but are owed to it by its employees/contractors), Capital assets (referring to real assets in the form of currently owned vehicles, computer equipment, radio equipment, or other equipment that are considered capital assets owned by “City of Stockton” that are not liquid), and accumulated depreciation (another creative accounting principle which lowers the over-all value of total net assets by showing that these non-liquid capital assets are worth less than the previous years – thus decreasing the stated overall value of all assets reported. Automobiles and their blue-book values are a good example of this, which inherently go down in value each year.
Capital asset depreciation accounts for $-31,232,000 of these noncurrent assets – reported as a liability here.
And so we could give this government a bit of credit and state here that a few million of these reported “noncurrent” assets are actually not liquid as of June 30, 2010, or could not be called in as a loan on this day.
All in all, this is just more creative accounting designed to hide 100’s of millions of dollars worth of assets from the taxpayers of “City of Stockton”.
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Moving to (page 78) we come to another type of investment fund.
AGENCY FUNDS
“Agency funds are a type of fiduciary fund used to account for assets held in an agency capacity for parties outside the City. The resources of these funds cannot be used to support the City’s own programs.”
Agency Funds are another creative accounting tool. For despite the fact that these monies are invested by this City corporation and receive both interest and other investment returns, this City corporation can legally state publicly that it is invested on behalf of other entities or government corporations. In this way, the profits and investment returns can once again be legally removed from the total presented “Net Assets” statement to the citizens of “City of Stockton”. Once again, we present assets as liabilities, by presenting positives as negatives through creative accounting. War is peace; love is hate; assets are liabilities, and profit is loss…
In the quite long chart entitled “STATEMENTS OF CHANGES IN ASSETS AND LIABILITIES”, we see that the government corporation reports these Agency Funds as both an asset and a liability at the same time. Each asset balance is canceled out by a liability balance of equal amount as the balance is owed elsewhere. So despite the fact that these Agency funds show that these balances represent “cash and investments”, some of those with “fiscal agents”, and the fact that they also show an investment/interest return, meaning that these funds must be held for a period of time in order to collect that interest and investment return, the “City” corporation lists all of these agency funds as having a zero balance through the creative accounting practice of holding onto these funds for other agencies.
To put this into perspective… if you get caught tomorrow holding 50 pounds of marijuana or cocaine in nicely packaged and preserved packages, you’d be arrested and carted off to jail. But in governments case, these municipal corporations and districts can pretend otherwise through legal exemptions. If government were caught with the same amounts of pot and blow, they would tell the police and the courts that they were simply holding onto these drugs “on behalf of a friend” in another municipal or public corporation, and therefore, since those drugs are ultimately repayable and owed to our friends, we aren’t actually holding these drugs. Our drug possession is at a zero balance. See, even though we have an asset of 50 pounds of drugs, our balance sheet shows a liability of 50 pounds of drugs. Therefore, we have no drugs. You can’t arrest us for drug possession, because you can’t prove that we are in possession of drugs!
This is creative accounting gone wild!!!
But remember, the government makes the rules and enforces its own rules. Usually, the government places loopholes in all rules it makes, so that it can continue with its organized crime and never punish itself. What a world…
In this way, tax benefits are created for the actual owners of these funds, keeping them in the non-profit world of government accounting and ensuring the safest insured form of investing anyone could ask for. So one might call these Agency Funds (agencies of the Stockton or California State government) nothing but a tax shelter for a for-profit venture by a non-profit government.
Note that these are not private entities, but all other government agencies.
So how much money does City of Stockton have in someone else’s “Agency Funds”?
Agency Funds are listed here on (pages-177-179) as follows:
Land Secured Financing Agency Fund – $58,489,000
Employee Withholdings Agency Fund – $380,000
Area of Benefit Fees Agency Fund – $12,335,000
Public Facilities Fees Agency Fund – $1,147,000
Miscellaneous Agency Fund – $6,770,000
All Other Agency Funds – $438,000
.
TOTALS – ALL AGENCY FUND BALANCES:
TOTAL FOR 2010 – $79,559,000
TOTAL FOR 2009 – $86,166,000
TOTAL INCREASE/DECREASE IN ONE FISCAL YEAR – $-6,607,000
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So, while these Agency Funds are showing a decrease in total fund balances, this does not in any way reflect a decrease in assets of the City corporation. These funds are special purpose funds that are held for other entities, remember. So no net asset in the total investment funds of the government-wide statements should be inferred here.
Also, listed in the Total Liabilities section, we can see that $78 million out of that $79 million is listed as “Deposits and other liabilities”. Again we see government treating an asset as a liability, despite the fact that it is holding and in possession of these funds and actively investing from them, and despite the fact that it is making a gain off of holding these funds.
But only a little over $1 million is actually “currently” owed to other governments or listed in the current payable to to other accounts “Accounts Payable” section. The rest will continue to be held as an asset by this City corporation until those assets actually become liabilities – when this government is required to actually pay those fund balances to these other entities. Until that point in the future, these are assets. But to hide their value as assets held by “City of Stockton”, the fact that at some unknown time in the future these assets will have to be given back as liabilities is exploited in the financial reporting of these assets.
This time-honored tradition of cross-pollination of the holding of other government agencies’ funds clandestinely is nothing if not a common practice of a corrupt government.
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Chapter 8:
Everyday Life On The Municipal Farm
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Now, there are two other important sections that need to be covered here. One is entitled the “Notes To The Financial Statements” section, and we’ll get to that in a moment.
But for now, let’s take a quick look at the “Statistical Section” starting on (page 180).
“The Statistical Section provides financial statement users with additional historical perspective, contest and detail to assist in using the information in the financial statements, notes to financial statements, and required supplementary information to understand and assess a government’s economic condition.
The Statistical Section is required by the Governmental Accounting Standards Board (GASB) to be reported in the following sections:
Financial Trends Information
Revenue Capacity Information
Debt Capacity Information
Demographic and Economic Information
Operating Information“
You may wish to read the descriptions for each item, but there is also a very simple way to understand what is in this statistical section – by comparing it to a farm!
If one is planning out the future for a group of people (a body politic), such as within such a corporate municipality as “City of Stockton”, A “City Manager” must take into consideration many different aspects of those people and what it will take to manage those people as both taxpayers and customers.
This is also done by farmers…
The life expectancy of the different forms of livestock is taken into consideration, as well as the amount of water, hay and grains it will take to manage successfully and profitably those livestock. In a cow’s life, for instance, it will have a certain number of prime years that it can be exploited for its milk, fertilizer, and finally its meat. Its total consumption of hay, grains, medical supplies and attention must be accounted for in order to determine its profit potential, as well as the other services for which the farmer must utilize on its behalf for the health and well-being of that cow. The sufficiently-fed cow never knows that his government (the farmer) is conducting these types of census studies on the herd, which is based on many generations of experience, research, and record keeping, as well as the introduction of new variables and environmental changes. And so the cow is never really concerned with what the farmer is doing when he is out of the sight of the herd. The cow can smell and is disturbed by the blood, but has never been witness to the slaughter. The cow knows deep in his rather large heart that something is deeply wrong with its disposition, and this is transferred to his multiple stomachs in the form of butterflies with a foreboding confusion. But he is entertained both sexually and mentally enough to not think about it too much.
The ratio of cow to hey and grain is very important within the farmer’s corporate structure – the farm. If a cow uses more of the farmer’s services than that cow will fetch for its current and future milk and meat profits, the farmer will likely thin the herd, or the economic conditions of the farm may worsen. Of course, the farmer is there to make a profit. And so much of the income that is raised by the farmer for the sale of the labor and production of those cows is used for other non-cow services and investments.
The infrastructure must be maintained, and new fences and barns must eventually be built. The farmer sometimes gets grants and loans from government programs as well, which come with contractual requirements to use that money for certain governmental purposes, most of which do not benefit the cows, but instead will somehow benefit the government and the local farmer together, creating gains upon these investments. But for the most part, the farmer sets aside different funds on his balance sheet in order to maintain different parts of the farm that need repair, always with the eye to create new infrastructure that will benefit the farmer, while maintaining the basic poverty-level livelihood and welfare of the majority of cows. By setting up investment funds for the future building and construction of new farm and personal infrastructure, this means that the cows don’t benefit from that money (the fruits of their labor) today. Of course, most of the farmer’s money goes into the farmer’s own personal empire; his home, his food, his credit payments, and of course to purchase new toys for his own pleasure.
But the cows don’t really see this happening from through their government built walls and fences, and the cows feel that there are always greener pastures just around the corner. And so the conditions for which the cows must live is maintained, though not necessarily improved on a permanent basis. For there just wouldn’t be enough capital gains to keep things running if the farm infrastructure was always in its best possible condition. In other words, the farmer would be sinking all of his money into cows, and using none of that wealth to benefit his own lifestyle and non-farm business ventures. While some areas of the farm are occasionally improved, others go to waste. The farmer is of course responsible for the upkeep of the farm in the public trust of the citizens of the farm (livestock), and uses some of the profits made on behalf of the cows to maintain the poverty level of the cows. But the cows don’t complain much, and think to themselves, “well, that’s just the way it is. Always has been, and always will be…“, and on to seemingly greener pastures the heard roams. But they stay within the jurisdiction of the farmer, for the farmer owns the property of the cows – though the cows ignorantly assume that the barn and other cow things are their own. Of course, the cows know full well that the farmer can come into their yard at any time and eminent domain anything he wishes, and the cows have no one but the farmer to complain to about this tyranny by the farmer. The problem is that the cows speak only conversational cow, and do not know the secret legal and accounting/legal language of the farmer. To them it sounds no different that the chirping of a bird or the barking of a dog.
In the end, in order to run a successful farm corporation, a farmer must know the average lifespan, the average income (potential as well as actual) of each cow, the mental and physical state of each cow on average and if they are employed in a particular task, the value of the property and possessions of each cow, the number of children (future cows) that the farmer will be able to extract income from, the number of elderly cows over a certain age (useless eaters) that the farmer must pay retirement and medical benefits to in order to sustain life, the likely income generated from each cow, and the average cost to service each cow without dipping into the profits and financial gains of the farm corporation. A farmer must consider these cows not as sentient lifeforms with their own free will, but as for-profit commodities to be utilized and extorted for the profit potential of the corporation, as well as the mother corporation.
After all, the main tenet and goal of a corporation is always to make a profit.
And so, the statistical section is a necessary part of the financial statements of each government corporation – each farm. The farmers must collect this type of data about all of its commodities so that it can ensure the livestock welfare system remains intact; welfare being the system of services provided in order to keep the people alive in order to tax them and generate income from the services provided to them.
Insurance companies, banks, and other corporations also create these statistics on their “customers” in order to ensure their current and future profit potential as well. Of course, for some reason, the poorer the person, the more interest is charged and the harder it is to get credit. Those who need help must pay a higher price for that help, while those who don’t need help get tax-breaks and credits.
Is the model of the farm so different from the model of benefits and entitlements granted by government in the City, County, State, Pension Funds, etc?
On (page 194) we see a chart called “TABLE 6 – ASSESSED VALUE AND ESTIMATED ACTUAL VALUE OF TAXABLE PROPERTY“.
Listed here is the government’s statistical valuation of the people’s land, personal property, and improvements made to that land and property. For 2010, “City of Stockton” places the value of $18,461,195,000 on all combined land and property.
Note here that this chart shows that in 2001, that same land and property was only estimated to be worth $8,631,886,000.
So the assets of the people of City of Stockton has increased by 125% in just 11 fiscal years?
I wonder how that happened…
Ah, in the notes section it states that property taxes are limited by Proposition 13 from the year 1978, when the people of California voted to limit property tax to a maximum taxation rate of 1% of the assessed value of the property being taxed. And it states that each year, the assessed value of property may be increased by an “inflation factor” (limited to a maximum increase of 2%).
Have you ever wondered why property values have blown sky high in California, and indeed around the country?
Is it because California is so special? Is it because the materials to build a home in California are more expensive than in other States?
No… It’s because unwitting Californians voted to make a public law that created a situation that says: only if property values are increased can government get more tax out of the people and their property.
Tax, tax, and more tax.
Instead of ending the legal organized crime that is a property tax, the people of California were fooled into allowing government to justify its property tax collection at the barrel of a gun – and even allowed it to be 1% of the value of their property! What fools the people can be. Of course government will wish to create inflationary pricing on the home market so as to collect more property tax. And so the housing bubble was created across America – and the property tax potential was and is incredible!
In the next graph on (page 196) the notes state that:
“Proposition 13 (Amendment XIIA to the California Constitution) limits the taxing power of California Public Agencies. The California legislature enacted legislation to implement Article XIIIA (Statutes of 1978, Chapter 292, as amended) providing that local agencies may not levy any property tax except to pay debt service on indebtedness approved by voters prior to July 1, 1978, and that each county will levy the maximum tax permitted of $1.00 per $100.00 of full assessed value.”
So let’s think about this for a moment. The voters approved the government to raise property taxes on the governments bonded indebtedness. And the voters approved that each county should go ahead and levy the full 100% possible property taxation on all personal property to pay for that bonded indebtedness in order to service that debt.
Is it possible that we just answered our previous question?
Is this yet another reason why government doesn’t pay off all of its debt immediately with its current assets – simply because the voters were foolish enough to give government the incentive not to pay off its debt, but instead to “service” that debt? Do you mean to tell me that government purposefully stays in debt because it can collect more revenue from the taxpayers according to the more money it owes in revenue bonded indebtedness? Are you serious?
No wonder property values have gone through the roof.
No wonder government creates new future revenue bonds to pay for things that it already has current assets to pay for.
Government can only raise property taxes to pay for its bonded indebtedness, folks. You made that happen. So what do you expect government to do? Of course, in order to raise more revenue in the form of property tax (extortion), government is going to create as much unnecessary bonded debt as it can, even though it doesn’t need a bond
And on a side note, since property values are only assessed when that property is bought and sold, no wonder the trend of turning houses around by quickly buying and selling them has been made so popular by the media, with dozens of reality shows showcasing this business of turning homes. Not only is government getting sales and other taxes regarding the selling of each home, but it is also able to reassess the properties value as it artificially inflates the real estate market! And when the artificial market bubble collapses a bit due to these ridiculous tax value assessments, people are either stuck paying high taxes (since the property can’t be reassessed and nobody wants to buy for what it was worth when you bought it) or they can sell that house for less than its worth (which brings a whole other set of taxation, profits, and capital gains taxation to banks and other government and private institutions).
The volatility of the real estate market is very profitable for government – problem, reaction, solution… In fact, it continues to build new homes by securing them with bonds even as thousands upon thousands of older homes sit for sale or are vacant across the City or County. This too is easy to explain. New homes equals new property taxes. New bonds equals new debt, which equals new debt servicing which equals even more property and other taxes.
Another note on (page 198) states:
“Per agreement with San Joaquin County, the County provides the City of Stockton with 100% of the amount owed to the City of Stockton for secured properties, regardless of collection status. In exchange, the County is entitled to 100% of revenues collected.”
What is a secured property?
Also, on (page 190) the notes state:
“Beginning fiscal year 2006, land secured financing was removed from capital projects and debt service funds and are reported in the Land Secured Financing Agency Fund.”
Remember, Proposition 13 (Amendment XIIA to the California Constitution) limits the taxing power of California Public Agencies, EXCEPT for debt servicing. Therefore, as a business model, it would make sense to take land-secured financing away from capital projects funds and to place them into an “Agency”. In this way, “City of Stockton” may charge property taxes on this debt servicing without requiring a new amendment voted upon by the people of the State! For the City corporation is required by the taxpayers to levy the maximum 1% property tax assessment to cover the transferred capital projects debt servicing, but only in “Agencies”, not in “funds”.
The people fell into a humongous fiscal trap! And government is just doing what the people unwittingly voted for…
Also note that on (page 190), the notes state:
“Some prior year balances may have been restated from previous CAFR’s to reflect new GASB implementations or prior period adjustments.”
“Note: Beginning with fiscal year 2006, land secured financings were removed from government-wide financial statements. For comparative purposes, 2005 balances have been restated to reflect this change… The City of Stockton implemented GASB S-34 for the fiscal year ended June 30, 2002; information prior to that is not available.”
Now I shouldn’t have to say this again, but why would any entity need these types of rules and regulations for the selective and deceiving presentation of its financial position – unless it was not really interested in letting the people know what its actual financial position actually is? In short, the government constantly changes its reporting requirements in order to hide trillions from the people in ever more creative ways; trillions that would otherwise be used on behalf of the people that are instead used to further governments grip on almost the entirety of what we still refer to as the “economy”. When all the cards are laid on the table, and all government investments are considered, government for all intents and purposes is the economy.
A good example of this is the chart on (page 199) entitled “WATER SOLD BY CUSTOMER TYPE”.
Here we see that government is indeed selling something that it has laid claim to; a natural resource that flows freely from the sky and through the veins of the Earth, and that was once enjoyed by all the people of earth freely, without pain and suffering, and without extortion through exaction and taxation.
The four “Customer Types” are listed as Residential, Institutional, Commercial/Industrial, and Irrigation.
As I explained earlier, you are a customer and a taxpayer – two different hats.
By far, government’s biggest “customer” is its residential base of taxpayers – the ones who paid for the infrastructure of this municipal corporation’s dams, flood-gates, wells, pipes, fire hydrants, sewers, and every other facet of the City corporation’s infrastructure that “City of Stockton” utilizes to block and control that very water from flowing naturally and freely to all peoples – and instead selling it to the people who funded that infrastructure. And they even pass statutes that make it illegal to utilize that water by digging your own well. Even the farmers must pay for their irrigation water (untreated water) that feeds their crops and feeds their livestock – just as government’s residential-commodities as “customers” must pay for their drinking water, so to must other farms pay for this privilege to obtain otherwise free-flowing water to live and thrive.
We can then go to the next chart on (page 200) and get a good idea of what happens when a government corporation has a monopoly on one of its services that it provides by force to the taxpaying customers who need it.
In Table 11, titled “WATER AND WASTEWATER UTILITY RATES – LAST TEN YEARS”, we can see those monopolistic effects in action. For the reaction of a monopoly without competition will without exception be tyrannical price increases.
In 2001, the monthly base rate of treated water for City of Stockton customers was $13.79 per month, with each additional 100 cubic feet (748 gallons) of water involuntarily costing the taxpayers as “customers” and extra $0.67 cents.
As we flash forward 9 years into 2010 fiscal year, we can see that the cost for treated water in the City of Stockton monopoly has reached $17.65 per month, with each extra 100 cubic feet costing $1.02.
This represents an almost 30% rise in the fees charged for this business activity of government for its taxpaying customers, charged as a “service” at the barrel of a gun.
And in the notes listed below this chart, it states that “The Utility charges an excess use rate above normal demand”. So expect to pay extra for committing the crime of excess water usage…
We also see that wastewater charges have raised by about 12% per year since the 2001 fiscal year – this being a product that comes right from the ground without any form of processing.
It reminds me of free dirt…
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(Page 209) gives us a look at the importance of government’s tracking of every facet of every citizens life and financial status. Based on the population of “City of Stockton”, Table 17 is entitled “DEMOGRAPHIC AND ECONOMIC STATISTICS”.
This chart lists the status of the City corporation’s herd of citizens, including their personal income, per capita income, unemployment rate, labor force, total housing units, household average income, medium family income, and school enrollment.
You see, in order for your financial officers and city planners, as well as the City Manager and his appointed staff, to figure out what a tax burden the City corporation can force involuntarily upon the populace of “City of Stockton”, these overlords must take into consideration the facts presented through these census statistics. After all, government doesn’t collect this kind of personal and financial information from its involuntary taxpaying customers just because its fun. The cattle of the farm must be kept in a state of welfare that is just above poverty, so as to ensure that there is no revolt or strike endangering the continuity of the government corporation. The maintenance of such a welfare system is impossible without the collection of income data per capita that can be used for more future debt obligations and collections of future taxation.
The notes state that:
“Personal income is the income received by all persons from all sources. Personal income is the sum of net earnings by place of residence, rental income of persons, personal dividend income, personal interest income, and personal current transfer receipts.
Per capita personal income is calculated as the personal income of residents of a given area divided by the resident population of the area. In computing per capita personal income, Bureau of Economic Analysis uses the Census Bureau’s annual midyear population estimates.”
What, did you think the Federal government corporation wants your income tax returns just for itself? No… this is how Cities and Counties, Districts and States calculate exactly how much taxation they can extract, exact, and extort from you with out a revolt.
Statistics run the world, my friends…
Sources for this statistical data are listed as:
City of Stockton (Municipal) Department of Administrative Services and Community Development Department
CA (State) Dept of Finance and Employment Development Department
US (Federal) Dept of Commerce, Burough of Economic Analysis
US (Federal) Department of Housing and Urban Development
CA (State) Department of Educations
So that’s what all of those redundant departments are doing with all of our personal information! Its as if we are all branded like cattle according to our income, what City, County, and State we live in, and what our future debt payments and taxation contributions will be.
Hmmm… I feel suddenly the need to chew my cud and be milked.
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(Page 210) shows us the chart of the “PRINCIPAL EMPLOYERS” of City of Stockton’s resident citizens. Notice here that government is the largest employer of the people of this City corporation, listing San Joaquin County and Stockton Unified School District as the top two employers in the City, with over 7% of the people employed within government in just these two government entities. Also listed in the top 10 is the Division of Juvenile Justice, the City of Stockton, and the North California Youth Center.
Apparently, the Unified School systems are creating plenty of prisoners for the Division of Juvenile Justice – perhaps a hint that something just isn’t right with America’s public schools…
Now, let’s not forget who pays for the salaries, pension, and health care of all government employees. It’s the taxpayers, of course! Every job that is created within government means more taxation and higher customer fees are needed to pay for those government employees, and the pension investment funds make out like bandits!
And on a personal note… You know its got to be a pretty dreary situation when the 5th largest employer in your City is a jail for children, ahead of Diamond Walnut and Del Monte Foods.
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Chapter 9:
The Government Accounting Standards Board (GASB)
And The Privatization Of Government
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Before we go on, I think it’s paramount for the people to understand just what the Government Accounting Standards Board (GASB) really is.
With a 100% unelected group of board members participating in a 100% private association, the GASB sets national standards for government accounting practices. In other words, the GASB creates creative accounting ideas and standards for organized crime within City, County, District, and State governments.
So let’s take a look at this non-governmental organization that sets government standards, and perhaps then we can begin to understand just how things got so uniformly screwed up around this country.
On November 18, 2011, the following article was published quite outside of the public’s perception, explaining and introducing the newly appointed members of the GASB special committees on legal, organized crime.
FAF Appoints 13 to FASAC, 5 to GASAC
The Financial Accounting Foundation’s board of trustees has appointed 13 new members to the Financial Accounting Standards Advisory Council and five new members to the Governmental Accounting Standards Advisory Council, effective January 1.
The FASAC is responsible for advising the Financial Accounting Standards Board on technical issues, project priorities, and other matters that affect accounting standard setting. The GASAC is responsible for advising the Governmental Accounting Standards Board on technical issues, project priorities, and other matters that affect standard setting for state and local governments’ accounting and financial reporting. The FAF oversees both FASB and GASB. The FAF also recently named three new members to its board of trustees.
Members of the FASAC are chosen from a cross-section of FASB’s constituents, including users, preparers, practitioners, associations, academics, and other parties interested or involved in financial reporting. FASAC members are chosen based on their professional expertise and their ability to broaden the base of constituent views on the Council.
The following new members will begin their term on the FASAC:
User (Investor) Community
• Kay Ryan Booth, Managing Director, Golden Seeds Fund
• Adam G. Hurwich, Portfolio Manager, Ulysses Management LLC
• Joseph Longino, Principal – Investment Strategy, Sandler O’Neill + Partners, L.P.
Preparer (Corporate) Community
• Peter Carlson, Executive Vice President and Chief Accounting Officer, MetLife
• Patrick T. Mulva, Vice President and Controller, Exxon Mobil Corporation
Practitioner (Audit) Community
• Cynthia M. Fornelli, Executive Director, Center for Audit Quality
• Jan Hauser, Partner, PricewaterhouseCoopers
• James R. Taylor, Partner in Charge – Assurance, Hogan Taylor LLP
Association
• Susan S. Coffey, Senior Vice President – Public Practice and Global Alliances, American Institute of CPAs (AICPA)
• Kenneth Daly, President and Chief Executive Officer, National Association of Corporate Directors (NACD)
Other
• Anthony J. Dowd, Chief of Staff and Special Assistant to the Chairman – President’s Economic Recovery Advisory Board, Office of Paul A. Volcker
• Patrick E. Hopkins, Professor of Accounting and Deloitte Foundation Accounting Faculty Fellow, Kelley School of Business, Indiana University
• John W. White, Partner, Cravath, Swaine & Moore LLP
Members of the GASAC are chosen from a cross-section of GASB’s state and local government constituencies, including users, preparers, and attestors of financial information. GASAC members are selected on the basis of their professional expertise and the depth and variety of experience they bring to their work on the Council.
The following is a list of the newly appointed members and the constituent organizations that nominated them:
• Jacqueline L. Reck, James E. Rooks and C. Ellis Rooks Distinguished Professor of Accounting, School of Accountancy, University of South Florida (nominated by the American Accounting Association)
• Odd Stalebrink, Associate Professor of Public Administration, School of Public Affairs, Pennsylvania State University (nominated by the Association for Budgeting and Financial Management)
• Joseph Stefko, Director of Public Finance, Center for Governmental Research (nominated by the Governmental Research Association)
• Charles A. Tegen, Comptroller, Clemson University (nominated by the National Association of College and University Business Officers)
• Glen Whitley, Tarant County Judge, Texas (nominated by the National Association of Counties)
The FAF also said Wednesday that Paul G. Camell, W. Daniel Ebersole, and Michelle R. Seitz have been appointed to the FAF board of trustees. Camell is executive vice president of mergers and acquisitions and chief administrative officer for CDM, a global consulting, engineering, construction, and operations firm. He previously served as the firm’s chief financial officer and senior vice president of finance.
Ebersole served as the state treasurer for the state of Georgia from 1997 to 2010, and was responsible for investing more than $14 billion of state and local government funds and administering two local government investment pools. He has more than 30 years of experience in both the executive and legislative branches of Georgia state government and served as a member of the Governmental Accounting Standards Advisory Council from 2003 to 2010. He was chairman of the group from 2008 until 2010.
Seitz is a member of the executive committee of William Blair & Company, L.L.C. She has more than 24 years of investment experience and leads William Blair Investment Management, consisting of the institutional, mutual fund, and private wealth management businesses. All three trustees will serve a five-year term that begins January 1.
(Source –> http://www.accountingtoday.com/news/FAF-Appoints-FASAC-GASAC-Members-60835-1.html)
As you can see, the entirety of government has been handed over to these private associations by appointment by other private associations. They in turn nominate and elect members of private corporations to sit on these boards without the approval or even the basic comprehension of the people of America. This is how corporations have sidestepped the so-called democracy and elections in the United States, and have become the power players in government without even a whimper from the general population – the people who must live under the rules and regulations of these private association boards that write the rules of “creative accounting” and who fleece billions of dollars out of each state in the form of investments in the private sector using taxpayer money.
Think about it… do you want the CEO of an investment firm or accounting corporation to set the rules of how investment firms and accountants declare their financial statements and holdings in government? How about the vice-president of Exxon Mobile???
In another article dated in 2008, we can really get a clear view of the inherent axiom of dangers of having private associations full of corporate executives writing government accounting and financial standards.
Bevy of New Projects on Tap for GASB
The GASB’s technical plan is a document that lays out the projects that the Board members will be deliberating and the staff will be researching over the next couple of years. It is reviewed three times a year by the Board members, who take into account feedback received from the Governmental Accounting Standards Advisory Council (GASAC) and constituents in general before the final agenda decisions are reached by the GASB chairman.
A typical GASB project begins in a list of potential projects suggested by constituents, GASAC members, Board members, or staff. The project moves to the research agenda when sufficient resources are available and it is deemed to be a high enough priority to command the use of those resources. After research is completed, if standards setting is needed and it is deemed a high enough priority, then the project will move to the current agenda—the list of projects that are being actively discussed by the Board…
GASB Chairman Bob Attmore announced that three major projects and three practice issues were being added to the current agenda, and three projects were being added to the research agenda. This article briefly describes the new projects and considers their potential impact on the information presented in state and local government financial reports.
Current Agenda Projects
Three projects added to the current agenda are considered major projects; that is, they are likely to result in significant changes to current accounting and financial reporting standards. The three new major projects are Postemployment Benefit Accounting and Financial Reporting, Public/Private Partnerships, and Reporting Unit Presentations/Statement 14 Reexamination…
Recent years have been marked by greater attention to arrangements referred to as “public/private partnerships” or P3’s. Although this term has been applied to a wide variety of transactions (from contracting out of social service programs to complete privatization of public assets), this project was initially prompted by increasing interest in arrangements through which a government enters a long-term contract (perhaps 50 to 100 years) with a private company to operate and maintain (and sometimes to build) a major public facility or piece of infrastructure, such as a sewage treatment plant or a toll road. This project will consider whether existing standards provide sufficient guidance on how to account for P3 transactions, or if new standards need to be developed.
Likely impact on financial reports: One key issue to be resolved is who reports the asset when long-term arrangements are entered into. Should it continue to appear on the government’s statement of net assets, or should the company report it? Another issue relates to up-front payments made by the company to the government. Should these payments be recognized as revenue right away, or should they be recognized in increments over the period of the agreement?
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Of course the correct answer is none of the above!
Government should not be selling off its infrastructure to private corporations – and the people should certainly not stand for it! But they do… And government should not be obtaining pennies on the dollar today for what that infrastructure asset would have brought in over many years or decades into the taxpayer services base. And no GASB, you should not be allowed to make rules and regulations on how governments report these transactions – BECAUSE YOUR MEMBERSHIP IS SOME OF THE SAME CORPORATIONS THAT WILL BENEFIT FROM THESE PUBLIC PRIVATE PARTNERSHIPS!!!
The plain truth: a private corporation can only obtain a monopoly that is legal under government law if that private corporations is partners with government. The PPP is the pathway to total monopolization of public services by the private sector.
Continued…
Reporting unit presentations and Statement 14 reexamination
This project has two distinct but related parts. The first part reexamines GASB Statement No. 14, The Financial Reporting Entity, which governs what parts of a government appear in its financial statements. Most notably, it established the criteria for determining if legally separate entities—component units—should be included in a government’s reporting entity, as well as how to report joint ventures, jointly governed organizations, and other arrangements. These standards have been in place for about 15 years.
The other part of the project will consider whether to establish generally accepted accounting principles (GAAP) for parts of a government that are less than a complete legal entity, such as individual departments or funds. This type of reporting already occurs, but in fact there are no standards for doing so; governments and their auditors do their best to apply the standards for entire governments to these individual parts. Consequently, there are plenty of unresolved questions, such as how to allocate specific capital assets or long-term debts.
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In other words, GASB wishes to establish generally accepted accounting principles (GAAP) for the creative accounting act of hiding government assets by calling them “separate” or “not quite completely legal” entities of the main government, or “component units”, as well as utilizing those separate entities to transfer taxpayer wealth and fund balances into as a separate reporting entity.
“City of Stockton” has a few of those if I recall…
This means that these agencies’ fund balances would not be reported in the CAFR for the government. Thus, all investment funds would be completely hidden from public consumption within the Annual Financial Reports of individual governments.
It is also interesting to note here that the Government Accounting Standards Board (GASB) is a very opinionated private association. We must remember that the rules of financial reporting for governments across the country are created within this entity. And that means that most of these creative accounting ideas that hide the real wealth of government are coming from the GASB and its corporate board members as well, which are then required to be followed by local and State governments.
In a recent “white paper” report released by the GASB, it had this to say about government corporation -vs- private corporation financial accounting:
Why Governmental Accounting and Financial Reporting Is – and Should Be – Different
Governments are fundamentally different from for-profit business enterprises in several important ways. They have different purposes, processes of generating revenues, stakeholders, budgetary obligations, and propensity for longevity. These differences require separate accounting and financial reporting standards in order to provide information to meet the needs of stakeholders to assess government accountability and to make political, social, and economic decisions. Although state and local governments in the United States have had separate standards for over 100 years, occasionally the question is raised: Why can’t general purpose governments (cities and counties, for example) simply apply the standards established for business enterprises?
(In other words, why can’t government just be honest and straight forward with its accounting and financial statement presentation, and be punished or incarcerated for lying like private corporations?)
The following questions and answers briefly address that issue, and the accompanying paper and its appendixes provide an expanded discussion.
Why Are Separate Accounting and Financial Reporting Standards Essential for Governments?
Separate accounting and financial reporting standards are essential because the needs of users of financial reports of governments and business enterprises differ. Due to their unique operating environment, governments have a responsibility to be accountable for the use of resources that is significantly different from business enterprises. Although businesses receive revenues from a voluntary exchange between a willing buyer and seller, governments obtain resources primarily from the involuntary payment of taxes. Taxes paid by an individual taxpayer often bear little direct relationship to the services received by that taxpayer. Overall, taxpayers collectively focus on assessing the value received from the resources they provide to government. Governmental accounting and financial reporting standards aim to address this need for public accountability information by helping stakeholders assess how public resources are acquired and used, whether current resources were sufficient to meet current service costs or whether some costs were shifted to future taxpayers, and whether the government’s ability to provide services improved or deteriorated from the previous year.
The longevity of government and its role to maintain and enhance the well-being of citizens through the provision of public services also result in information demands that differ from those of business enterprises. For example, governments do not operate in a competitive marketplace, face virtually no threat of liquidation, and do not have equity owners. Consequently, information on fair values of capital assets is of limited value and measures of net income and earnings per share have no meaning to users of governmental financial reports. Instead, users need information to assess the government’s stewardship of public resources, including information to evaluate the manner and extent to which resources are devoted to specific services and the costs of providing those services. Users also need information to determine compliance with legally authorized spending authority. Creditors of both businesses and governments are interested in information on the ability to repay debt. However, government creditors focus more on information regarding the government’s ongoing ability to raise taxes and the costs of activities that could compete for those resources, rather than on information about how earnings are generated.
How Do Existing Accounting and Financial Reporting Standards Reflect the Different Needs of Stakeholders?
The needs of the users of governmental financial reports are reflected in differences in the components of the conceptual framework for accounting standards and in individual accounting standards. Although investors and creditors are important constituencies of every standards-setting organization, the Governmental Accounting Standards Board’s (GASB) conceptual framework also places priority on addressing the informational needs of citizens and elected representatives, two constituencies not identified as users of business enterprise financial statements by the Financial Accounting Standards Board (FASB). Consequently, the GASB’s financial reporting objectives consider public accountability to be the cornerstone on which all other financial reporting objectives should be built.
Some of the most significant GASB standards that address differences in governmental and business financial reporting include (1) the measurement and recognition of certain types of revenues (for example, taxes and grants), (2) the view that capital assets provide services to citizens rather than contribute to future cash flows, (3) the use of fund accounting and budgetary reporting to meet public accountability needs, (4) the use of accountability principles rather than equity control to define the financial reporting entity, and (5) the treatment of pensions and other postemployment benefits to allocate cost of services equitably to applicable periods. These and other accounting and reporting differences are described more fully beginning on page 11 and in Appendix B.
Why Is There an Ongoing Need to Set Additional Governmental Accounting Standards?
Since its inception in 1984, the GASB has strived to meet the needs of the users of governmental financial reports by issuing a number of important standards. Although the GASB has made progress, the need to develop and improve accounting standards for governments still exists. For example, additional components of the conceptual framework, which enhances consistency in setting government standards, are still being addressed. In addition, there are many important types of transactions, such as those associated with derivatives and intangible assets, for which there are no existing standards or for which existing standards are not comprehensive. The GASB’s research agenda also includes, for example, a project to address additional ways to communicate results of government activities. Finally, over time governments and the governmental environment continue to change, resulting in an ongoing need to update existing standards and to adopt new standards.
1 The term business enterprise is used to refer to private-sector entities organized for the purpose of earning profit. Business enterprises in the United States apply accounting pronouncements of the Financial Accounting Standards Board. Business enterprise does not refer to and should not be confused with business-type activities of governments.
(Source –> http://gasb.org/cs/ContentServer?c=Page&pagename=GASB%2FPage%2FGASBSectionPage&cid=1176156741271)
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At least the GASB acknowledges that the citizens of the government corporations are just the same as the cows of the farm corporations! Just as cows and chickens involuntarily give up their milk and eggs (and flesh), so too do the people involuntarily give up the fruits of their labor; and if they resist, their private property is stolen as punishment. The farm provides services to its livestock at the barrel of a gun just as the government provides services to its citizens at the barrel of a gun.
Welcome to the farm, people!
It also tells us here that governments operate in a completely non-competitive market, verifying the fact that governments have created a monopoly in those services it provides at the barrel of a gun. The fact that governments have no equity owners means that there are no shareholders watching over the corporation, and no chance of liquidation of the corporation’s stock due to bad business practices, as is the case with other major private corporations. In other words, the only supervision and punishment of government and its organized legal crime is… government itself.
Imagine if the elected Sheriffs of the land actually acted as real men; overseeing the law of the land and arresting criminal bankers and politicians for their organized criminal behavior. Instead, these officers of legal code have become the enforcers of the government’s extortion (exaction) and collection methods as created by the courts, and show up to forcibly sell your assets and property when you don’t pay your taxes to government. In short, there is no law in government, only the administration of legal tyranny. And the Sheriff and his deputies and bailiffs are the strong-arm of the courts. For without an enforcement police force, the courts decisions would have no power! This is why municipal police – the corporate officers who enforce municipal codes against the people – have progressively become more and more militarized; driving armored vehicles and carrying machine guns, spying through traffic cameras, and consistently being trained for “civil unrest”, which simply means that the people no longer want to be forced to be “citizens” if it means paying involuntary taxes to these government corporations with nothing in return. Municipal police are no different than the security guards at a bank; they are there to keep the peace, so that when the bank informs you that they are foreclosing on your home you don’t get out of hand and cause a scene. Confiscation of property, after all, is perfectly legal for government. And of course government made its own wonderful little banking rules so that property confiscation is perfectly legal for banks too. Police are not required to and do not protect and serve the people. They are hired to protect and serve the corporate interests and continuity of the municipal corporation and State, who pays their salaries with involuntarily collected taxpayer money. We pay for the cops who beat us up, taze us, and force us into jail for non-cooperation of municipal codes and fines – or for trying to protect our children.
While we will not be covering the budget report for 2012-2013 in this presentation, I do think it is important to point out just a couple of items listed in the budget report.
On (Page A-9) of the budget plan, we read the following:
“Police
The Police Department is responsible for six funds: Asset Seizure, COPS State Block Grant, Special Revenue Grant, Police State COPS, Police Measure W and Police Special Revenue. Notable elements of the 2012-13 proposed budgets for these funds include the following:
In the Asset Seizure Fund revenues continue to decline and the available funds will be used to fund safety equipment and supplies.
The COPS fund will continue to pay salaries and benefits for six Community Service Officers…”
So even within these “departments” of the City corporation we see more investment funds hiding wealth from the people.
This “Asset Seizure” fund is one of those instances where I would think that logically, the people of the City corporation should have a very angry and questioning response. But instead, there seems to be an “as long as it doesn’t happen to me…” response, where the people do not stand up for each others’ rights. This is a true travesty in the general population of America, and one of the many badges of shame through inaction that the citizens of America must wear because of their purposeful ignorance of these tyrannies.
What is the “Asset Seizure” fund?
This is where the municipal corporation police – the officers of the corporation who enforce the rules and statutes passed by the so-called “government” of that so-called “City” – this is the fund where these so-called “police” place the private property that they literally steal from the people of the City, a practice legally called confiscation or asset seizure. This is the so-called “service” that the City provides at the barrel of the gun from these police officers of the corporation. Confiscation is freedom. Theft of personal property is for your mutual benefit as a citizens of the “city” corporation. Individual rights are squashed for the collective… the collective being the City of Stockton corporation.
Remember, asset seizure is your political civil right (a positive right) as a citizen of the United States. You have the right to be exacted from according to US CODE.
It should also be noted that this budget report states that the “revenues” for this fund continue to decline. Is this good or bad? It’s hard to tell with this “City”. But any entity in the public trust that considers the taking of private property from that public as a “revenue” source for that entity can’t be considered good in my book…
On (page A-12) of this “budget report”, we also read the following:
Economic Development
The Economic Development Department is responsible for 10 Housing funds, as well as the City Administration Building, Central Parking District, and Downtown Marina Complex funds. The department formerly oversaw the Redevelopment Agency funds prior to the dissolution of the Agency. The General Fund will be required to fund administrative and overhead costs for the Successor Agency, due to the fall-off in tax increment proceeds. Those costs, estimated at $1.6
million, are included in the General Fund revised Baseline Budget. The Successor Agency budget is not included in this document. Notable elements of the 2012-13 proposed budget for this department’s funds include the following…
The Central Parking District Fund proposed budget reflects the changes necessitated by the possession of the Market Street, Coy and Arena garages by Wells Fargo. No increases to monthly or hourly fees are planned for next fiscal year. Monthly rates will, however, be established for surface lots that presently do not offer monthly parking.
Did you get that?
“City of Stockton” has entered into a public private partnership (PPP, P3) with Wells Fargo Bank, allowing the revenues of the parking structures mentioned here to go to that bank. And they plan on offering more for-profit Wells Fargo parking services on behalf of the City in the near future on this taxpayer infrastructure!
What is it going to take for the people to say enough is enough?
For even as Wells Fargo and other private institutions privatize your City services as customers at the barrel of a gun, you are still paying as a collective indentured and involuntary tax base for the building and maintenance of these parking and other structures that forcibly service you. This privatization is happening across the country, and has been for over 4 decades.
The promising of future tax and business type revenues to private corporations is the government of the future… and that means that the monopolistic nature of government services offered at the barrel of a gun are also being transferred into private banks and other private corporate hands.
The City Manager, Bob Deis, leaves us with this statement in his transmittal letter; a foreshadowing future look at exactly what Wells Fargo has already been allowed to accomplish in City of Stockton corporation today:
“The future will be bright, but the transition will be difficult. When given accurate information you have made the difficult decisions that other governmental agencies refuse to make…”
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In another report from the GASB, we get even more important information on the “accidental” financial accounting mishaps of many governments when it comes to their reporting of fund balances:
“Most respondents to a GASB survey of financial statement users did not understand that fund balance was intended be interpreted within its fund. Only three out of ten respondents correctly answered that a limitation consistent with the purpose of the fund, but not more specific, does not lead to reserved fund balance. But they were not alone. When asked to describe the criteria they use to decide when fund balance should be reported as reserved, very few of the government finance officers surveyed recognized the distinction either.
The consequences of this misunderstanding can be seen in financial statements. A review by the GASB of nearly 200 financial reports found that more than half of the governments reserved the entire fund balance of at least one fund and more than one-third did so for two or more funds. To appropriately reserve all of a fund’s fund balance, the fund would have to be broadly defined and all of the resources it contains would have to be legally limited to more specific purposes. For instance, if a government has a single capital projects fund to report all of its capital construction activity and all of the resources in the fund are legally limited to being used for particular individual capital projects (a specific bridge project or the purchase of a fire truck) or types of capital projects (bridge reconstruction projects or firefighting equipment), then it would reserve all of that fund’s fund balance. However, such circumstances are more the exception than the norm. Therefore, it is likely that most of those governments that reserved all of a fund’s fund balance were not aware that the broader level of use limitation should be inferred from the fund itself. Of course, this misunderstanding could be traced to a lack of clarity in the current standards.
Although this issue may seem esoteric, it can have a significant impact on the user of the financial statements. If the accounting standards are applied based on the intent described above, a financial statement user should not conclude that unreserved fund balance in any fund other than the general fund can be used for any purpose. One should realize that those resources are available only for the purpose of the fund they are reported in. If a government reserves all of a fund’s fund balance, the reader of the balance sheet may come away believing there is no flexibility in how those resources can be used, when in fact there is.
So, could the GASB solve these problems simply by clarifying this point? While doing that might be helpful, it would be a partial solution. The users of financial statements look to the fund balances of governmental funds because they know from experience that they can find generally available resources there. It is popularly believed that some governments transfer resources from the general fund to another governmental fund although they do not intend to use the resources for the purpose of that fund. This may be done in order to minimize the size of the fund balance in the general fund.
It is very difficult to identify when this has happened by looking at the financial statements; even if such resources are reported as unreserved, you cannot distinguish between the available resources that belong in the fund and those that reside there temporarily. The public may be helped by a provision of GASB Statement No. 38, Certain Financial Statement Note Disclosures, requiring governments to provide information about the resources they transfer between funds…”
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So that you understand what is being spelled out here by this very private association called GASB, which creates these rules of financial reporting (creative accounting) that all governments follow, this is telling you that governments across the country are literally transferring cash and investment balances out of the general taxpayer-use fund called the “General Fund” and into their other individual enterprise-use funds because that is the only way they can put legal restrictions on that cash and investment wealth according to GASB standards. You see, in the general fund, all of that fund balance is designated by default as unrestricted unless pre-designated, meaning it can be used for any liability or taxpayer obligation that needs to be paid… that is, if the mayor and council actually wish to use it to benefit the people. Well, government can’t have that! And so the government corporation transfers that general fund balance into specially compartmentalized holding cells in the form of other governmental and business-type funds so that they can place specific restrictions on those liquid investment funds and ensure that they are used to promote the debt of the citizens to the government – which brings in more revenue through debt servicing – which allows more general purpose fund money to be transferred into debt servicing funds… And on and on and on the merry-go-round of legal organized crime goes, while the people look on with confusion and disdain, but never with comprehension of the real shell game being played.
It then states that governments are knowingly breaking the GASB rules, either through ignorance or due to purposeful malfeasance, by placing restrictions on fund balances that should not have restrictions placed on them by law. If there is anyone still reading this presentation who thinks that anywhere close to a majority of these fund transfers and the illegitimate restrictions placed upon those investment funds for such things as “debt servicing” is being done by accident, well then let me show you my fine selection of rare pet rocks for sale at $50,000 per rock.
Once again, the GASB states:
“It is popularly believed that some governments transfer resources from the general fund to another governmental fund although they do not intend to use the resources for the purpose of that fund. This may be done in order to minimize the size of the fund balance in the general fund. It is very difficult to identify when this has happened by looking at the financial statements; even if such resources are reported as unreserved, you cannot distinguish between the available resources that belong in the fund and those that reside there temporarily…”
So riddle me this, GASB… if well-trained government accountants like yourself, who use the CAFR reports on a regular basis and who is trained in this type of financial reporting can’t figure this stuff out, how in the hell are the people of America, and indeed the people of City of Stockton supposed to figure it out?
Well get ready, because hopefully after this information gets passed around, you are going to have a whole lot of angry, involuntary tax payers asking the same question…
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Chapter 10:
The Notes To The Financial Statements
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For our final understanding of how all Comprehensive Annual Financial Report’s are put together, we must read and comprehend how the “Notes to the Financial Statements” section ties all of these charts and creative accounting principals together. While the charts and statements show a basic accounting of much of the asset totals of the City corporation, most of the pertinent explanations of the information presented in these charts and figures must be accompanied by these Notes to the Financial Statements for a more full and detailed understanding of those charts.
In many reference books, as well as in educational and non-fiction novels, there will often be these types of notes referenced by numbers, which refer the reader to either the bottom of the current page or to the back of the book to obtain more information on the current term, phrase, or fact used. These notes expand the readers knowledge of concepts and definitions of certain words or concepts for which the author of that book presumes the knowledge of his reader. Government presumes that you, the people, will not be reading the CAFR, and so these notes are equally difficult to decipher their true meanings. The Notes to the Financial Statements are perhaps the most important part of the CAFR because they shed certain alternative light on the facts and figures that are discretely presented in the Financial Statements themselves. Thus, this essential information is not listed with the charts or statements in real time or on the same page, and it is government’s hope that you the people do not get far enough past these confusing and obfuscating financial statements to want to read these notes that accompany them.
But without them, total comprehension cannot be attained by the reader of the government’s financial statements. And this is the main difference here, for in an educational book the author is trying to educate the reader; while in a CAFR report the author is trying to obfuscate the information presented. These Notes to the financial statements are only presented because there is a federal law that requires it.
These “notes” are referred to often throughout the CAFR, with statements like this one on (page XII) where it states:
“Additional information on cash management can be found in Notes 1 and 2 in the notes to the financial statements.”
And within the government-wide financial statements, under the statement of net assets chart where it states:
“The notes to the financial statements are an integral part of this statement.”
Also, the balance sheet for governmental funds on (page 43), as well as the reconciliation of fund balance on (page 45) and the statement of changes in fund balance chart on (page 46) all state the same thing:
“The notes to the financial statements are an integral part of this statement.”
Translation: These financial statements are incomplete without these notes.
As we go down the pages of financial statements and charts we see the same reference to these notes as being an integral part of your comprehension of these incomplete facts and figures being presented herein, that can only be explained with further notation, in the notes to the financial statements section. This of course is why they are listed separately from the actual financial data they represent.
Smoke and mirrors…
And so , starting on (page 60) and carrying all the way to (page 142) – almost half (about 40%) of the entire CAFR report presented, we come to these “Notes to the financial statements“.
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(Page 60-62) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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“The City of Stockton (City) was incorporated on July 25, 1850, under the general laws of the State of California. Under the charter adopted in 1923, the City operates under a Council-Manager form of government…
AS REQUIRED by accounting principles generally accepted (GAAP) in the United States and Governmental Accounting Standards Board (GASB)…
Component units are legally separate entities for which the government is considered to be financially accountable. Additionally, blended component units can be organizations for which the primary government’s exclusion would cause the reporting entity’s financial statements to be misleading or incomplete.
**In other words, the component unit is part of the city, so it should be reported as such. But the City likes to pretend that these are separate entities as discussed above.
The following is a brief overview of the component units included in the City’s accompanying financial statements. Financial information for these component units can be obtained from the City’s Administrative Services Department. Each blended component unit has a June 30th year-end.
The Redevelopment Agency of the City (Agency) was formed in February 1975 to prepare and carry out plans for improvement, rehabilitation and redevelopment of blighted areas within the City of Stockton. City Council members in concurrent sessions serve as the governing board of the Agency, and all accounting and administrative functions are performed by the City. The Agency is reported in the City’s fund financial statements as a special revenue fund, debt service fund, and a major capital projects fund, as well as in the City’s government-wide financial statements.
**This agency is nothing more than a way to keep taxpayer money out of the general fund, so that the City corporation can justify raising taxes. In other words, the Council is servicing debt in this agency with taxpayer money instead of paying off debt with that same taxpayer money or using it for taxpayer services.
The Stockton Public Financing Authority (SPFAJ) was created in June 1990 and carries out lease debt financing for the City’s General Fund, Redevelopment Agency, Water Utility, Waste-water Utility, and Central ‘Parking District. The members of the City Council also serve as the governing board of the SPFA. SPFAJ’s reported in the City’s fund financial statements in the debt service funds, capital projects funds, enterprise funds, and the internal service funds, as well as in the City’s government-wide financial statements…
**Again, debt servicing… for leases of taxpayer funded infrastructure. It is unclear how this agency is not considered a usurious central bank for the City corporation, very much like the Federal Reserve that loans money to the Federal government. This is government leasing it own infrastructure to either itself or other governments or private corporations through debt contracts. That means taxpayers of other governments are paying this government to lease the public infrastructure, and that the taxpayers of City of Stockton are paying to lease other governmental structures. Why should governments be charging other governments (taxpayer money) when they are all the same government of the people? The answer, of course, to every similar question you might ask, is simply $ revenue generation $ at the expense of taxpayers.
Consistent with the National Council on Govemmental Accounting (NCGA) Statement No.5 and GASB Statement No. 14, capital leases between the primary government and blended component units are eliminated. The debt and assets are reported in the primary government. The SPFA also issues various land secured debt financings with no City commitment. This activity is reported in the fiduciary funds.
Because the City Council serves as the governing body of the Agency and SPFA, the financial activities of these entities are integrally related to those of the City and are “blended” with those of the City.
I’ll give you one guess as to whose land is being secured by the City in these “various land secured debt financing with no City commitment“. Hint, its your home!
Continued…
An additional governmental agency in which the City participates is the San Joaquin Area Flood Control Agency (SJAFCA) which is Jointly governed by the City and the County of San Joaquin (County). The City retains neither an on-going financial interest in, nor obligation to SJAFCA, therefore financial information for the SJAFCA is not included in the accompanying financial statements.”
**Assets which are in this agency are not reported as assets of the City of Stockton. And yet the liabilities are drawn from the City (the people), through taxation.
Once again we see that this City corporation has several sub-corporations for which it likes to utilize in the obfuscation process of reporting its actual financial position. We can again compare this to a corporation like Microsoft and its annual financial reporting of its several national and international sub-corporate entities, though they are all just pieces of the main mother corporation, which is the “Microsoft Corporation”. If you were to invest in one of these sub-corporations, you are in reality investing in part of the mother corporation, no matter how you or Microsoft reports it. The point here is that these are separate entities or “component units” of Microsoft, and their profits and losses are directly related to the health and financial welfare of the main unit, Microsoft Corporation. Likewise, “City of Stockton” like all other governments has transferred some of its functions and taxpayer funds into some of these component units/agencies (sub-corporations). It then utilizes these separate entities of government in its deceptive practice of creative accounting in its financial reporting, especially on its hand-selected budgetary reporting each year to the people, in order to claim that the wealth and investment funds that are located or transferred within these component units are restricted for those funds or separate units and not available for general purpose or taxpayer operating funds. In other words, the value of these assets is not for the taxpayers, but for the City corporation and its “customers”, created via taxpayer debt.
The notes go on to say:
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(Page 62-65) Basis of Accounting and Measurement Focus
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“Government-wide and Fund Financial Statements – The government-wide financial statements include a statement of net assets and a statement of activities. These statements present summaries of governmental and business-type activities for the City. Fiduciary activities of the City are not included in these statements. Governmental activities, which normally are supported by taxes and intergovernmental revenues, are reported separately from business-type activities, which rely to a significant extent on fees and charges for support.
**Here again, the difference between you being a taxpayer and a customer of government.
The statement of activities demonstrates the degree to which the direct expenses of a given function or program is offset by program revenues. Direct expenses are those expenses specifically associated with a service, program, or department and, are clearly identifiable with a specific function or program. Program revenues include 1) charges to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given function or segment and 2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or segment. Taxes and other items not included among program revenues are reported as general revenues.
Separate financial statements are provided for governmental funds, proprietary funds, and fiduciary funds, even though the latter is excluded from the government-wide financial statements. Major individual governmental funds and enterprise funds are reported as separate columns in the fund financial statements.”
**Here again, Stockton City corporation is revealing not only the fact that it must create fees, charges, fines, and other “revenues” besides lawful taxation in order to provide services and “privileges” to its “customers” – which is you, the taxpayer, as well as other governments and private corporations. It then states clearly again that it does not report these revenues in all financial reports, especially the budget report, which does not necessarily take into consideration these profitable ventures that must extort and exact “program revenues” outside of the taxation methods as reported on the budget report, through fines, citations, tickets, charges, fares, fees, and anything else they can think of.
“The govemment-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting, as are the proprietary and fiduciary fund financial statements. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Property taxes are recognized as revenue in the year for which they are levied…”
**Again, we must understand what this sentence says here… Revenues are recorded (placed in the report as assets) when earned – meaning that future payments that will be received on bonds or other known or guaranteed future income does not get recorded in the financial statements. But inversely, expenses are recorded (placed into the report as liabilities) as soon as a contract is signed or a bond is passed for that liability – even if the payment of that bond will be paid for with future revenues that aren’t being recorded immediately. And so we now have it right out of the government’s mouth that it purposefully uses future liabilities and debt payments to wipe off the charts today any current assets or revenues. Remember the car payment analogy we used earlier, hiding current assets with future liabilities? Remember, you can’t report things this way to government, so why should government get away with reporting things this way to you?
**Notice in the following paragraph the major differences between what we just read, and the very different way that the Governmental fund financial statements are reported:
“Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the government considers intergovemmental revenues, which are primarily grants and subventions, received as reimbursement for specific purposes or projects to be available if they are expected to be received within the upcoming year to repay interfund liabilities incurred as a result of borrowing the cash in order to pay the expenditures. Other major revenues in accordance with GASB Statement No. 22, Accounting for Taxpayer Assessed Tax Revenues in Governmental Funds are considered to be available if they are collected within 60 days of the end of the current fiscal period. Revenues considered to be available include property taxes, sales and use tax, gas, utility user and hotel/motel room taxes, franchise fees, interest, and intergovernmental revenues, which are virtually unrestricted as to purpose of expenditure and revocable only for failure to meet prescribed compliance requirements. All other revenue items, such as business licenses and fines and penalties, are considered to be measurable and available only when received by the City.
Expenditures generally are recorded when a liability is incurred, as under accrual accounting. However, debt service expenditures, as well as expenditures related to compensated absences, and claims and judgments are recorded only when payment is due.“
**An expenditure that is “recorded only when payment is due” is a simple description of what you and I do every month when we pay our monthly bills – we pay our current liability in the form of a debt payment with our current assets that are in our bank account. We, the People, do not have the luxury, as government does, to show that we have already paid future payments on that debt and are counting that as a current liability to hide our current assets. In other words, government is pretending and reporting that it has already paid its full liability to this debt that it owes in 30 years or more – with make believe money it doesn’t actually have. It is then stating that it doesn’t have enough current money (assets) to pay for current taxpayer services because all current assets are tied up for future debt, as if the current assets have already been spent, which obviously they have not.
**If this is difficult for you to understand, don’t worry about it. Only a criminal and usurious mind is designed to understand this type of language for these types of criminal and usurious concepts. The fact that this sounds absolutely absurd to the point of disbelief and disillusion is a sign that you are not a criminal… and that is a good thing, I assure you. Read this presentation a couple of times. You will get it eventually. But you won’t like it!
“Deferred revenue is that for which asset recognition criteria have been met, but for which revenue recognition criteria have not been met. The City typically records deferred revenue related to uncollected estimated special assessments not yet payable and intergovernmental revenues (primarily grants and subventions) received but not earned.”
**A deferred revenue is 100% the same thing as a future (deferred) liability – a deferred liability or payment due in the future. A mortgage amortization schedule is a good example of a deferred revenue for the bank that gave you the mortgage on your home. The bank has deferred your payments over a 30 year period or so, meaning that the revenue it collects from you is differed until a future date (one part per monthly mortgage payment). This mortgage contract and payments over 30 years represents for the bank a future (differed) asset, and is equally representative of a future (deferred) liability to you. City of Stockton states here that the recognition of a future (deferred) asset (revenue) must meet what it calls “revenue recognition criteria”. And yet, apparently, there are little to no such “recognition criteria” requirements on what the City corporation might call deferred liability (future liability payments). And as we read in the next paragraph, we can once again see that these criteria are coming from a central uniform source: the private association called the GASB.
“With respect to both the business-type activities in the government-wide financial statements and the proprietary fund financial statements of the City, as required by GASB Statement 20, Accounting and Financial Reporting for Proprietary Funds and Other Governmental Entities that Use Proprietary Fund Accounting, the City continues to apply all applicable GASB pronouncements as well as Financial Accounting Standards Board (FASB) Statements and Interpretations, Accounting Principles Board (APB) Opinions and Accounting Research Bulletins (ARBs) of the Committee on Accounting Procedure issued on or before November 30, 1989, unless those pronouncements conflict or contradict GASB pronouncements. The City has elected under GASB Statement No. 20 not to apply all FASB Statements and Interpretations issued after November 30, 1989.”
**Just how many 100% unelected private associations are there out there telling government how it should fool the people and steal their wealth simply because the people never knew that wealth existed in the first place? We, the People, may never know…
“Amounts reported as program revenues include (1) charges to customers or applicants for goods, services, or privileges provided, (2) operating grants and contributions, and (3) capital grants and contributions, including special assessments. Internally dedicated resources are reported as general revenues rather than as program revenues. Likewise, general revenues include all taxes.”
**Now is it just me, or is anyone else out there a bit disturbed and disconcerted that City of Stockton corporation keeps stating the fact that it charges the taxpayers and collects revenues for State granted “privileges“. Remember, a “privilege” was something once given to slaves by their masters… Here again, the distinct difference between general (taxpayer) revenues and program (customer) revenues is made, and of course that they are reported differently to the people. We will cover what the word “contribution” actually represents coming up soon in these notes. And remember above that the GASB stated in its “white paper” that taxes are involuntary. I seem to remember some famous event that the term “no taxation without representation” was uttered, followed by a bit of bloodshed and revolution…
“Proprietary funds distinguish operating from non-operating revenues and expenses. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund’s principal ongoing operations. The principal operating revenues of the proprietary funds are charges to customers for sales and services. Operating expenses for the proprietary funds include the cost of sales and services, administrative expenses, and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as non-operating revenues and expenses.”
**Again, for-profit corporations have customers. Non-profit corporations have members or supporters. Government just happens to have both. And its supporters as taxpayers just happen to also be its customers for its monopolies and trusts. Once again, we see non-governmental revenues in the form of “non-operational” revenues, which are reported differently than operational (government) revenues. This, again, is the difference between the budget report and the annual financial report. The CAFR is the audit of government and non-governmental assets, while the budget is just governmental functions and is merely proposed (a guess) and is in fact, mostly unaudited. And the budget is collated and presented to you by non other than your unelected City Manager.
“On the government-wide financial statements, when both restricted and unrestricted resources are available for use, it is the City’s policy to use restricted resources first, and then unrestricted resources, as they are needed.”
**While this is fairly self-explanatory, it does help us to understand the will of government to turn as many “unrestricted” resources into “restricted” resources. They wouldn’t want any extra money or liquid assets floating around government in an unrestricted state of being, for it would be very hard for government to explain why that resource wasn’t used for where it was “needed” – like paying off future liabilities that are supposedly causing a bankruptcy for the City. Placing restrictions on unrestricted fund balances keeps unrestricted fund balances from being spent on all of you needful and dependent taxpayers and the services and privileges you deserve. So it’s much better for business to stow those resources away where the council can’t touch them, according to their own laws that government makes to ensure that taxpayer money is not used for taxpayer services. Services are for customers, after all. And so these unrestricted resources must be locked up and restricted for the promotion of customer based-services and privileges, not freebee taxpayer services that turn no profit. Are you starting to understand?
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(Page 65) Fund Descriptions
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“Fund Descriptions
(Nonmajor funds)
Special Revenue Funds
Special revenue funds are used to account for and report the proceeds of specific revenue sources that are restricted or committed to expenditure for specific purposes other than debt service or capital projects. The term “proceeds of specific revenue sources” establishes that one or more specific restricted, committed revenues should be the foundation for a special revenue fund. Restricted or committed specific revenue sources should comprise a substantial portion of fund’s resources, but the fund also may include other restricted, committed, and assigned resources. Transfers into a fund are not considered to be revenue. All of the City’s special revenue funds are classified as nonmajor. A description of the purpose for each of the nonmajor special revenue funds, and their primary revenues or resources, is provided in the supplementary information nonmajor governmental funds section of this report.
Capital Project Funds
Capital projects funds are used to account for and report financial resources that are restricted, committed, or assigned to expenditure for capital outlays, including the acquisition or construction of capital facilities and other capital assets.
Debt Service Funds
Debt service funds are used to report financial resources that are restricted, committed, or assigned to expenditures for principal and interest on long-term debt.
Enterprise Funds
Activities are required to be reported as enterprise funds when (1) the primary revenue sources of the activity are financed with debt that is secured solely by a pledge of the net revenues from fees and charges of the activity, (2) laws or regulations require that the activity’s cost of providing services, including capital costs (such as depreciation or debt service), be recovered with fees and charges, rather than with taxes or similar revenues, or (3) fees and charges are designed to recover the costs of the activity, including capital costs.”
So again, enterprise funds are customer-based funds holding restricted assets to pay for the enterprise itself or for its construction or improvements, debt servicing, or special revenue needed to build the customer based enterprises. The enterprise is usually created through debt, and the debt is paid through debt servicing. Taxpayer dollars are transferred into these funds so as to continuously support the customer-based infrastructure and services of government, while the taxpayer (non-customer) services usually suffer from budget cuts because the taxpayer resources are “restricted” for customer-based enterprises. Add in the public-private-partnership and the privatization of government services, and you can foresee the government of the future – private corporations providing customer-based services to the very taxpayers whose taxes go to support the infrastructure that allow the private corporations to provide the services back to the taxpayers – and profit heavily off of this privatization and contractual relationship with government. Essentially corporations are becoming the government, the police, the prisons, the schools, the tollways, the water, sewer, and electric, and any other service of government… and are protected by government laws.
And all of this is coming from United Nations sustainable development policies that are being promoted and uniformly placed into action by the GASB and other private associations out there all around the world, writing the laws, policies, and accounting standards in your municipal corporation, county, district, and State. If you can’t see that this is already happening all around you, I suggest that you open your eyes and take a panoramic look around your own City corporation. And if you still can’t see, well, your belief in tyranny is not required for that tyranny to flourish. In fact, it prefers it.
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“Financial Statement Presentation
The City’s funds are categorized and reported by major and nonmajor funds based on criteria established pursuant to GASB Statement No. 34, Basic Financial Statements and Management’s Discussion and Analysis – for State and Local Governments.
In the 2009/10 fiscal year, the City reports the following major governmental funds:
General Fund is the primary operating fund of the City. It accounts for normal recurring activities traditionally associated with government, which are not required to be accounted for in another fund (unrestricted). These activities are funded primarily by property taxes, utility user taxes, sales and use taxes, franchise fees, business licenses, state grants, charges for services, and interest and rental income.
Public Facilities Impact Fees Capital Projects Fund accounts for the collection of and expenditure of fees imposed as a condition of new development within the City, in compliance with California Government Code Section 66006 (AS 1600). Impact fees were established in July 1988 by Ordinance No. 56-88 C.S. for traffic signals, street improvements, community recreation centers, city office space, fire stations, libraries, poUce stations, parkland and street tree/street signs, street light in-lieu, air quality mitigation, and public facilities fees administration.
Capital Improvement Capital Projects Fund accounts for the acquisition (eminent domain), construction and improvement of capital facilities financed by grants and transfers from other City funds.
Redevelopment Agency Capital Projects Fund accounts for the acquisition, relocation, demolition, and sale of land for those portions of the City earmarked for redevelopment. Projects are financed from bond proceeds, loans from other City funds, and property tax increment revenue.
The remainder of the City’s governmental funds are reported as nonmajor funds in the financial statements.”
Here government states that it receives loans from other City funds. Government restricts funds so that other unrestricted funds like the General Fund are short, borrows from itself from other restricted funds, charges interest to itself, and the taxpayers pay the principle and interest of those loans or bonds. It makes this necessary, again, by restricting unrestricted general fund balances so as to create the absence of legally usable revenue.
But let’s think logically about this for a moment…
If you had a checking and a savings account, and your checking was empty, you would naturally transfer money out of your savings account and into your checking account so as to use the funds available in your savings account. In this way, we could compare your savings account to the governments “restricted fund balances”. Thus, if it chose to, government could simply un-restrict those restricted fund balances (its savings account) and use those funds to pay for what it needs.
But instead, it takes out a loan against the restricted money that it is already in possession of, and services that debt with other restricted funds and future taxpayer and customer revenues. You would have just transferred money from your savings into your checking, write a check, and go lay by the pool without any worries. But government, in its continuing effort to promote debt and interest onto the people due to the usurious profit potential of that debt and interest, instead chooses to borrow money from its own savings account, pay itself back interest on its own money (taxpayer money), and then tells the people that it needs to raise their taxes, fines, service fees, and anything else they can come up with so as to pay themselves back the debt that they owe to themselves in perpetuity. And yet, all this could have been avoided by the simple act of using current assets to pay current and future liabilities (debt) off completely today. Illogical, irrational, and yet in the end, extremely profitable.
“The following funds comprise the City’s nonmajor governmental funds:
Special Revenue Funds – Special Grants, Solid Waste and Recycling, Gas Tax, Measure K Streets Sales Tax, MeasureW Public Safety Tax, Special Assessments, Low-Moderate Income Housing RDA Loans, Community Development Block Grant (CDBG) Programs, Neighborhood Stabilization Loan Program (NSLP), Housing GrantiLoan Programs, HOME Program, Emergency Communication, City Administration Building, Development Services, and Other Special Revenue funds;
Debt Service Funds – Redevelopment Agency and Stockton Public Financing Authority; and
Permanent Fund – Miscellaneous
Several financial statement presentation adjustments have been made in this report. The Community Development Block Grant (CDBG) Program Fund in this report is the combined or merged financial activities of the formerly presented Urban Development Action Grant, Community Development Block Grant, ‘Community Development Loan, and CDBG Revolving loan funds. Both the Low-Moderate Income Housing RDA Loans and the- Housing Grant I Loan Programs funds presented in this report were formerly called the Redevelopment Agency Loan Fund and the Special Grants and Loan Programs Fund, respectively. These fund mergers and title changes were made to clarify the financial activities of these funds. Additionally, at the end of the current fiscal year, the Emergency Communication Fund was closed and combined with the General Fund due to discontinuation of the specific 911 fee revenue source previously dedicated for the activity recorded in this fund.
In the 2009/10 fiscal year, the City reports the following major enterprise funds:
Water Utility Fund accounts for activities associated with the acquisition or construction of water facilities, production, distribution and transmission of potable water to users.
Wastewater Utility Fund accounts for activities associated with the acquisition or construction, and operation and maintenance of wastewater facilities for collection, treatment, and disposal of wastewater.
Stormwater Utility Fund accounts for activities associated with the acquisition or construction, and operation and maintenance of stormwater facilities for drainage and disposal of stormwater.
Central Parking District Fund accounts for activities associated with the acquisition or construction, operation and maintenance of off-street parking facilities.
The remainder of the City’s enterprise funds are reported as nonmajor funds in the financial statements.
Additionally, the City reports the following fund types:
Internal Service Funds
Internal service funds are a type of proprietary fund used to report any activity that provides goods and services to other funds, departments, or agencies of the primary government and its component units, or to other governments, on a cost reimbursement basis.
The City’s internal service funds are the General Liability Insurance, Workers’ Compensation Insurance, Employee Health Insurance, Retiree Health Insurance, Retirement Benefits, Other Benefits and Insurance, Vehicle Fleet Equipment,
Computer Equipment, Radio Equipment, and Other Equipment funds. Several financial statement presentation adjustments have been made to the Internal Service Funds financial statement section of this report from the prior year. The former Health Benefits Insurance Fund is now presented as two separate funds; the Employee Health Insurance Fund and the Retiree Health Insurance Fund. Vehicle Fleet Equipment Fund was formerly named Central Garage Fund. The Other Benefits & Insurance Fund was formerly named the Other Benefits Fund. These changes and the separation of the financial activity of the health insurance function were made to clarify the financial activities of the respective funds.
Agency Funds
Agency Funds, a fiduciary fund type, are used to account for assets held in an agency capacity for parties outside the City. The resources of these funds cannot be used to support the City’s own programs. The agency funds are custodial in nature and do not involve measurement of results of operations.
The City acts as an agent for individuals, private organizations and/or other govemmental units such as for land secured financing, employee payroll withholdings, area of benefit fees, public facilities fees, and other miscellaneous items.”
Now, there is one thing here that is very important for your comprehension.
When I read the term “land-secured financing”, I was certain that this term was more devious than I could imagine. And I was right!
When I checked to see what land secured financing actually meant, I found out that there are literally 100’s of private corporations all across the country that offer this private banking service to local governments. But what I was shocked to find was the fact that when governments get financing from these private non-governmental corporations, they are required to put up something as collateral for that loan. Care to take a wild guess at what that little something is?
This brochure from “William Blair & Company” based in Chicago explains this process well:
Land-secured bonds are used to finance the basic public infrastructure required for both new development and existing communities. Most often, these bonds are issued through – or for the benefit of – special tax districts. The bonds generally are non-rated and exempt from federal income taxes…
Owners of properties that benefit from the bond-funded infrastructure agree to a lien on their homes (or commercial property) that is paid off over time through an annual special tax or assessment. That tax or assessment is used to pay debt service on the bonds, which are secured further by the underlying taxed or assessed property as collateral. The special tax or assessment constitutes a senior lien on the property, meaning it is superior to private liens such as construction or mortgage loans.
Did you catch that? For this above all else reveals the true nature of your corporate municipal “government”. And it proves without a doubt that you, the people, are not the owner of your land, your home, or your property. In fact fyou are registered, deeded tenants; living in government-owned property. How else would your government be able to put what you thought was your own home and land (property) up as collateral any time it chooses for these “secured bonds” and “land secured financing” in order to build public infrastructure to “serve” you?
The brochure continues:
Land-secured bonds are used to finance many types of public infrastructure. For example, for transportation, bond proceeds can fund streets, sidewalks, traffic signals, highway interchanges, public parking, public landscaping, and street lights. For utilities and related infrastructure, the bonds can fund water supply, storage, treatment, and distribution facilities; wastewater collection, treatment, and disposal facilities; and storm drain systems. For economic development, the bonds can finance public infrastructure associated with shopping centers, business parks, and industrial parks. In addition, land-secured municipal bonds can fund flood control, recreational facilities, parks, and open space. What constitutes an eligible project is subject to specific state statutes, but in many locales the possibilities are expansive.
In short, land-secured bond financing can be used to fund the cost of public infrastructure for almost every kind of real estate development: existing urban and suburban neighborhoods, new master-planned communities, local and regional commercial districts, retail malls, big-box commercial centers, office and business parks, industrial complexes, redevelopment project areas, affordable-housing projects, and military bases being converted to civilian use.
So that you understand what is going on here, these corporate ventures funded by taxpayer bonds will be utilized for building commercial and for-profit real estate projects. These are not necessarily for taxpayer services as much for enterprise operation customers. These are real estate projects for sale to customers. These are malls, grocery stores, movie theaters, and department stores being built by using your own home and that of the real estate being built as collateral for a private corporation to finance the capital project, often under a P3 lease agreement. And this is what a capital projects fund is used for.
As the brochure continues, this private corporation literally promotes for sale to governments how to bypass the laws that require voter approval.
Continued…
In various states, a voter referendum is required to raise property taxes. This makes it difficult for local governments to cost-effectively finance new projects and existing infrastructure upgrades when they are needed… Consequently, a cash-flow mismatch exists between the up-front costs of public projects and generation of tax revenue. To fill this gap, land-secured bond financing was created so governments can fund infrastructure directly and developers can fund the public-use components of new neighborhoods before the improvements are conveyed to municipalities.
In other words… these bonds are created to bypass the lawful voting procedure that would otherwise be required of the people to raise property taxes. The government can “fund infrastructure directly” – which means it can create anything without voter approval; directly by contract and lease agreement with private corporations, who then earn the fees and customer charges for this direct contract with government and not the people. This is literally “taxation without representation”. And government creates what are called “Special Financing Districts” in order to do just that – to bypass the legal voting system. Special Finance Districts are bestowed with the power not to tax, but to create fees and charges for “services” they provide, which can then later be levied on property tax and be responsible for the confiscation of the property if not paid. This is how an unconstitutional and unlawful customer fee becomes a tax.
And perhaps the worse consideration of all… when government invests into these investment funds and commingled State funds, one way they do so is by offering “corporate bonds” (low interest loans) to private corporations. So ultimately, the money being used to enter into lease agreements with government by private corporations outside of voter approval is very likely taxpayer money that has been bonded (loaned) to the corporation by the very taxpayers and government who will agree to give all of its revenue to that corporations – because the taxpayers are merely customers and have no vote. This is ironic to say the least… And perhaps next time you park in a parking garage you’ll think about which bank or corporation is actually getting your parking fees under a lease agreement with government.
The brochure continues:
“Land-secured bonds generally are not rated by the rating agencies because they are considered riskier than other municipal bonds and are unlikely to receive investment-grade ratings. As home-builders have come to understand, however, as long as all goes according to plan, the risks lessen over time. Risks are highest as development begins and the project is still dirt’ risk then declines as the project reaches its full potential, builds out, and establishes a diversified tax base with a record of special tax or assessment payments. The annual tax or assessment levy is generally part of the owner’s property tax bill so payment can be routine.
The creative use of land-secured municipal financing through special tax and special assessment districts offers an opportunity for home-builders and real estate developers to partner with local governments to bring new development to fruition.”
(Source Link: www.cdfa.net/cdfa/cdfaweb…/WilliamBlair-SpecialTaxDistrictFinancing.pdf)
I am assuming that this answers the question as to why cities and counties across the country are building new housing, strip-malls, mega shopping centers, and business complexes all over the place in “planned communities”, while empty businesses and homes stockpile in the rest of the cities and counties as banks continue their siege of foreclosures on the clueless people.
The more buildings government builds, the more taxation can be brought into the government Special Financing District!
And it is perhaps important to note here that the City of Stockton bankruptcy victims might be the very corporations that will be defaulted by this Chapter 9 proceeding, and may have been operating under this type of Land-Secured financing – which means that the homes of voters (customers) may very well be collateral for this default!
Special District Services, Inc – A private, non-governmental Florida company – describes “Special Taxing Districts” as:
“Special District Services, Inc. creates and manages special taxing districts throughout the State of Florida. SDS was organized to meet the growing demand for urban services and provide a public financing vehicle to serve community infrastructure and service needs in a timely and cost-effective manner. SDS is a results-oriented company with the philosophy that a Public-Private Partnership is an essential ingredient for the successful delivery of public infrastructure through the use of special districts. The basic concept being that growth pays for itself. We are committed to tailoring services to provide essential planning, organization, management, financing and construction of public facilities through the use of special taxing districts.”
The importance of this statement cannot be overstated!
Here you have a private corporation entering into a Public-Private-Partnership with governments “throughout the State of Florida” through the utilization of State created “Special Districts”. This company also states that it is “creating, planning, organizing, managing, financing, and constructing public facilities through the use of special taxing districts“.
So perhaps you might be asking the same question that I am… What in the hell is government doing, if it is contracting out all of its “public services and infrastructure construction and management” to private corporations through PPP’s?
Why not just cut out the middle man and have private corporations be the government?
Well, in case you haven’t noticed, that is exactly the plan – the incremental privatization of all governmental functions into outside private corporation hands, using private associations sanctioned by the Federal Government and the United Nations to make this transition one of uniform legal organized crime. But the real trick for government is to be able to do this without the taxpayers even knowing it is happening, keeping them distracted and entertained by “Monday Night Football” and “Dancing With The Stars”, while working two jobs in order to pay their taxes and never even comprehending that they are customers. You see, the people – if ever they actually wake up, look around, and actually see what is happening ; that governments across the country and indeed the world are all but giving away everything that the taxpayers of America have built to private corporations (including football stadiums), while at the same time being the main investor into those same private corporations through the majority stock ownership of them in government investment funds – the people would surely revolt tomorrow! But without this knowledge, and without even the slightest comprehension that this is all happening right under our collective noses, this well-oiled organized crime machine just keeps on taking everything. And as long as this true nature of this collective government municipal corporation remains unseen by the people; as long as public-private-partnerships, special districts, and the very Comprehensive Annual Financial Report that I am reading from is kept out of the realm of comprehension by the vast majority of the masses of the people, there will literally be nothing left in this world that is truly owned by and in the name of the people. The world will be officially a colony of indentured, enslaved, and indebted servants with nothing but what government provides for them in monopolistic fashion. This is the planned future of world government. And these are the tools that are being used to implement that plan, even as the GASB and other private associations are implementing “global financial accounting standards” in order to make uniform the worlds governments in accounting practices.
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(Page 69-70) Assets, Liabilities and Net Assets or Equity
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At some point in history, the goal of governments changed, and the earning of money within now legal, organized crime became the new goal…
The Stockton CAFR explains:
Cash and Investments
Except for certain bond proceeds, the City pools cash from all funds in order to maximize interest from investment activities. Money market investments and certain nonparticipating guaranteed investment contracts are carried at cost. All other investments are stated at fair value, which is based on published market prices
**Here again we see that earning interest on investment is the main objective of government, not filling in your potholes.
The City participates in an investment pool managed by the State of California, the Local Agency Investment Fund (LAIF), which has invested a portion of the pooled funds in structured notes and asset-backed securities. Based on information obtained from the State of California, the investment in LAIF has been recorded at fair value.
**These State investment pools are called “commingled funds”, and are generally invested in by all cities, counties, and school districts within a State as a requirement by law. In 2011, the California State Treasurer’s Investment Fund (STIF), which includes the LAIF, stood at over $64 billion in liquid investments. And you wonder where all of your tax dollars go…
“Interest income on pooled investments is allocated on the basis of average daily cash balances in the General Fund, certain special revenue funds, debt service funds, capital projects funds, Water Utility Fund, Wastewater Utility Fund, Stormwater Utility Fund, Central Parking District Fund, internal service self-insurance funds, and the Agency Funds, as required by law or as directed by the City Council adopted budget. The remainder of interest income is allocated to the General Fund as required by California Government Code.
For purposes of the statement of cash flows, the City reports as cash and cash equivalents all highly liquid investments (including restricted assets) with a maturity of three months or less when purchased, LAIF and other money market investments, and cash held by fiscal agents. Investments that are held with fiscal agents with a maturity greater than three months are not reported as cash and cash equivalents.”
It is important to note here that it is indeed the legal requirements of Cities and counties to invest their funds into the State commingled funds. The comprehension of this is paramount, for it is indeed the law (statutes, codes, etc) that forced this financial tyranny to happen. And so the important point is that in order to change this so that the taxpayers once again are the main beneficiaries of their own taxation and customer fees, the fact is that the laws must be changed and recreated.
Again, this is the goal of Mr. Walter Burien and his Tax Retirement Funds. And this is the perfect reason and opportunity for the people of stockted to stand up and vote for Mr. Burien’s plan to end taxation and make government for the people again. But the important thing to consider is that until the laws are changed, and until the laws state that this type of behavior and financial terrorism is illegal, your public officials and appointed employees of government will continue in this organized legal crime – BECAUSE IT IS LEGAL AND DONE ON BEHALF OF THE PEOPLE WITH THEIR VIRTUALLY UNKNOWN INFORMED CONSENT!!!
Often, council members of local governments have no idea that much of this investment wealth even exists, and are never really told about it. For the most part, the majority of council persons are only there as a formailty, so as to fulfill the legal requirement of a council vote to approve the projects that are schemed up by such appointed positions as the Stockton City corporation’s “City Manager” and Mayor. The more clueless, financially uneducated, and arrogant the better.
Of course, the City Managers and Mayors have their own private associations for which they are also members of, like:
The United States Conference of Mayors (http://usmayors.org/)
“The voice of America’s Mayors in Washington D.C.“
“The organization sets policy as the collective voice of municipalities and their leaders. Committees and task forces develop policies that the entire body votes on before sending their resolutions to elected leaders in Washington. They also undertake studies on issues related to their special interests and fund grants and awards to incent execution of their ideals. The group has continuously evaluated the landscape of public policy and has current issues related to homeland security and economic recovery…
By standing as a unified voice through this organization, municipal leaders have influenced United States Presidents and United States Congresses to enact legislation that has provided a legacy of benefits to cities.”
LINK–>(http://en.wikipedia.org/wiki/Conference_of_Mayors)
The National Conference of Democratic Mayors (http://democraticmayors.org/)
“The National Conference of Democratic Mayors (NCDM) is an exciting organization which represents a strategic network of Democratic Mayors across the country – CEO’s of cities (corporations) from Los Angeles to Baltimore and Seattle to Orlando. We are on the front lines of addressing some of the nation’s most critical issues and creating innovative solutions every day.
The International City/County Management Association (ICMA) (http://icma.org/en/icma/about/organization_overview)
“ICMA’s mission is to create excellence in local governance by fostering professional management worldwide.”
“ICMA, the International City/County Management Association, develops and advances professional local government management to create sustainable communities that improve lives worldwide. ICMA provides member support; publications; data and information; peer and results-oriented assistance; and training and professional development to nearly 9,000 city, town, and county experts and other individuals and organizations throughout the world. The management decisions made by ICMA’s members affect millions of individuals living in thousands of communities, from small villages and towns to large metropolitan areas.”
**Dare I ask how the whole “local helps worldwide” thing works? Creating sustainable communities is basic code for Agenda 21 Sustainable Development, via the Rio Summit of the United Nations, by the way…
The California City Management Foundation (http://www.cacitymanagers.org/whats-city-managers)
“Since 1924, City Managers have adhered to a Code of Ethics developed by the International City/County Management Association (ICMA). Revised most recently in 2004, this code outlines concepts of effective and democratic local governments in an effort to provide consistently excellent public service.”
**Note: There is a City Managers Association branch of ICMA in all 50 states.
**Also note that this says nothing about adhering to the code of ethics of the founding of America or any other country or constitution… since 1924!
Municipal Management Association Of Northern California (http://www.mmanc.org/)
“The League of California Cities is a partner with MMANC and both are members of the Cal-ICMA Consortium. In 2008, MMANC will have one appointment to each of the eight League Policy Committees, which are composed of city officials from around the state. The committees help to make League policy by reviewing legislation, studying key issues impacting cities, and suggesting broad policy guidelines. This is an excellent opportunity for MMANC to be aware of and involved in key statewide issues facing cities.”
The League of California Cities (http://www.cacities.org/index.jsp)
“The League’s online bill search makes it easy for city officials and others to track the League’s position on bills, view letters that the League has sent to legislators or contact the League lobbyist working on a bill. League positions and lobbyist assignments are available for all League-tracked current session bills… The League’s federal page has information on federal bills and sample letters.
California ICMA (http://icma.org/en/ca/home)
“Seven years ago, California created a new model for its affiliation on a state level with ICMA. Cal-ICMA, is a collaboration of the California City Managers’ Department (CMD); the California City Managers Foundation (CCMF); the two assistants groups (MMANC and MMASC); the County CAOs; the COG Directors; along with members of the academic community and from all of the other ICMA membership categories. Cal-ICMA is the “official” state affiliate with ICMA and is inclusive of all ICMA members without creating another “organization” with a separate dues structure.
Cal-ICMA coordinates member service activities for California, including: professional development and training; new member recruitment and member retention; response to “ethics issues” relating to ICMA members; and appointments to ICMA committees, task forces, and nominees for the ICMA Executive Board.
This collaborative maintains a strong relationship between ICMA and its members in California and creates a broader base of collaboration between all local government management professionals in the state, particularly in the area of professional development and training.
Cal-ICMA Leadership and Staffing
Cal-ICMA has a 15-member Board of Directors composed of representatives from the various groups of ICMA members within the state.”
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Now, if the reason for treason is lost on you here, let me explain what all of this means. It means that your City Manager is likely a member of an national or international private non-governmental association that has no allegiance to America or any other country. It means that your City Manager is being told what to do by this private association, uniformly, with most other significant City Managers out there. It means that this private association is influencing the creation, amendment, and voting process for local, State and Federal legislature, and has its own lobbyists – which is strange when you consider that this means that government is essentially lobbying itself (!?!). It means that your City Manager does not have your best interest at heart, nor is he or she required to, since he or she was not elected by you in the first place. And, if you haven’t figured it out yet, this means that basically your whole government has been outsourced to international interests, organizations, and private corporations under P3 agreements who profit globally from your ignorance of what is actually going on here. This is your America, your State, your County, and your Municipal Corporation that you call your “city” and your home.
Perhaps most important to understand here is that these private associations of unelected officials are lobbying for themselves, not for the people. The City and other governments are like any other corporation when it lobby’s – doing so without consideration of its “customers” in its attempts to gain benefits and entitlements for itself. Thus, it creates and pushes for laws to limit such groups who may fall under the American With Disabilities Act, as seen above, so as to limit or avoid lawsuits that may benefit the people.
Continuing on with the CAFR and its “Notes”:
“Restricted Cash and Investments
Proceeds from debt and other cash and investments held by fiscal agents by agreement are classified as restricted assets in the proprietary fund and government-wide financial statements.”
**Remember, in order to gain “proceeds from debt”, it means that this City corporation or one of its agents must have loaned money and is receiving payments on those bonds/loans. Why is government acting as a banking or lending institution? Is that what you voted for? Oh, that’s right, the CEO isn’t elected by you!
“Receivables/Payables
Short-term interfund loan receivables and payables are reported as “due from other funds” and “due to other funds,” respectively. Long-term interfund loan receivables and payables are reported as “loans to other funds” and “loans from other funds.” Any residual balances outstanding between the governmental activities and business-type activities are reported in the government-wide financial statements as “internal balances.”
“Loans to property owners” represent loans for repairs to low-income’ owner and tenant-occupied households throughout the City. These loans are to be repaid over an extended period of time; therefore, the vast majority of the year-end balance will not be repaid within the next year…”
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And here again we can see the intrafund transfers and loans between funds coming into play. These fund-to-fund loans are listed as future liabilities in the fund that received the loan from the other fund, in the full amount of the loan. But again, the full loan amount that is an asset because it will be paid back by the other fund that received the loan, is not reported in full as a future asset affecting the total asset balance of the fund today. Short and long-term liabilities affect the fund that borrowed the money, but only short-term assets (payments on the loan) affect the fund that loaned the money. And here the term “internal balances” represents the difference between government (taxpayer) balances and business-type (customer-based) balances – the difference between these two being the internal balance. But remember… we are only talking about one bank account here, partitioned into different investment funds so as to hide that wealth in restricted partitions and profit from that wealth through investment return and, as seen here, interest paid by government, to government – which really means by taxpayers to government, whom might use that interest for taxpayer services, but probably wont.
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Long-Term Obligations
In the govemment-wide and proprietary fund financial statements, long-term debt and other long term obligations are reported as liabilities in the governmental activities, business-type activities, or proprietary fund type statement of net assets. Bond premiums, discounts, deferred amounts on refunding, as well as bond issuance costs, are deferred and amortized over the life of the bonds using the straight-line method, which approximates the effective interest method. Bonds payable are reported net of the applicable bond premium, discount or deferred amount on refunding. Bond issuance costs are reported as deferred charges.
In the fund financial statements, governmental fund types recognize bond premiums and discounts, as well as bond issuance costs, during the current period. The face amount of the debt issued is reported as other financing sources. Premiums received on debt issuances are reported as other financing sources, while discounts on debt issuances are reported as other financing uses. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service expenditures.
**This is stating once more that items are reported differently depending upon which statements you are looking at. Here we can see stated once more that long-term debt – the face value of the bonds – are instantly reported as a liability in the full amount of the bond. And yet the premiums or discounts (gains from interest and dividends) is reported up front, being “deferred and amortized over the life of the bonds”. Thus government is once again promoting future debt while hiding future assets. And yet in the fund financial statements, we see that they report the current premiums and discounts, but call them different things. Of course, the fund financial statements are not included in the budget report that taxpayers see and which councils and mayors promote to the taxpayers.
Capital Contributions
Capital contributions are comprised of cash and assets donated from developers (private persons or industry). Connection fees are recorded as capital contributions in the Water Utility and Wastewater Utility enterprise funds.
**A capital contribution in the form of money, real estate, or other asset generally comes from a non-governmental source. These contributions usually include an “operating agreement” in the form of a contract, meaning that government is accepting gifts and then contracting with private persons, governments, or corporations. These can be used as well in public private partnerships, as when say a parking garage or the capital to build that garage is financed via a capital contribution from say J.P. Morgan Chase. Of course the income earned on this “public capital infrastructure” may well be contracted through this private agreement with government to go into the pockets of J.P. Morgan Chase instead of to the taxpayers who use that “donated” capital. Thus, capital donations aren’t generally just an altruistic notion by such entities as big banks. There are of course exceptions, and generally the donation of true charitable capital will include in the agreement that that capital or capital infrastructure must be used for public purposes and protected as such. Water, sewer, power, and gas utilities are also examples of cases where a private corporation builds public infrastructure and benefits from the use of that infrastructure through government contract (taxpayers as customers using those services provided by the donated capital assets).
Property Taxes
Property taxes receivable are recorded in the fiscal year for which the tax is levied. In governmental funds, revenue is recognized when measureable and available. The County levies, bills and collects property taxes for the City. Property taxes paid to the City by the County within 60 days after the end of the fiscal year are “available” and are, therefore, recognized as revenue. Secured and unsecured property taxes are levied based on the assessed value as of January 1, the lien date, of the preceding fiscal year. Secured property tax is levied on October 1 and February 1. Collection dates are December 10 and April 10, which are also the delinquent dates. under the Teeter Plan, the County pays the City 100% of the tax that is levied. The County assumes responsibility for collecting any delinquent amounts and retains penalties and interest for those amounts.
Property taxes are extortion by government and are not at all what most would call “constitutional” – though its origins are from the “Takings Clause” of the 5th Amendment. Don’t pay your property taxes, and government takes (collects) your property to pay those delinquent taxes. This is just one more way of knowing that property is not and never has been owned by the people – because government can take that property and sell it whenever it so chooses. It can take your children and your motor vehicle in the same way. And all of this because you consent to it in contract with the United States. You are a tenant… you own no property, but are allowed the privilege of caring for and controlling government owned property as a “registered” citizen.
Here’s what congress has to say about it:
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“The new money is issued to the banks in return for Government obligations, bills of exchange, drafts, notes, trade acceptances, and banker’s acceptances. The new money will be worth 100 cents on the dollar, because it is backed by the credit of the nation. It will represent a mortgage on all the homes and other property of all the people in the Nation.”
–Senate Document No. 43, 73rd Congressional Record, 1st Session, 1933–
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Net Assets
In the government-wide financial statements, net assets are reported in one of three categories:
• Invested in Capital Assets, Net of Related Debt – This category consists of capital assets net of accumulated depreciation and reduced by outstanding debt that is attributed to the acquisition, construction, or improvement of the assets.
• Restricted Net Assets – External creditors, grantors, contributors, or laws or regulations of other governments restrict this amount.
• Unrestricted Net Assets – This category consists of all net assets that do not meet the definition of “invested in capital assets, net of related debt” or “restricted net assets.”
The City’s government-wide statement of net assets reports $208,502,000 of restricted net assets, of which $96,095,000 is restricted for enabling legislation.
Fund Balance
Fund balances presented in the governmental fund financial statements represent the difference between assets and liabilities. GAS’S Statement No. 54, Fund Balance Reporting and Governmental Fund Type Definitions, establishes criteria for classifying fund balances into specifically defined classifications and clarifies definitions for governmental funds. This new standard has substantially changed the categories and terminology used to describe the components of fund balance. As of June 30, 2009, the City categorized fund balances in the Balance Sheet as reserved and unreserved. GASB Statement No. 54 requires that the fund balances be classified into categories based upon the type of restrictions imposed on the use of funds. The City evaluated each of its funds at June 30, 2010 and classified fund balances into the following five categories:
• Nonspendable – Amounts that cannot be spent because they are (1) not in spendable form, such as prepaid items, inventories and long-term receivables for which the payment of proceeds are not restricted or committed with respect to the nature of the specific expenditures of that fund or (2) legally or contractually required to be maintained intact.
**Ah, so the fact that future assets in the form of long-term assets are not immediately “spendable” today, they are not included as assets to meet future liabilities – even though those future liabilities are reported as a negative balance today, and even though they cannot be spent today, by law… How convenient! Three words that are not used in this report? Honesty; integrity; ethics.
• Restricted – Amounts that are restricted by external parties such as creditors or imposed by grants, laws or regulations of other governments or imposed by law through constitutional provisions or enabling legislation. The City has legislative restrictions on amounts collected and reported in the City’s various governmental funds. As a result, these restrictions have been classified as restricted for community development, debt service reserve, general government, housing projects/loans, libraries and arts, parks and recreation, public safety, redevelopment projects, solid waste/recycling and streets, transit and traffic.
• Committed – Amounts that can only be used for specific purposes pursuant to constraints imposed by formal action by the entity’s “highest level of decisionmaking authority“; which the City considers to be the Stockton City Council governing body legislative actions. This level of approval has been reported in the governmental funds in establishing the commitments within the various functional categories.
• Assigned – Amounts that have been allocated by action of an official authorized by the Stockton City Council in which the City’s intent is to use the funds for a specific purpose. The City considers this level of authority to be with the City Manager of the City of Stockton.
**Remember, the word intent is a fictional tale told by the government. No law requires that intent to come to fruition. The only way to guarantee that the intent of something or someone is true is through a law or signed contract stating the intent as a requirement. The classic falacy among Americans is to continuously bring up the intent of the Founding Fathers and their constitution… though intent has nothing to do with the actual law and how it is interpreted. A government based on intent is a government based on lies and deceipt by nature. Thus, changing the law and exercizing punishment for breaking that law will be the only way to guarantee the intent.
• Unassigned – Amounts that constitute the residual balances that have no restrictions placed upon them. As restrictions exceed available resources at June 30~ 2010, only deficit amounts are reported in the unassigned category.
**One might ask, as a taxpayer who is stuck with the responsibility to pay off that incurred debt of the council and City Manager of the corporation of Stockton City, why isn’t there a restriction on debt? Why are we allowing you to spend more than you earn in taxes and fees? Why are you hiding unrestricted funds under the premise of “intent to use” or “use for specific purposes” in liquid investment funds, while putting the general-use fund in a deficit? And why aren’t we stringing y’all up from the nearest tree, for fraud and embezzlement?
The City reduces restricted amounts first when expenditures are incurred for purposes for which both restricted and unrestricted (committed, assigned or unassigned) amounts are available. The City reduced committed amounts first, followed by assigned amounts, and then unassigned amounts when expenditures are incurred for purposes for which amounts in any of those unrestricted fund balance classifications could be used. Additional information concerning the nature of the City’s fund balances pursuant to GASS Statement No. 54 is provided in Note 8 – Fund Balance, beginning on page 113.
**So for you in the Council and your City Manager… a question for you: How is it that you have oodles of restricted funds while at the same time you have no or negative unrestricted funds, if your own report and rules state that you must spend restricted funds before unrestricted ones? This is yet another financial paradox you have somehow been able to make possible through your very clever “creative accounting”. How can you possibly have restricted fund balances in the black if you have unrestricted fund balances in the red? Unless you committed organized, criminal fraud that is…
**Well, let’s do as the Notes suggest, and fast forward to Note 8 to take a quick look at the graph presented on (Page 113)…
8. FUND BALANCE
“A summary of the composition of the City’s reported nonspendable, restricted, committed, assigned and unassigned fund balance amounts as reported in the City’s Governmental Funds balance sheet at June 30,2010 is as follows (dollar amounts in thousands):”
**Interesting to note here is the line item for “loan receivables”. Notice that for the general fund, $11,688,000 of future loan payments (receivables) are listed in the “Nonspendable” category. This represents almost half of the entirety of the general fund balance. In other words, almost half of the general fund balance is restricted as “Nonspendable” simply because the council and City Manager saw fit to loan that fund balance away. But unlike long-term liabilities in the form of future loan payments (spend-ables) which are shown as liabilities against current assets, these future assets in the form of loan payments cannot be considered or used to pay or offset current liabilities, nor to show those liabilities as paid on the balance sheets. The use of general purpose operating funds are restricted in their use as future assets (receivables) for payment of current or future liabilities, even though current and future payments for other loans affect the value of current assets so that those current assets cannot be used to pay current or future liabilities. Is the shell game starting to be clear? Does this sound honest to you?
Accounting for Escheat Property
The City is in compliance with GASS Statement No. 21, Accounting for Escheat Property, and accounts for these assets in the General Fund when the assets are subject to escheatment in accordance with California state law.
Please understand that an “escheat property” is defined as the entitlement of the State, by virtue of its (self-proclaimed) sovereignty, as being the original and ultimate proprietor of all the lands within its jurisdiction.
Bouvier’s Law Dictionary of 1856 states that: this seems to be the universal rule of civilized society, that when the deceased owner has left no heirs, it should vest in the public, and be at the disposal of the government. Of course, since government’s universal rule is to profit from everything it can, it will certainly take that property and sell it to contractors or to one of its its taxpaying customers.
And of course, this feeds right into the congressional record, which as you remember stated: “The new money… will represent a mortgage on all the homes and other property of all the people in the Nation.”
So if you die, and you have no heirs, or if you loose your “property” through “asset seizure”, the government will simply take what it considers as rightfully its own – your land, your property, and your legacy! This is a wonderful reason for government to convict innocent men of crimes. And if you do have heirs, it will tax your estate a 50% death or “orphan” tax. So either way, your death is a guaranteed asset to government. Surely if government could sell your body for food, it would. It already asks for your voluntary consent to harvest your organs, while hospitals charge millions for their use, and it already allows aborted fetuses to be sold for parts. So why not? After all, you are only human capital under government’s human capital management… cattle on a farm, remember?
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.
**An earthquake may happen, therefore we have less money to use for taxpayer services since we must prepare for a possible future earthquake. Let’s create an investment fund…
**Martians may attack, therefore we must reserve funds for an alien invasion. Oh, by the way, those funds no longer exist in the financial reports, and cannot be used to cover our bankruptcy defaults to real life people today…
**So government estimates what its actual current fund balances are? Is it that difficult to simply count the actual totals up and put them in a simple report? This again is the utilization of future liabilities and assets so as to effect the actual current fund balances of today. More creative accounting here… Imagine if you told the IRS that your tax return was only an estimate, and based on mere assumptions of what you are reporting to it, and that the actual results of your accounting to the IRS might differ than what you actually have in the bank. The only difference between you and government is that you’d go to jail while these politicians and creative accountants go right on cheating on their returns – because this government claims that a private association has power and authority to make up the rules that “requires them to make estimates and assumptions” by law. Total, plausible, deniable legal protection.
Comparative Data
The fiscal year 2008/09 comparative data amounts are presented only to facilitate financial analysis. These columns do not present information that reflects financial position, changes in financial position or cash flows in accordance with GAAP.
**So the fact that fund balances went up this year in the CAFR while the budget report shows a negative year should not be misconstrued as a good year for government, but is a bad year for the people… LOL! Ignore the CAFR! Nothing to see here!
New Pronouncements
Effective July 1, 2009, the City implemented the following new governmental accounting standards issued by the GASB:
GASB Statement No. 51, Accounting and Financial Reporting for Intangible Assets. This statement establishes more specific guidance for accounting and financial reporting in the areas of recognition, initial measurement, and amortization of intangible assets. Intangible assets include, but are not limited to, water rights, easements, timber rights, patents, trademarks and computer software. As a result of this statement, permanent right of way easements have been separately reported in the City’s footnotes and added to the City’s capital assets. Refer to Note 5 – Capital Assets for more information…
**Now just imagine what other types of “assets” the Cities, Counties, States, and especially Federal governments are not reporting to the people simply because this private association called the GASB and its federal version (FASB) hasn’t made a rule that forces them to yet…?
GASB Statement No. 54, Fund Balance Reporting and Governmental Fund Type Definitions. This statement establishes fund balance classifications that comprise a hierarchy based primarily on the extent to which a government is bound to observe constraints imposed upon the use of the resources reported in governmental funds. GASB Statement No. 54 improves the financial reporting by providing fund balance categories and classifications that are more easily understood. The reserved components of fund balance are eliminated and replaced with restricted, committed, assigned, or unassigned classifications to enhance the consistency between the information reported in the government-wide and the governmental fund financial statements to avoid confusion about the relationship between reserved fund balance and restricted net assets. The fund balance disclosures seek to give users information necessary to understand the processes under which constraints are imposed upon the use of resources and how those constraints may be modified or eliminated. The City’s report includes an early implementation of this statement. Additional information on the fund balances of the City GASS Statement No. 54 is provided in Note 8 – Fund Balance, beginning on page 113.
As a result of the implementation of GASB Statement No. 54, the City evaluated each of its governmental funds at June 30, 2010, which resulted in a reclassification of funds within the governmental fund types for fiscal year 2009/10. The City/County Library, Recreation Services, and Boat Launching Facilities, previously reported as special revenue funds, have been combined with the City’s General Fund for financial statement presentation purposes because a substantial portion of the revenue sources recorded in these funds do not meet the definition of being restricted or committed to expenditures for specific purposes, as defined by GASB Statement No. 54.
**Busted! Just look at what a simple little rule change will do to flush out local government’s attempts at restricting funds that they have no right or lawful reason to restrict! Now imagine what else could be flushed out if only government reporting statements were straight-forward and honest instead of creative and purposefully difficult to read and deceiving…? And imagine if Walter Burien and myself were involved!!!
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(Page 77-81) Note 2. Cash And Investments
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2. CASH AND INVESTMENTS
The City maintains a cash and investment pool that is available for use by all funds. Each fund’s portion of the pool is displayed on the balance sheet (governmental funds), statement of net assets (proprietary funds), and statement of fiduciary net assets (agency funds) as “cash and investments.”
Summary of carrying amounts at June 30, 2010 (dollar amounts in thousands):
Deposits $17,679,000
Investments $468,015,000
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Total Cash and Investments $485,694,000
Restricted Cash and Investments $229,389,000
Deposits – At June 30, 2010, the recorded amount of the City’s deposits was $17,679,108; and the bank balance was $20,044,297. The bank balance and carrying amount differ due to deposits in transit of $2,386,314 and outstanding checks of $4,751,503.
The bank balances were entirely insured or collateralized at June 30, 2010. Section 53652 of the California Government Code requires financial institutions to secure a state or local governmental entity’s deposits, in excess of insured amounts, by pledging government securities in an undivided collateral pool held by the depository regulated under state law as collateral. The fair value of the pledged securities in the collateral pool must equal at least 110% of the total amount deposited by all public agencies. California law also allows financial institutions to secure deposits by pledging first trust deed mortgage notes having a value of 150% of secured public deposits.
**Care to venture a guess as to what this means? A trust deed is a legal contract that provides a mortgage lender with a lien on your home. “First” signifies that the lender’s lien on your property has a first priority status, which means the lender will be first in line to foreclose on your home if you default on your payment (sort of like when government takes your home for default of property or other taxes). So, my fellow cattle, this simply means that banks or “financial institutions” as they like to call themselves are actually securing your government’s pooled investments with your own mortgages – your own homes. Again, these properties are not yours to begin with, because you consent to this process of collateralization without even knowing it, and because Federal and State law say that it’s simply OK for government to utilize your home and property as collateral to insure against its own investments, or as I like to call it, governments addiction to can’t-lose gambling. They can’t lose, you see, because “The new money… will represent a mortgage on all the homes and other property of all the people in the Nation.” And of course, they are insured by the corporations that government holds controlling stock in. And those homes are being used as collateral for government’s gambling of your hard-earned money. If they lose, they create more collateralized money called a “bailout”! See how that works? And do you see how it might not matter if they lose, and that crashing the “economy” is just a standard of practice for government?
**Of course, when we look at what most governments are investing in, we see a laundry list of what is wrong with this country/world and with the banking system and stock market itself (government being the largest share holder of most corporations out there, including banks and mortgage companies). The largest bully and thief in the markets and in banks is the government institutional investors, who can collectively move the markets in which ever way they wish to force-trade them, sure to collect on any futures, put options, or other derivatives bets they make. For government institutional investors, winning a bet in the stock and futures markets is like throwing a rock over the ocean and betting that it will land somewhere in the ocean… that is, unless they deliberately wish to loose that investment so that some other entity can purposefully gain from the bad bet. This “laundering” of tax money through investment is again just standard practice for an organized crime syndicate that operates in the public trust.
Investments – California statutes, the City’s investment policy and individual bond documents authorize the investment of funds in the following instruments:
• Securities of the U.S. Government, or its agencies
• Local agency obligations (including the City of Stockton*)
• Certificates of deposit
• Negotiable certificates of deposit
• Bankers acceptances
• Commercial paper
• Local Agency Investment Fund (LAIF) deposits – State pool
• Repurchase agreements
• Demand accounts – insured/collateralized
• Money market mutual funds
• Medium term notes
• Guaranteed investment contracts (GICs)
*When permitted by IRS and SEC Rulings
Although the City did not participate in any securities lending transactions or enter into any reverse repurchase agreements during the year, the City does have investments in LAIF in the amount of $39,995,351. The total amount invested by all public agencies in LAIF at June 30, 2010 was $23.3 billion. LAIF is part of the State of California Pooled Money Investment Account (PMIA) whose balance at June 30, 2010 was $69.4 billion. Of this amount, 2.78% is invested in short-term asset backed commercial paper, and 2.64% is invested in structured notes and medium-term asset backed securities. PMIA is not SEC-registered, but is required to invest according to California Government Code. The average maturity of PMIA investments was 203 days as of June 30, 2010.
The Local Investment Advisory Board (Board) has oversight responsibility for LAIF. The Board consists of five members as designated by California state statute. The value of the pool shares in LAIF, which maybe withdrawn, is determined on an amortized cost basis, which is different than the fair value of the City’s position in the pool.”
Here again we see that the California State Treasurer was holding $23.3 billion of pooled local government investments across the State, with a total balance of $69.4 billion for all investments of government in that pool. And for some reason, the PMIA gets the special benefit of being free of SEC registration.
Here is what the SEC had to say about this exemption:
“State and local governments issue municipal securities to finance a wide variety of projects that are critical to building and maintaining the nation’s infrastructure.
At the start of 2012, there were more than one million different municipal bonds outstanding totaling $3.7 trillion, with 75 percent held by individual “retail” investors.
Despite its size and importance, the municipal securities market has not been subject to the same level of regulation as other sectors of the U.S. capital markets due to broad exemptions under federal securities laws for municipal securities.
Without a statutory regime for municipal securities regulation, the SEC’s investor protection efforts in the municipal securities market have been limited. The SEC’s report discusses potential legislative changes that could help improve disclosures to investors. For instance, the report recommends that Congress consider authorizing the SEC to set baseline disclosure standards and require municipal issuers to have audited financial statements.”
You may download the full report, here: http://www.sec.gov/news/press/2012/2012-147.htm
The SEC also reports:
- In 1945, there was less than $20 billion of municipal debt outstanding.
- In 1960, there was $66 billion of municipal debt outstanding.
- In 1981, there was $361 billion of municipal debt outstanding.
- Today, investors hold approximately $3.7 trillion of municipal debt.
This statement by the Securities and Exchange Commission should hit home with the entities, corporations, contractors, and persons who are about to be defaulted and defrauded upon by the City of Stockton and the corrupt bankruptcy court (which is just another part of government). For the Federal Government states here that “protections” for these investors are severely “limited”. And with 3.7 trillion in debt, if we don’t stop this municipal corporation from declaring bankruptcy and defaulting on these investors, then one by one every other government across America will surely follow the same fraudulent pattern.
Some of the recent news headlines from the SEC on municipal securities include:
Muni Enforcement (links)
- SEC Charges J. P. Morgan Securities with Fraudulent Bidding Practices Involving Investment of Municipal Bond Proceeds
- Former San Diego Officials Agree to Pay Financial Penalties…
- SEC Charges State of New Jersey for Fraudulent Municipal Bond Offerings
- SEC Warns Firms on Muni Pay-to-Play Rules
- SEC Charges JP Morgan in Scheme to Win Business Involving Muni Bonds
- SEC Charges Broker With Defrauding Two Florida Municipalities
Just reading these headlines should be enough to tell anyone viewing this presentation that something is very, very, very wrong in America, and that banks and investment firms like J.P. Morgan are right smack dab in the middle of it. But the conflict of interest of J P Morgan’s majority of stock being owned by government investments (especially pension funds) is perhaps the greatest horror of all – for how can government harm its own investments and returns in such corporations by finding them guilty of fraud? Ironically, be it through investment returns or through fees for committing criminal fraud against government and the people, the government is always in a hedge position to profit from either scenario – a form of arbitrage that perhaps has never been considered by “economists” out there.
Where do those hefty fees go to anyway…?
Not the people!
In fact, here is what it said about J.P. Morgan’s violation of the Pay-to-Play rules:
“The pay-to-play rule, MSRB Rule G-37, generally prohibits firms from underwriting municipal bonds for an issuer for two years after a municipal finance professional (MFP) involved with that firm makes a campaign contribution to an elected official of that municipality.
In the Report of Investigation, the Commission makes clear that an executive who supervises the activities of a broker, dealer, or municipal securities dealer is not exempt from the MSRB’s pay-to-play rule just because he or she may be outside the firm’s corporate governance structure. As such, an executive may be deemed an MFP if he or she is not part of a broker-dealer, but oversees the broker-dealer from the vantage of the holding company…
When the Commission approved the rule in 1994, it indicated that banks and bank holding companies affiliated with brokers, dealers and municipal securities dealers were excluded from the rule. Since then, the Commission has not directly addressed whether directors, officers or employees of such banks and bank holding companies are MFPs if they supervise the public finance activities of brokers, dealers and municipal securities dealers or serve on executive committees that engage in such supervision.
The Commission’s Report of Investigation stems from an Enforcement Division inquiry into whether JP Morgan Securities Inc. (JPMSI) violated the MSRB Rule. According to the Report, JPMSI underwrote municipal bonds issued by the state of California within two years after a then-Vice Chairman of JPMSI’s parent bank holding company (JP Morgan Chase) gave a $1,000 contribution to a California elected official…”
Of course, the MSRB (Municipal Securities Rule-making Board) is just a another self-regulatory organization (not voted by the people) created under the Securities Acts Amendments of 1975 and a is a Virginia non-stock corporation. So really it is just another unelected association of the organized criminals of government.
The common misconception here is that government is somehow broken, and that it is so corrupt that it needs to be fixed. People actually believe that government officials are a bunch of idiots, even as they literally steal everything the people have right under their noses and leave them with worthless paper to represent the real wealth they once possessed. But you see, government is actually working like a well-oiled machine because it is so corrupt and because there is so much wealth involved, and there is no way to simply fix the problem. Again, this is perfectly organized criminal activity that is made legal by the very criminals that run it. In short, government is not at all broken. It is working exactly the way it was planned to work, and possibly better. It is the lack of action and reaction from people like you that is exactly what government wants. It wants you to send it a letter or write an email begging for justice. It wants you to sign an ineffectual petition asking pretty please with sugar on top for government to be nice to the people. It wants you to believe that you have no power to do anything about it… But this just isn’t the truth.
The CAFR continues under Note 2. Cash and Investments:
“Guaranteed Investment Contracts – The City has entered into nonparticipating guaranteed investment contracts (GICs), which are authorized under bond documents as outlined in the City’s investment policy.
GICs are non-marketable interest bearing agreements with or guaranteed by certain financial institutions. The agreements provide for a guaranteed return on principal over a specified period. A GIC is a general obligation instrument issued by a financial institution, subject to applicable legal restrictions. The City’s investments in GIG’s represent proceeds from bond issues that have been set aside (held for the benefit of the bondholders) as debt service reserves and proceeds of bonds that have been invested until used on the projects being financed. The investment contracts holding debt service reserves are held long-term and bear interest ranging from 1.860/0 to 5.330/0, while project funds are invested short-term with rates ranging from 0.42% to 0.94%. Any of the investment contracts are collateralized by investments, with $7,819,856 coltateralized at 104% to 105%, as set forth in the legal agreements.
Risks –
Interest Rate Risk – As a means of limiting its exposure to fair value losses arising from rising interest rates, the City’s investme’nt policy provides that final maturities of securities cannot exceed five years. The exceptions to this policy are that U.S. Treasury or U.S. Agency securities may be used for investments greater than five years and investment in variable rate obligations of the City of Stoc:kton is permissible when aUowedby the IRS and SEC. Investments maturing beyond a five-year horizon should not exceed fifteen percent (150%) of the total portfolio value at any given time. Specific maturities of investments depend on liquidity needs.
Credit Risk – It is the City’s policy that commercial paper must have a minimum rating of A-1/P. Banker’s acceptances do not have credit rating limits. Medium-term notes must have a rating of A or better. Money matket mutual funds and federal agency securities must have the highest rating issued by the nationally recognized statistical rating organizations. The Local Agency Investment Fund (LAIF), administered by the State of California, has a separate investment policy governed by Government Code Sections 16480-16481.2, providing credit standards for its investments.
**Did I mention that government is also the main investor in the credit rating corporations that rate their commercial paper and credit worthiness?
Custodial Credit Risk – For an investment, custodial credit risk refers to the event in which the custodial bank (outside party) in possession of an investment security fails to supply the value of investments or collateral securities to the City upon demand. All securities, with the exception of the money market mutual funds and LAIF, are held by a third party custodian (Union Bank of California). Union Bank of California (UBOC) is a registered member of the Federal Reserve Bank. The securities held by USCC are in the street name, and a customer number assigned to the City identifies ownership.
As of June 30, 2010, the ratings of the City’s investments in U.S. Treasuries, U.S. Agencies, money market mutual funds, and tax-exempt municipal bonds range from AA to AAA by Standard and Poor’s, and Aa2 to Aaa by Moody’s Investors Service. Medium term notes have ratings ranging from A- to AAA from Standard and Poor’s and A3 to Aaa by Moody’s. Commercial paper is rated A-1 + by Standard and Poor’s and P-1 by Moody’s. LAIF, Negotiable certificates of deposits, and GIC’s are not rated. The City’s repurchase agreement is rated A-1 + by Standard and Poor’s and is not rated by Moody’s. Investments of bond proceeds permitted under bond covenants are included in the above ratings.
A summary of investments by category and maturity (fair value shown) at June 30, 2010 is as follows (dollar amounts in thousands):
U. S. Agencies – $96,143,000
U. S. Treasuries – $32,263,000
Medium term notes – $33,659,,000
Medium term notes (FDIC Insured) – $37,953,000
LAIF – $39,995,000
Money market mutual funds – $72,880,000
Negotiable CD’s – $537,000
Tax exempt municipal bonds – $1,899,000
Repurchase agreement – $16,124,000
GICs – $136,562,000
Total – $468,015,000 “
According to the Investment Company Institute and its industry statistics, there were 632 money market mutual funds in operation, with total assets of nearly $2.7 trillion, with $1.75 trillion of that from “institutional funds”, which are majority held by collective government investments across the country since institutional money market funds have an extremely high minimum investment requirement. The expense per share are low, and these funds are specifically marketed to corporations, governments, and fiduciaries. They are convenient for the legal organized criminals of government municipal corporations for the reason that revenues collected by that government can be transferred into these funds overnight from the corporation’s main operating accounts – the general and governmental funds. Large corporate chains, as well as governments across the country (a cooperative national chain of municipal corporations) will have different accounts with banks all across the country due to location constraints, but they generally electronically transfer a majority of those funds on deposit with these individual banks and place their revenues into a mutual money market fund. In this way, the investment return begins immediately, and the average daily balance of the mutual fund is maintained. Courts also invest and pool their money into what is called the Court Registry Investment System (CRIS). Courts, sadly, along with the private prisons they fill, are very much for profit corporations.
The largest institutional money fund is the JP Morgan Prime Money Market Fund, standing at over $100 billion in assets. Some of the other larger conglomerate companies offering institutional money funds are BlackRock, Western Asset, Federated, Bank of America, Dreyfus, AIM and Evergreen (Wachovia). Thus, much of the taxpayers money and fees collected go directly into banks and investment institutions before their heads even hit the pillow at night.
A cursory look into the pension fund system CAFR and statements of assets reveals that government is heavily invested in all of these mutual type of funds as the main institutional investor. Government (i.e. the “public”), as the bankers figured out so long ago, is where the money is at!
Notice that the second largest percent of investments are in what are called GIC’s…
A guaranteed investment contract (GIC) is an contractual agreement guaranteeing the repayment of principal and a fixed or floating interest rate for a contracted period of time on certain investments. GIC’s are traditionally financial instruments offered by life insurance companies and marketed to institutions qualified for favorable tax status under the Internal Revenue Code. 401k plans are an example of these types of “qualified assets”. A GIC is sometimes called a “funding agreement”. When a municipal bond issuance is funded (the money is given to government), it will generally take long periods of time for that government to draw down (spend) that money for the purposes for which that bond was intended, and will instead be spent in parts over many years or decades on an “as needed” basis. Thus, the benefit to depositing the bond proceeds into a guaranteed investment contract allows government to have liquidity in that investment fund, meaning that those bond proceeds are invested but are also available for withdrawal (as a “demand deposit account” similar to a credit card), while at the same time earning a higher rate of return than they would in a money market account, savings account, or U.S. treasury security.
If you don’t understand what all of this means, let me try to explain…
When government creates a taxpayer bond, that bond is issued or funded in full at the time of its creation, just like any other loan. And government is now holding the value of that bond in cash. These are called the “proceeds” of the bond. Since the reason of that bond issuance was for a designated (restricted) purpose by vote or by law – usually for some infrastructure purpose – the proceeds of that bond are invested and immediately placed into the “restricted” category of governmental fund balances.
But now the government has a dilemma; and a purposeful one at that. It has just utilized the “Hegelian Dialectic”; or problem, reaction, solution principle. The bond (loan) was government’s reaction and its solution to a problem that was either natural or purposefully created by these government criminals, such as the building or improvements of a bridge, sewer, or other infrastructure project, or to create new customer-based infrastructure so that government can collect even more fees for the services and privileges it provides to the taxpayers so as to build up its monopolistic control over its “customers”. Whatever the need, the bond will be designated and restricted in its spending for that specific purpose or need.
Don’t forget that the bond was not needed in the first place, but that the investment funds that would otherwise pay for the needed construction or repair are already “restricted” for some other bureaucratic purpose – the true purpose being the promotion of ever more new debt.
But indeed, the funding of that bond has just created another quite desired problem – for government now holds these bond proceeds (taxpayer money), which cannot be spent on the taxpayers or infrastructure until the specific required need for that spending arises by law and as delegated in the bond issuance contract itself, which may be months, years, or even several decades away. And now government must come up with a reaction and a solution to this wonderful new problem that it has created for itself – the issuing of such a large loan before the proceeds of that loan (bond) are actually needed or can by law be spent.
Enter the guaranteed investment contract (GIC): the solution to the problem of this new restricted taxpayer money that may not be spent for years in the future! Since government will not actually need that money for the purposes of the bond anytime soon, and indeed may not even have a plan or an exact amortized schedule of when that money will be spent in the future for its “restricted” taxpayer or non-governmental purpose, the government reacts by investing that loaned money into a GIC or other financial instrument, creating the solution of receiving an investment return on otherwise idle taxpayer bond proceeds. This fulfills the original problem – how to create wealth on bond proceeds without being required to spend that money on the taxpayers.
So to recap: government created a taxpayer bond, which is really a loan to be paid back at interest, and then invested the proceeds of that bond (loan) into a higher yield guaranteed investment contract so as to earn more gains than it will pay in interest to the original loan.
But here is the kicker…
While government has taken the proceeds of that loan and reinvested that money into another investment fund, with a guaranteed rate of return on the investment, the government is at the same time charging the payments of the interest and principle of that original bond issuance (loan) on to the taxpayers. So the taxpayers will be paying off that loan for months, years, or decades, benefiting some other government, fund, or private corporation for which that bond was issued from, while government then invests that money and earns even more interest on that loaned money! And those payments will be paying back the bond even though the bond proceeds aren’t even being used!!!
This is just one of many tricks for this legal organized criminal syndicate to suck the taxpayers dry.
Also important to note here is that since the proceeds of that bond are “restricted”, those funds cannot be used for any other purposes by law. This is why government loves to put these types of restrictions on taxpayer monies, and indeed goes out of its way to not leave any money in the unrestricted fund balances! After all, governments are only following the law… and the law that they created says that restricted funds can’t be spent on other taxpayer needs (unless they want them to), and instead should or must be invested! What a brilliant scheme indeed.
And thus, the “golden rule” is very true… He who holds the gold makes the rules … except in America, where government makes its own rules to govern itself, in order to hold onto the peoples wealth and property and turn it into gold at the peoples expense.
Think about it this way, folks: If you had the chance to borrow $1 million dollars at 2% interest for 30 years, and at the same time had the chance to invest that same $1 million dollars and receive a guaranteed investment contract with a return on that $1 million dollar investment of 5%, while being able to withdraw that money at no charge to make payments on your original loan while keeping the extra interest as a profit, would you do it? That is, if you had no ethics, standards, morals, or values?
Well, this scheme is only possible because government passed a law that said it was legal! That interest or capital gain does not by law have to be used for the purposes of the restricted funds of that original bond. Think about what is possible with this kind of unlimited power of law and money creation and tax money exaction and extortion through bond creation, with no punishments and no worries that the people might actually stand up and fight back or say no… let alone have a clue as to what is actually happening behind their backs in the first place!
Just a short note about these insurance company issued guaranteed investment contracts… A CIG must be available for redemption when called on by the investor, meaning that the investments must be liquid and available for withdrawal at any time, which again is why government loves GIC’s so much. When in the 1990’s people lost confidence in the CIG’s ability to be called in, they found corporations – like Executive Life Insurance Company – could not fund these guaranteed contracts when they were called in, causing this company to fail and be seized by government, which froze most of these investment contracts so investors could not get their money back. This, in turn, lead to the enabling of municipal-bond insurance companies to insure guaranteed investment contracts, which became known as “wrapped” CIG’s. So what happened? Remember when American Insurance Group or (AIG), the nations largest insurance company, had to be “bailed out” by taxpayer money? Well, about $9 or $10 billion of that $100 billion in bailout money was actually used to pay out the calls on these guaranteed investment contracts – the GIC’s that were offered by AIG in the first place, and to which it also could not meet the call-ins.
So technically, since government was and is a major investor in CIG’s, the bail-out of AIG and other banks and mortgage companies was really the utilization of taxpayer money to bail out AIG and these other investment houses so that government contracts could be insured and therefore “guaranteed” to be called in… so that government accounts and investments were safe. That, my friends, will always be the purpose of any “bailout” – the bailing out of government’s addiction to junk investments and of robbing the people blind.
What, did you think those bailouts were to help the taxpayer and the consumer and their retirement funds? LOL!
In essence, most all of government investments are not for the people in any way. In fact, when it comes to financial obligations, pension payments, and taxpayer services we must remember in general that people are nothing but a liability, and not an asset. They are statistics in a numbers game of human capital management. This can only be understood without emotion or ethics, morals, values, or empathy – which are exactly the traits that a corporation must never show in order to turn a profit. Since a corporation is an artificial person, that is not hard to imagine. Remember, it’s just business… And this, in a nutshell, is the problem with having a limited liability corporation as your government, where men act under color of law as officers of that corporation instead of as responsible men who are responsible for and pay for their own actions while serving in the public trust.
At the end of Note 2, the CAFR explains:
Restricted Cash and Investments – Certain proceeds of proprietary fund and government-wide certificates of participation (COP), revenue bonds, bonds payable, and other long-term liabilities are classified as restricted cash and investments on the statement of net assets as their use is limited by applicable indentures or covenants. These covenants provide that these funds, in the absence of specific statutory provisions governing the issuance of bonds, certificates, or leases, may be invested in accordance with the ordinances, resolutions or indentures specifying the types of investments its trustees or fiscal agents may require. These ordinances, resolutions, and indentures are generally more restrictive than the City’s general investment policy. In no instance have additional types of investments, not permitted by the City’s general investment policy, been authorized. The major part of this restriction is for the construction or acquisition of facilities, but also includes reserves for payment of debt service as required by the bond indentures.
It is important here for you to understand what a certificate of participation (COP) is and why it is considered as a restricted asset. A certificate of participation (COP) or sometimes referred to as a “participation certificate (PC)” is yet another type of financial instrument used primarily by municipal and other government entities.
But to be honest, in my research on this particular subject, I could not seem to get a straight answer as to what exactly a certificate of participation actually was. And as it turns out, I wasn’t the only one.
In 2002, a grand jury was impaneled in Placer County, California, in order to ascertain the function and purpose, and for that matter a basic description of just what exactly a COP really is. And here is what that grand jury decided:
“2001-2002 Placer County Grand Jury Final Reports:
CERTIFICATES OF PARTICIPATION
METHOD OF FINANCING PUBLIC PROJECTS WITHOUT VOTER APPROVAL WITHIN PLACER COUNTY
Background
The 2000-2001 Grand Jury received a complaint late in the year that dealt with the use of Certificates of Participation (COPs) by a city within the County. This complaint was passed on to the 2001-2002 Grand Jury for follow up investigation.
During the course of its initial investigation, the Grand Jury became aware of the widespread use of this method of financing major projects in the County, all without voter approval.
While the use of COPs is legal and in some instances necessary, many projects were undertaken without full and easily understandable disclosure to the general public of the reasons for the projects and the costs that would be involved.
Because of the number of COPs that are outstanding within the County and the large dollar amount that is associated with them, the Grand Jury, with its oversight responsibility, chose to include all current countywide COPs in its investigation and inform the general public of its findings.
A Certificate of Participation is a method of funding used by governing agencies for construction or improvement of public facilities. By use of a lease type repayment structure, the monies needed to fund these building projects, even though some may be payable over periods in excess of 20 years, do not, by California State law, constitute a public debt; therefore they do not require voter approval. Federal tax laws, however, treat these lease type obligations as debt, which allows for tax-exempt interest to the underwriting agency. Government agencies with this statutory authorization of funding include the County Board of Supervisors, City Councils, Special District Boards of Directors, and County, City, and District School Boards.
Other key elements of the COP are:
• The approving public agency enters into a tax-exempt lease with a lessor. Lessor acquires site through purchase from a third party or by leasing it from the public agency.
•Facilities are implemented more quickly than those approved by a General Obligation Bond.
• COPs obligate the General Fund.
• COPs can encumber the facility and the land.
• Usually requires rental interruption insurance (in addition to regular insurance).
Governing Boards may, by resolution, also create Enterprise Funds, using COPs. These funds are established for activities normally found in the private sector, i.e., parking garages, golf courses, public utilities, airports, sports and entertainment venues. They are meant to be self-supporting through user charges and should be operated in accordance with generally accepted accounting procedures and reporting requirements of similar private sector business. The nature and purpose of such a fund is to provide goods or services to the general public on a continuing basis. By the use of COPs, these Enterprise Funds do not require voter approval.
COPs were not largely used until the passage of California Proposition 13 in 1978. This Proposition required a two-thirds majority vote of those living within the affected area for issuance of a General Obligation Bond.
General Obligation Bonds may be sold by a public entity that has the authority to impose ad valorem taxes. This is a tax based on assessed value of real property and must be approved by a two-thirds majority vote of the people. Primary use of this tax is to acquire and improve public land and property. As enacted in 2001, General Obligation Bond elections for schools are an exception to the two- thirds majority in that they require only a 55% majority. If, however, the bond is tied into a previous bond under the two-thirds majority rule, the 55% figure will not apply.
Since 1978 most local government entities have had a difficult time gaining approval of General Obligation Bonds. They also have had difficulty in accumulating cash reserves as funding levels have been reduced as a result of funds being transferred to the State, with no guarantee of how much will be returned. This has led to a sharp increase of lease purchase financing, primarily within the Penal System and School Districts.
The use of COPs has been tested in the court system. The most notable case was in 1942, City of Los Angeles v. Offner. The California Supreme Court held that a lease is not a debt, and therefore does not need voter approval. It was of interest to the Grand Jury that all County Agencies and District Budgets that were reviewed listed these COP’s/Enterprise Funds in their financial statements under Long Term Debt.
Finding 1
The following table represents the principal balance due on COP/Enterprise Funds as of June 30, 2001. Interest that will be paid over the term of the lease has not been computed as the figure can change through re-financing the COPs or converting them into Revenue Bonds.
Schools:
District Remaining Principal
Auburn Union $27,443,580
Eureka 502,000
Placer County Office of Education 3,200,000
Loomis Union 7,000,000
Placer Union High 3,534,208
Placer Hills Union 680,000
Roseville Joint Union High 2,320,000
Roseville City Schools 22,500,000
Tahoe-Truckee Union 15,631,000
Western Placer Unified 8,035,000
Sierra Community College 5,200,000
Total $92,845,788
.
Cities: Remaining Principal
Auburn $2,325,000
Rocklin 3,019,610
Roseville 87,140,000
Total $92,484,610
.
County:
Placer County: Total $29,961,000
.
Special Districts:
North Tahoe Public Utility District $7,310,000
Placer County Water Agency 54,150,000
Total $61,460,000
COP Totals:
School Districts $92,845,788
Cities 92,484,610
Placer County 29,961,000
Special Districts 61,460,000
Total outstanding obligation in
Placer County as of June 30,2001 $276,751,398
.
As a point of reference, if $276,751,400 at 5.5% matured in 15 years, the total cost would be $407,032,182.
If the same $276,751,400 at 5.5% matured in 25 years, the total cost would be $509,848,719.
*This is assuming all COPs matured at the same time at the same rate of interest.
Finding 2:
All COPs issued were legally initiated and implemented.
Finding 3:
There is no central repository that has on file COP information for all agencies within the County.
Finding 4:
There appears to be little understanding or awareness of this type of financing on the part of the public…
APPENDIX
There does not appear to be any one definition for a COP. For example, the following were found during (the grand jury’s) investigation:
City of Auburn Financial Report
“Bonds issued by the City to construct capital facilities and buildings. Non-specific revenue sources are used to pay debt service on these bonds.”
California Debt and Investment Commission
“A certificate (which looks very much like a bond) representing an undivided interest in the payments made by a public agency pursuant to a financing lease (or an installment purchase agreement). Also known as COP’s.”
“A portion of each lease payment (and, therefore, a portion of each interest in a lease payment) is designated as being principal, and the remainder as interest. Even though COP’s are not treated as indebtedness of the issuer under state law (particularly the California Constitution), the federal tax law treats the lease obligation as if it were a debt, and, as a result, the interest component of each lease payment may be treated as tax-exempt interest.”
League of California Cities, The California Municipal Law Handbook
“Certificates of Participation (COPs) use a tax-exempt lease structure to finance the construction of public facilities or improvements. If structured properly, COPs do not constitute “debt” for purposes of the state constitution. Because COPs often rely upon an annual appropriation from the cities general fund, the interest rate and the cost of financing often depend upon whether the improvements to be financed and the property which is the basis for the underlying lease are essential to the functioning of the city. However, COPs can be used to finance virtually any public improvement or facility. COPs do not require an election, even if the payments are secured by enterprise revenues.”
Monterey County Grand Jury
“Certificates of Participation are debt instruments for financing capital projects by the local government. They were developed in response to the difficulties encountered by local governmental bodies in obtaining voter approval. COPs do not require voter approval.”
“COPs differ from a bond issue, in that a non-profit Corporation is given the legal right to the revenue developed by the new facility up to the level required to pay the interest and the amortized principal sum of the borrowing. This legal right to a share of the revenue is usually expressed in the form of a lease with the Corporation, the lessor, and the government body, the lessee. The Corporation, in turn, sells shares in this revenue stream to individual or commercial investors. The government body sponsoring the new facility leases it back from the Corporation; the government body also guarantees the return of the principal and interest. In effect, the facility is paid for by its own revenue, but to make the deal possible, the government body must guarantee the required revenue to pay off the loan. Thus, if the costs of the project exceed original estimates or the planned revenue streams do not meet expectations, the taxpayers must ultimately make up the shortfall.”
Glossary of Bond Terms
“COP’s are a structure where investors buy certificates that entitle them to receive a participation, or share, in the lease payment from a particular project. The lease payments are passed through the lessor to the certificate holders with the tax advantages intact. The lessor typically assigns the lease and lease payments to a trustee, which then distributes the lease payments to the certificate holders.”
City of Lincoln Annual Budget 2001-2002
“A type of fund established for the total cost of those governmental facilities and services which are operated in a manner similar to private enterprise. These programs are entirely self-supporting.”
City of Roseville Annual Financial Report for fiscal year ended June 30, 2001
“Enterprise Funds are used to account for operations (a) that are financed and operated in a manner similar to private business enterprises where the intent of the City is that the costs and expenses, including depreciation, of providing goods or services to the general public on a continuing basis be financed or recovered primarily through user charges; or (b) where the City has decided that periodic determination of revenues earned, expenses incurred, and/or net income is appropriate for capital maintenance, public policy, management control, accountability, or other purposes.”
San Bernardino County
“Governing boards may, by resolution, create Enterprise Funds, using COP’s. These funds account for governmental activities that are similar to those found in the private sector. Generally accepted accounting procedures, principles and reporting requirements used by similar private sector businesses apply.”
“The nature and purpose of such a fund is to provide goods or services to the general public on a continuing basis:
• That are financed and operated in a manner similar to private enterprise
• Where the intent of the governing body is that all costs are to be financed or recovered through user charges.”
–End Grand Jury Report–
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Perhaps the obvious doesn’t need to be said here. But I must say…
This grand jury felt it very important to disclose within the public record the way in which these financial instruments work, and how they are totally under the radar of the public. I personally want to thank them for this effort, and praise whoever led this charge within that jury. But still I don’t know exactly what the true definition is!
I suppose the most important aspect here is that government is acting on its own, with callous disregard for the will of the people it supposedly represents, and placing the cost of these actions upon the public anyway. For as stated above, the true nature of these agreements are that ultimately the General Fund can be tapped to pay back this money if otherwise defaulted on. And that means that even though the people don’t vote for it, they are financially responsible for paying it back anyway. For like an unlawful fee that can ultimately be attached to property tax, these enterprise ventures can likewise be attached to the general fund.
Corruption at its finest…
What you have just comprehended is the implementation of what we covered earlier, which is the concept of the public-private-partnership, or (PPP). As we read, the public government municipal corporation enters into a contract with a private “non-profit” corporation in a tax-except interest bearing loan, which is not approved by the voting public as a revenue bond, and which is legally called a “lease agreement” instead of a revenue bond. Semantics are very important. The front corporation acting as a non-profit cannot keep the money earned as a profit, and therefore sells shares to other private for-profit foreign and domestic investors and corporations, acting as a go-between dummy corporation in order to transfer public wealth into private hands.
This is what is referred to as the privatization movement – replacing the function of government as a public entity for the benefit of the people into a for-profit private enterprise that still appears to be non-profit to the people, but for which is really a transfer of public wealth into private hands through public-private-partnerships. And to be clear, this is very much a way to extract taxpayer money from citizens as customers without doing so through lawful means within government. In other words, the predetermined dispostion of a business-type enterprise that will charge “fees” for goods and services in what is otherwise a private business (enterprise) actually bypasses the need for voter approval in lieu of a private contract (lease agreement) and bypasses the public law that binds governments and corporations from forcing taxpayers to pay for goods and services. This elaborate scheme involving public-private-partnerships is the way that government bypasses the law. Of course, since government makes the laws (through private non-governmental associations) it also creates loopholes and exemptions which ultimately make its actions barely “legal”. This is what the people must change.
One must begin to ask one’s self… at what point does the definition of “government” cross over and become something else? And at what point do I withdraw my support (tax) to that no-longer quite public entity?
Remember, these are “goods” and “services” offered at the barrel of a gun as a virtual government regulated private monopoly or trust, where the taxpayers or “citizens” have no other choice as to where they purchase those services or products – and these services are being handed over to private corporations which are then protected by “law enforcement”; to protect and serve private partnerships. Government can’t force you to buy goods or services, and so instead it creates a monopolistic environment so that you don’t have a choice but to purchase your goods and services from government or from one of its private partners at for-profit rates… and thos profits are sunk back into the investment fund scheme as “restricted” funds only to be used to build up more and more monopolistic infrastructure and invest in corporations by loaning it to them through corporate bonds at extremely low interest, which is used to build more private infrastructure that ultimately force small businesses to close their doors.
And all that the people see is a shiny object dangled in front of them like a carrot on a stick, and out comes their wallets to pay for the use or consumption of that carrot – that good or service – without ever even realizing they are helping to create and living in a fascist state. And there are so many other carrots dangling everywhere you look.
Want to watch sports? Well, you the people paid for the arena and your homes and infrstructure may have been collateral for its construction, but you the people don’t own it. And your ticket costs don’t go to government or to help the people, they go to make the Arena self-supportive while the profits, interest payments, and dividends go into private hands. Remember, you are the customers of government, not the people, when it comes to its enterprise operations.
Did you know that the NFL, NBA, NBL, and all other sports leagues are non-profit, tax-exempt organizations?
Does this help you to understand why they have so much power, and perhaps beg your question as to what happens to all of the profits they make through merchandising and media?
Of course, as the grand jury in Placer County has here stated in court and on the record, these non-voter approved loans called land-secured “lease agreements” are taken at interest, and are paid over many years to assure a massive and usurious 30-50% interest profit to these so-called non-profit corporations.
Is it just me, or is the concept of a non-profit corporation charging interest on a loan an oxy-moron? Isn’t the purpose of interest to make a profit on money? Let’s face it folks, we have just uncovered the very epitome of legal organized crime – and its called the non-profit corporation.
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(Page 82 – 85) Note 3: INTERFUND RECEIVABLES / PAYABLES
–=–
Here we uncover the way in which City of Stockton continuously transfers money from fund to fund.
Interfund receivables and payables are as follows at June 30, 2010:
Due to/from other funds (dollar amounts in thousands {in report} and added here):
Receivable Funds Total due to the General Fund, Capital Improvement Funds, and Internal Service Funds:
Redevelopment Agency………$11,502,000
Other Governmental……………$7,659,000
Other Enterprise……………………$382,000
Internal Service Fund………….$3,333,000
Total……………………………..$22,876,000
“Due to” and “due from” balances have primarily been recorded when individual funds overdraw their share of pooled cash or when there are short-term loans between funds.
The graph on (page 83) shows “Loans from/to other funds (dollar amounts in thousands)”, and represents over $72,000,000 in City funds that have been loaned from other City funds – called “interfund transfers”. These represent the amount of fund balance that is due to these funds from these enterprises and other governmental and non-governmental funds. This represents the loans that government is constantly loaning to itself, and then using the future liability part of that loan (not the future asset that will be paid back) to show a deficit in these current financial statements. More creative accounting… because remember, its all one big account that has been partitioned into many investment funds and then restricted so as to create the perception and illusion of debt and deficit.
To give the viewer a clearer picture of what is actually happening here, let’s take a look outside of the CAFR and go read a letter written by Harvey M. Rose corporation, a public sector management consulting firm located in San Fransisco, Ca, on May 20, 2010, to the City Manager, the Preseident of the Stockton Police Officers Association, and to the President of the Stockton Firefighters Local 456 Union.
Now the astute person will right away notice that this letter is not addressed to any publicly elected politician – in other words, it is not being written to anyone that was actually elected by the people. This letter is addressed instead to the leaders of 100% private associations and the appointed Manager of the municipal corporation. I can’t stress enough the importance of this fact. For this is not a letter to the “representatives” of the people…
The draft letter states:
We have completed our review of the City of Stockton’s Comprehensive Annual Financial Report (CAFR) for the years ending June 30, 2007, 2008 and 2009; the adopted budgets for FY 2008-09 and FY 2009-10; and mid-year budget projections prepared by the Stockton City Manager. Based on our review of these documents, as of June 30, 2009 the financial condition of the City of Stockton was fair to weak. However, the City’s financial health is at a critical juncture during this current economic downturn. While the City should be commended for taking quick and immediate action to address shortfalls in projected discretionary revenues over the last two years, significant historical financial activities have been subsidizing operations in special revenue, capital project, redevelopment, and enterprise funds and are distorting the financial status of the General Fund and the City in general. These financial activities include significant interfund loans and transfers, debt issuance, reliance upon future revenues as indicated by deficit fund balances, and receipt of deferred revenues. The City should evaluate each of these activities, and associated loans and transfers, with respect to financial viability and policies going forward. The decisions made during the next one to two year cycle will have significant long-term impacts on the financial health of the City.
Page 2
As of June 30, 2009, the General Fund had a fund balance amounting to approximately $22.8 million, or 13.1 percent of the City’s $174.1 million annual General Fund operating expense. Of the total $22.8 million fund balance, approximately $8.6 million was unreserved fund balance, and thus was available for any purpose. Approximately $6.9 million of the $8.6 million unreserved fund balance was immediately available in cash. The $14.2 million reserved fund balance included $11.2 million in loans to other City funds, including $9.9 million to the Stormwater Utility Enterprise Fund for subsidizing historical operations.
The City has also established over 20 special revenue funds to account for restricted revenues that are used for a variety of purposes. While a majority of these funds and resources cannot be used for General Fund purposes due to legal and contractual restrictions, some special revenue funds may have been created by policy of the City for specific purposes and, in some cases, would otherwise be General Fund resources except for specific actions by the City Council and administration. Such actions may have been taken many years ago by an entirely different Council and management. The current Council may have the authority to modify the ordinances that determine the amount of monies that go into these funds and the type of expenditures that can be made from these funds. Our review of these funds indicates that potentially $2.2 million may be available resources and further analysis may yield additional funds.
Additionally, the City held fund balances related to general government operations in nine internal service funds. As described in more detail below, surplus cash balances in these funds would yield as much as approximately $30.5 million in additional resources if returned to initial funding departments and funds, most of which would be the General Fund.
The City operates three utilities and four other proprietary operations, which are accounted for in enterprise funds. Several of these funds have been historically, and continue to be, subsidized by other operating funds, including the General Fund. The enterprise funds with negative unrestricted net assets and/or interfund loans include the Stormwater Utility, Central Parking District, Solid Waste, Downtown Marina, and Golf Courses activities. The City should review the operating health of each enterprise to determine whether:
- The enterprise could be economically viable by identifying on-going and available revenue sources or reclassifying current loans from contributing funds as one-time transfers of resources; or
- If not economically viable, the enterprise should be merged into other City operations and funds or whether the activity should be altogether exited.
Finally, the City operates two capital projects funds, the Capital Improvement Fund and the Redevelopment Agency Fund, that are used to account for resources for the construction of facilities and to make certain capital acquisitions. As with the enterprise funds, these activities appear to be significantly subsidized by other City funds including the General Fund. The City should review these activities in light of financial and policy considerations and also conduct a… (Page 3) detailed reconciliation of historical funding sources and uses by project to determine if residual General Fund contributions remain in the balances.
As shown in Table 1, the City’s General Fund balance increased by $1.9 million, or 8.8 percent, from the $20.9 million level as of June 30, 2007 to approximately $22.8 million as of June 30, 2009. However, the unrestricted General Fund balance has declined substantially by 45.4 percent, or $7.2 million, primarily due to classifying historical General Fund subsidies of the City’s Stormwater Utility as a loan from the General Fund resulting from a settlement agreement with the Howard Jarvis Taxpayers Association in 2009. Over the three year period reviewed, annual General Fund expenditures decreased by $2.4 million, or 1.3 percent, to $174.1 million from $176.5 million reported in FY 2006-07.
As can been seen in the table, the City’s General Fund financial status, as indicated by fund balance level, has remained relatively stable over the past three years. This is significant in light of the economic downturn as well as two significant settlement agreements approved by the Stockton City Council in 2009 and reflected in the FY 2008-09 financial statements. With regard to the economic downturn, the City has taken quick and immediate action, as can be seen from the overall reduction in expenditures of $7.9 million, or 4.3 percent from FY 2007-08 to FY 2008-09. Additionally, the City was able to maintain its revenue level despite significant decreases in property and other taxes by increasing miscellaneous revenue collections, which are typically one-time and non-recurring in nature1. The net impact of the two settlement agreements… (Page 4) resulted in a one-time reduction of General Fund balance of $6.3 million. However, as noted above, because the City maintained revenues, while decreasing expenditures, the City was able to sustain its General Fund balance at $22.8 million at year-end.
…in FY 2007-08, a 3.0 percent decrease in revenues amounting to $5.7 million during the year was partially offset by a 1.2 percent decrease in operating expenditures of $2.1 million, resulting in a net operating deficit for the year of $3.6 million. While these results were not included in the FY 2008-09 original budget, actions during the year resulted in a net operating surplus of $8.6 million for FY 2008-09, which assisted in maintaining a stable fund balance despite the extraordinary impacts of the settlement agreementson the General Fund, as noted above.
…While the FY 2009-10 Adopted Budget assumes a beginning and ending unreserved fund balance of $6,843,929, as shown in Table 1, the actual unreserved General Fund balance shown in the audited financial statements was $8,607,000 as of June 30, 2009. Therefore, the FY 2009-10 Adopted Budget understates available fund balance by approximately $1,763,000, which can be considered surplus. However, the City currently projects a year-end operating deficit in the General Fund of $987,000, which would reduce available fund balance…
Fund Balance Designated for Budget Uncertainties and Catastrophic Events
The City Council has adopted policies to accumulate and then maintain 5 percent of annual appropriations for catastrophic events and 5 percent for budget uncertainties in fund balance, or a combined total of 10 percent of annual appropriations. The Governmental Finance Officers’ Association (GFOA) recommends such reserves be set at between 5 percent and 15 percent of annual operating expenditures. As of June 30, 2009, the City has designated $1,620,000 to be held for catastrophic events and $1,620,000 to be held for budget uncertainties, which are approximately 0.9 percent of annual appropriations each, or a total of $3,240,000 and 1.8 percent of annual operating expenses. Therefore, no surplus funds are available from this source.
Activities Impacting the Financial Status of the General Fund
During our review, we have noted significant financial activities that have direct and indirect impact of the health of the General Fund. These activities include significant interfund loans and transfers, reliance upon future revenues as indicated by deficit fund balances, and receipt of deferred revenues. As of June 30, 2009, the General Fund was owed approximately $4,444,000 in short-term loans typically recorded when other funds overdraw cash balances. Longer term loans payable to the General Fund totaled approximately $11,163,000, whereas the General Fund owed the Water and Wastewater utility funds approximately $8,148,000. In all, the City had a combined interfund loan total of $70,350,000.
Further, for FY 2008-09, there was a combined $46,434,000 in operating transfers throughout the City “to finance expenditures, subsidize operating losses, and service debt.” Deficit unreserved fund balances existed in the Capital Improvement, Redevelopment Agency, Stormwater Utility, Central Parking District, Gas Tax, Measure K Sales Tax, and Development Stockton CAFR, as of June 30, 2009, Notes to the Financial Statements, Note 4, Page 68… (Page 6) Services, among others. Finally, the City was in receipt of $14,918,000 deferred revenue, of which $7,310,000 was in the General Fund.
The City should evaluate each of these activities, and associated loans and transfers, with respect to financial viability and policies going forward in an effort to simplify the City’s dependencies and make the policy implications more transparent.
Special Revenue Funds
The City has established over 20 special revenue funds to account for restricted revenues that are used for a variety of purposes. The City’s CAFR identifies only one special revenue fund as a major fund, Public Facilities Impact Fees, which accounts for the collection of fees as a condition of new development and expenditures of such fees on public facilities.
Additionally, the City has over 19 smaller special revenue funds that have a total combined fund balance of approximately $130.1 million. A majority of these funds and resources cannot be used for General Fund purposes due to legal and contractual restrictions. However, substantial undesignated fund balances supported by cash on hand for select special revenue funds as of June 30, 2009 are as follows:
Special Revenue Fund – Undesignated Fund Balance
Solid Waste and Recycling …………..$2,080,000
City-County Library …………………….$3,989,000
Special Assessments ……………………$8,292,000
Redevelopment Agency Loan ……….$8,583,000
Other Special Revenue …………………$1,068,000
Total …………………………………………$24,012,000
Financial, legal, administrative and other services are typically provided by the General Fund to support special revenue fund activities, and reimbursement for the cost of these support services may be allowable. Because of the substantial undesignated fund balances, the City should analyze the activities performed for each special revenue fund by General Fund departments and agencies to determine whether additional costs can be reimbursed. Further, because special revenue fund activities may parallel activities performed in the General Fund, the City should conduct a review to see if there is any duplication and whether activities occurring in the General Fund would meet the criteria specified by any special revenue fund restrictions.
(Page 7)
Further, some special revenue funds may have been created by policy of the City for specific purposes and, in some cases, would otherwise be General Fund resources except for specific actions by the City Council and administration. The City maintains several special revenue funds, such as for Emergency Communications, Recreation Services, and the City Administration Building that in many jurisdictions are frequently funded by and operated out of the General Fund. These three funds have a total undesignated fund balance as of June 30, 2009 of approximately $2,233,000 that may be considered available fund balance. The City should conduct a review to determine which of these special revenue funds are subject to City Council authority, allowing modification of the ordinances that determine the amount of monies that go into these funds and the type of expenditures that can be made from these funds.
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The CAFR goes on to explain each loan due to each fund from the other fund. We will only cover a few of the more ridiculous and criminal (but legal) of these intrafund loans and their purposes here for the City of Stockton:
“Loans to” and “loans from” balances represent loan activity between various funds.
The $728,000 is a loan from the General Fund to the Redevelopment Agency for various project areas.
This is just a basic loan to be paid back by the redevelopment agency to the General Fund. But remember, every time a “loan” is made to another fund, that money, which would otherwise be unrestricted and allowed by law to be used for any general taxpayer purpose whatsoever, instead becomes restricted to just the purpose of that particular partition (fund) by law. While seemingly innocent in its nature, this loan takes away from the taxpayer base and thus the investment funds can only be utilized in the customer base – meaning that this money will be used now only to develop or redevelop future monopolistic infrastructure that is for “goods and services” for taxpayers to purchase as “customers” of government, and even more likely as customers of a public-private-partnership.
The $483,000 loan from the General Fund to the Central Parking District is for settlement costs of property acquired through eminent domain…
The $530,000 loan from the General Liability Insurance Fund to the Central Parking District is for settlement costs of property acquired through eminent domain.
Perhaps one of the most bone-chilling facts about government and the way that it steals the property of its citizens (the people) is the realization of what this sentence actually means. When the rule of eminent domain is utilized to take property for and on behalf of the public welfare and use, under the color of law, as happens all across this supposedly free country, the government claims ownership of that property by using its supposedly public nature – in other words, the government steals property and land in the name of the people and on the authority of the people simply because the people never stand up for their neighbors and say no to government.
Government then turns that land or property into a for-profit infrastructure asset for the “customers” of government – and the profits go into a future liability investment fund so that these profits are turned into non-profits. I have often wondered that, if the authority and jurisdiction of government is based on the consent of the governed or on the presumed consent of all the people, that if just one citizen verbally and in writing stated that he or she did not consent to the government using his or her as “one of the group of people” as the reason for that authority to use eminent domain on behalf of “the (collective) people”, would government still be legal in their act of stealing land and property on behalf of “all of the people” to build a parking garge? Can the people be considered the people (a body politic) if just one of those people in that body says no?
So what is this sentence stating? It states that: from out of the taxpayer base of taxation and revenue which is placed into the general fund, this enterprise operation acting on behalf of public-private-partnerships called the Central Parking District has taken a loan out from the taxpayers… so that it can legally steal the property of the taxpayers! Do you understand? The government uses your own taxpayer money when it steals your home or land under eminent domain!!! This, my fellow citizens, is what the government calls “just compensation”. And perhaps that is the most apt name for it… After all, we the people are getting JUST what we deserve for allowing ourselves and our friends, family, and neighbors to be subjects through contract and presumed consent to these government corporations. It seems only “just” that our “compensation” for our own cowardice and inaction on behalf of our fellow man be that we pay for our own enslavement and theft of our own property. Remember, this money is for legal theft, and the property or land that is being stolen will likely be used to offer more and more “goods and services” to the American “customers”.
The $1 ,000,000 loan from Public Facilities Impact Fees to Central Parking District is for construction costs of new parking structures.
Ever wondered why parking spaces seem to be harder to find in the City, or why ticket and parking meter fees have shot up sky-high?
These parking structures are one of the main infrastructure assets that are entered into as public-private partnerships with private corporations (especially banks) for-profit. Therefore, the fees collected in this fund are being used to construct parking garages that will, once again, charge you even more fees as customers of government, and will go into the pockets of these private corporations under “lease agreements” not approved by the voting public.
The $5,036,000 is a loan from the Water Utility to the General Fund for subsidizing its operations established as a result of the Howard Jarvis v. City of Stockton lawsuit settlement of March 2009…
The $3,381,000 and $8,789,000 is a loan from the Wastewater Utility to the General Fund and Capital Improvement fund, respectively, for subsidizing its operations established as a result of the Howard Jarvis v. City of Stockton lawsuit settlement of March 2009 (refer to Note 14 – Special Items of the financial statements for more detailed information)…
The $2,810,000 is a loan from the Water Utility to Capital Improvement for subsidizing its operations established as a result of the Howard Jarvis v. City of Stockton lawsuit settlement of March 2009. (Refer to Note 14 Special Items of the financial statements for more detailed information.)…
The $798,000 from Capital Improvement to Stormwater Utility represents loans to subsidize operations established as a result of the Howard Jarvis v. City of Stockton lawsuit settlement of March 2009 (refer to Note 14 – Special Items of the financial statements for more detailed information)…
Geez… Even the notes to the financial statements refer you to other notes of the financial statements! No wonder people get confused at these CAFR’s!!!
But here again, we have an equally appalling example of the limited or no-liability structure that has been set up by governments across the oountry and as a “Best Practice” presented by the GASB and GAAP. Understanding the following is paramount to understanding the true tyranny of government under color of law on behalf of the very people it enslaves…
This states that due to the settlement of a lawsuit by the “Howard Jarvis Taxpayer’s Association”, the government must pay a certain amount of money to itself for settlement of that lawsuit. This would be similar to the people (government) suing the president of a private oorporation, and then the settlement amount was paid to the corporation instead of the people, for which the president of that corporation could then use his own money to eventually pay himself back what he was forced to pay back to himself in that lawsuit settlement. Another creative accounting paradox initiated by the legal organized crime syndicate called government. You see, when you sue the government, you really only sue yourself! The case is settled with your own taxpayer money taken from a contingincy investment fund created for future liabilities as lawsuits, which is then reused for other purposes of government – most likely to fix or build customer-based infrastructure that will take even more of your hard-earned money… after income tax, State tax, property tax, sales tax, gas tax, citations, and other legal exaction and extortion, that is.
To really get a grasp on what this all means, we must do what the Notes tells us to do, which is to go to Note 14 so that we can understand exactly what this lawsuit did to fix government, if anything…
And so, let’s fast forward to (pages 135-137) and read about this lawsuit:
“Howard Jarvis Taxpayer Association v. City of Stockton – Commencing in 1969 and 1978, the City levied a “fee in lieu of property tax” on properties served by the City’s water and wastewater utilities, respectively. These fees originally were deposited as transfers into the General Fund and supported a variety of City services. In FY 2002-03, the City doubled the fee rate, and revenue from the increase was directed to a special Infrastructure Reinvestment Fund. Also in 20-02-03, the City imposed the same “fee in lieu of property tax” on stormwater utility users. As with the water and wastewater fees, the City designated one-half of this fee for deposit into the General Fund and one-half for deposit into the Infrastructure Reinvestment Fund (now the Capital Improvements Fund).
On October 10, 2006 a lawsuit (Howard Jarvis Taxpayers Assoc., et al. v. City of Stockton – San Joaquin Superior Court No. [CV-030686-CU-JR-STK]) was filed contending that the transfers violated Proposition 218 on the grounds that the transfers caused utility fees to be used for purposes other than providing the utility services for which the fees were charged. On March 24, 2009 a settlement of this lawsuit was approved by the Stockton City Council requiring the City’s General Fund and Capital Improvement Fund to repay over a future thirty year period $15,798,000 in principal plus $3,580,000 in accrued interest (as of June 30, 2009), for a total estimate of $19,378,000 with the annual repayment plan of approximately $1,130,000 to begin in FY 2010/11 and end in FY 2039/40.
The above total balances and repayment figure in the court settlement were based on an estimate of the City’s pooled investment rate of return in FY 2008-09 of 3.40% and 4.0% for FY 2009/10 which has been subsequently computed to be 3.29% in FY 2009/10 resulting in modifications to the estimated settlement agreement approved by the court. The modification found in the current year special item is related both to the pooled investment rate of return adjustment and the additional one year of liability of unpaid accrued interest, resulting in a total liability of $15,798,000 in principal plus $4,218,000 in accrued interest (as of June 30, 2010), for a total estimate of $20,016,000. The total liability (loans from other funds) is split between the General Fund and Capital Improvement Fund in the amount of $8,416,000 and $11 ,599,000, respectively.
The settlement agreement’s estimates were based on the MuniFinancial Review of General Fund Cost Recovery from Utility Funds Report (dated October 6, 2008), accepted by the Court and City Council. The MuniFinancial’s (currently Wildan) report provided the basis of the fee for services calculation methodology supporting the repayment plan schedule accepted by all parties. Repayment amounts are net of prior services provided during the fiscal years 1996/97 to 2005/06, resulting in the “excess transfers” to the General Fund and Capital Improvement (General) Fund.
In accordance with general accepted accounting standards and pursuant to the settlement agreement, implementation requires recording the total liability amounts (loans from other funds) which decreases the fund balances of both the General Fund and Capital Improvement Fund. The repayment schedule beginning in FY 2010/11 has been incorporated into the City’s long-term financial outlook.
As a result of the settlement agreement, the City recorded in the FY 2008-09 financial statements the special item for $7,596,000 in the Water Utility Fund, $11,782,000 in the Wastewater Utility Fund, a negative $8,148,000 in the General Fund, and a negative $11,230,000 in the Capital Improvement Fund. The special item recorded for this FY 2009/10 financial statements are subsequent related entries to capture the accrued interest liability with respect to fiscal year 2010. As a result the special item for this year is for loans to other funds of $250,000 in the Water Utility Fund and $388,000 in the Wastewater Utility Fund, and loans from other funds of $269,000 in the General Fund and $369,000 in the Capital Improvement Fund.”
Now, so that you fully understand what the concept of “justice” is when considering your government when it gets sued for fraud and malfeasance, let’s recap what has just happened here:
1) The City Council and City Manager of the City of Stockton corporation purposefully and knowingly broke the law and their own municipal GASB and GAAP rules by first doubling the fees approved by taxpayers and then misappropriated that taxpayer money – a “fee in lieu of a property tax“. To be clear, “The transfers violated Proposition 218 (the law created and voted upon by the people) on the grounds that the transfers caused utility fees to be used for purposes other than providing the utility services for which the fees were charged.
2) The City Council and City Manager, without the consideration or approval of the voting public of City of Stockton corporation, doubled the cost of that original fee, and then directed half of the total amount of that newly increased fee away from its designated purpose investment funds, and into other unrelated investment funds – “for purposes other than providing the utility services for which the fees were charged“.
3) A lawsuit was filed to correct this purposeful malfeasance, forcing the City corporation to pay itself back the funds that had been misappropriated.
4) The City Council and City Manager were not punished or charged with malfeasance of fraud for their actions, and the matter was instead settled out of court with an agreement between the court and the City Council – the very criminals who perpetrated the fraud.
5) Finally, the City Council and City Manager made the situation even worse for taxpayers by using their same old creative accounting techniques. Instead of immediately returning that money to the taxpayers that they had publicly stolen, they once again took an intrafund loan out of the General purpose operating fund (the unrestricted fund balance of the General Fund), which could have been used for current taxpayer obligations, leaving a deficit for that General Fund of over $8,000,000 dollars, and a similar debt of over $11.2 million dollars in the Capital Improvement Fund. To make this perfectly clear, the council and Manager were not held responsible for their actions, and used unrestricted taxpayer funds to correct the purposeful and provable malfeasance they themselves conducted, and then charged over $4.2 million dollars in interest payments to the taxpayers to boot, totaling over $20 million in liabilities that will be paid as advanced forward (future) liabilities by the taxpayers through their “service fees” as “customers”. And once again, the taxpayer budget report will show a negative balance due to the creative accounting principles and “Best Practices” of the Stockton City municipal corporation, GASB, GFOA, and GAAP. This is another $20 million dollars that in the bankruptcy proceedings should not under any circumstances be considered a “CURRENT LIABILITY” effecting the current assets. So add another $20 million onto the available liquid investments held by City of Stockton to pay for its liabilities to its creditors that would otherwise by defrauded by bankruptcy.
Imagine folks, that if and when you did harm to someone else or broke the law by defrauding the entire public, you could pay for your sins by paying yourself. Is it any wonder that government is as immeasurably corrupt and vile as it is?
“The $764,000 loan from the Capital Improvement Fund to the Golf Courses Fund is for the Swenson irrigation system
project.”
Golf courses are also enterprise operations – service and profit-based businesses that are run like private corporations for a specific, limited customer base of government. And even if you have never played a game of golf in your entire life, your taxpayer money is going into the fund that both builds and maintains these golf courses. And this is a good example of the difference between essential government services (of which taxes lawfully fund such things as street-cleaning, road repair, public parks, and fire stations – which serve all people as a collective community) and non-essential services and enterprise operations (which take taxes or fees from all people collectively for services that are in no way essential to the community of people, nor are they able to be utilized by all people). Golf courses, entertainment venues like arenas, stadiums, and concert halls, parking garages, and other customer based business activities of government are forms of non-essential, profit based services.
In this author’s humble opinion, these “services” should not be government (taxpayer) funded or controlled, only minimally regulated for the benefit of the people. And if a private corporation or other entity decides to build a stadium or golf course, they should take full responsibility for the safety and well-being of the people who choose to utilize that for-profit service, and be liable for the same. But most importantly, they should need permission from all taxpayers to build and rebuild such atrocities. But when government both regulates and owns the business, there really is no reliable regulation of that business, and no responsibility by or punishment to the owner. In short, government’s business activities are a major conflict of interest, since government regulates itself in its government-owned businesses. This is worse than a trust or a monopoly, it is communism in the form of fascism – government ownership of the economy!!!
**It is important to note here that enterprise operations of government differ in one very special way from private corporations and the businesses they run. If a private business runs a deficit or fails to bring in enough customers, that business will either fail or be bought up by some other company. In other words, it does not have the power or authority to force the taxpayers of the city, county, or State to loan it money at the taxpayers expense in order to keep offering its services. And perhaps this is the easiest way to understand the problem of government-owned or controlled enterprises and businesses… If a government corporation has a bad year, or several bad years, or even if it never makes a profit, the government has an unlimited supply of debt money in the form of future liabilities to taxpayers that it extorts from the people on behalf of the people in order to continue providing goods, services, and privileges to those people. This is another aspect of the paradoxical relationship of government and business – and the now household term “too big to fail” is exactly why government should not be in the business-activities side of government. For there is another term that you should get familiar with as well…
“Never unprofitable enough to fail”.
Or how about: “No deficit to big to cause failure”?
This is your government.
“The $54,000 is a loan from the Wastewater Utility to the Redevelopment Agency for various project areas.”
“The $500,000 loan from the Redevelopment Agency to the Downtown Marina (Other Enterprise) Fund is to fund operating start up costs of the Marina Complex.”
And here is a behind the scenes look at the hypocritical nature of government. Remember, the lawsuit above placed millions into the Wastewater Utility Fund, because the government was misusing those funds against the law. But now we see that at the same time, government has millions of dollars extra in the Wastewater Utility Fund, and it will go ahead and “loan” that fund balance into the Redevelopment Agency for the generic description of “various projects”, breaking their own rules of what that Wastewater Fund money can be used for by calling it a loan to another fund. Yet the deficit still exists to pay the lawsuit. And of course, the Redevolopment Agency will utilize the proceeds of this loan to build even more non-essential infrastructure (the majority of people do not own boats) that government can charge fees for to its select few taxpaying customers. Just another example of creative accounting principles.
Wastewater management = essential tax-payer service.
New Downtown Marina = non-essential customer-based enterprise operation for profit, which may in the future be run by a private corporation that collects its revenue as a public-private-partnership.
See the difference here?
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(Page 85 – 87) Note 4: TRANSFERS
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The Notes state that “Transfers for the year ended June 30, 2010 are as follows…”, and we see total intrafund transfers of $37,228,000.
It goes on to explain:
During the year various interfund transfers were made to finance expenditures, subsidize operating losses and service debt. The $4,920,000 General Fund transfers out include $2,722,000 to the Gas Tax Fund for street repair and maintenance, $777,000 to the Stockton Public Financing Authority (SPFA) Debt Service Fund, and $258,000 to the Special Grants Fund to match funds on specific grant projects. The transfer out of $160,000 from the General Fund to the Golf Courses Fund was to cover accumulated deficits. Additionally, the $1,000,000 transfer out from the General Fund to the Other Benefits and Insurance Internal Service Fund is a one-time transfer to fund City employee separation costs resulting from the City Council’s measures to reduce the City workforce due to budget shortfalls.
**Note here that if the Golf Course is in a deficit, it should be closed and made into something more essential, or offered for sale to someone who can run a business correctly. But instead, the golf course will receive a loan so “cover accumulated deficits”. Government enterprises cannot fail no matter what miserable failures they are.
The General Fund received transfers in of $451 ,000 from the Emergency Communications Fund as a result of the closure of the Emergency Communications Fund due to the loss of its specific 911 fee revenue source and the consolidation of its residual fund balance with the General Fund, and $777,000 from the Central Parking District for an operating subsidy related to the General Fund policing functions of the Stewart Eberhardt Building /Parking Structure.
An additional transfer in of $1,300,000 from the Computer Equipment Internal Service Fund to the General Fund is for one-time funding of an escrow account to be used for the cost associated with the negotiated termination of the contract with IFG Management Group responsible for the management of the Stockton Events Center and Arena.
The Public Facilities Impact Fees Fund transfer out amounting to $4,237,000 to the Stockton Public Financing Authority Debt Service Fund is for debt service principal and interest payments and reserves for the Capital Improvement Lease Revenue Bond 2009, Series A.
**Customer fees used to build more infrastructure by investing those fees in investment funds to pay for the debt servicing of unnecessary loans (bonds) with lease agreements that grant the future fees of that infrastructure to a private corporation.
The $23,458,000 Redevelopment Agency Capital Project Fund transfer out includes $6,409,000 to the Low-Moderate Income Housing RDA Loan Fund to provide loans for neighborhood revitalization and improve housing affordability; $16,413,000 to the Redevelopment Agency Debt Service Fund, and $636,000 to the Stockton Public Financing Authority Debt Service Fund for the payment of principal and interest on outstanding debt.
**Loans from other investment funds gaining interest here to pay off the loans charging interest there… Why not just pay off the bond or never get the bond in the first place? Because government loves unnecessary debt and interest that it loans to itself and creates the need for more taxation.
Transfers out of $1,291,000 from the Other Governmental Funds include $842,000 from the C:ity Administration Building Fund to the Stockton Public Financing Authority (SPFA) Debt Service Fund for principal and interest debt service payments on the 2007 Variable Rate Demand Obligation Revenue Bonds, Series A and B, $290,000 from CDBG Grant Fund to the CBBG Loan Fund to reclassify property owner project expenditures as project loans, and $159,000 from various Other Govemmental Funds to Other Governmental Funds for the reimbursement of miscellaneous expenditures.
The Water Utility Fund had transfers out of $45,000 to Capital Improvement Fund for public art contributions, $24,000 to the Vehicle Fleet Equipment Internal Service Fund for vehicle acquisitions, and $3,000 to the Other Equipment Internal Service Fund to close out financial reporting of the Laboratory Services Fund.
The Stormwater Utility had a transfer out of $4,000 to the Other Equipment Internal Service Fund related to the close out of the Laboratory Services Fund.
The Wastewater Utility Fund had a transfer out of $696,000 to the Vehicle Fleet Equipment Internal Service Fund for vehicle acquisitions.
**On and on it goes… and yet we are to believe that the same transfers of what are restricted funds cannot be transferred to actually pay off the debt and creditors that are being defrauded by this bankruptcy? In fact, all it takes is council approval. But this certainly makes it sound like if City of Stockton does pay off its debts to its creditors, it will create a bond and service that bond with investments funds as debt servicing instead of just using its already available cash and liquid investments on hand. Aren’t you getting a bit tired of this crap?
Finally, the Internal Service Funds had transfers out of $1,322,000. The transfers include a one-time transfer of $1,300,000 from the Computer Equipment Internal Service Fund to the General Fund for contract termination costs associated with the IFG Management Group managing the Stockton Events Center and Arena, and $22,000 from the Vehicle Fleet Equipment Internal Service Fund to the Special Grants Fund for the reimbursement of costs for assets purchased from this fund.
So we have a private corporation called IFG Management Group managing the Stockton Events Center and Arena.
What exactly is IFG Management?
From the – International Facilities Group, LLC – main website (http://IFGroup.cc):
“Over the last 17 years, IFG has established a reputation as one of the country’s leading developers and operators of sports and entertainment facilities.”
**Can you say Public Private Partnership ? ? ?
This is the government of the future, my friends.
And here is a list of their government “clients”:
Beijing (China) Municipal Government (PRC)
Bi-Lo Center (SC)
City of Charlotte (NC)
City of Indianapolis (IN)
City of Glendale (AZ)
City of Laredo (TX)
City of Orlando (FL)
City of Sarasota (FL)
City of Stockton (CA)
County of Bexar (TX)
County of Dade (FL)
Dunkin’ Donuts Center (RI)
Fresno State University (CA)
Major League Baseball
Maricopa County Stadium District (AZ)
Miami Dade County (FL)
Mississippi Department of Finance & Administration (MS)
Pepsi Center (CO)
Petco Park (CA)
PGE Park (OR)
Rose Garden (OR)
Save Mart Center (CA)
Staples Center (CA)
Village of Bridgeview (IL)
Nothing turns me off more to sports than the overwhelming sponsership and corporate advertising associated with it, not to mention the hero worship that is portrayed by the corporate media, distracting the people from ever seeing any real heroes. But the one thing that really pisses me off when it comes to this unfathomably popular industry of “professional sports”, is when the private corporation – acting in a public-private-partnership with government under a “lease agreement” or other contract to hoard public revenues for themselves – plasters that fact in bright neon letters for all of the non-customers to see. When Riverfront Stadium, for instance – the perfect name for a wonderful stadium built by taxpayer money along-side the Cincinatti River – entered into a sponsorship deal with Greater Cincinnati’s energy company, Cinergy Corporation, it was renamed Cinergy Feild in 1996. I remember clearly how upset and against this name change the people of the Greater Ohio Northern Kentucky were.
It may suprise you to know that most of the above listed “clients’ are non-profit and tax-exempt, even the client named “Major League Baseball”.
The National Football League (NFL) was formed by eleven teams in 1920 as the American Professional Football Association, with the league changing its name to the National Football League in 1922. The NFL is an unincorporated 501(c)(6) association, with a federal nonprofit designation, comprising its 32 teams.
The Internal Revenue Code describes this exemption as:
“IRC 501(c)(6) provides for exemption of business leagues, chambers of commerce, real estate boards, boards of trade, and professional football leagues (whether or not administering a pension fund for football players), which are not organized for profit and no part of the net earnings of which inures to the benefit of any private shareholder or individual…
The IRC 501(c)(6) amendment was enacted to ensure that a professional football league’s exemption would not be jeopardized because it administered a players’ pension fund. H.R. Conf. Rept. No 2308, 89th Cong., 2d Sess. (1966), reprinted in 1966-2 C.B. 958, 963, 964.”
Here we have the perfect example of how the public-private-partnership works with lease agreements. This professional association, which represents these teams and players, acts as the “non-profit” that allows this multi-billion dollar per year “proffessional sports league” business to thrive under these leased agreements – and to do so federally tax-free!
The OpenSecrets.org website reported in 2009:
“…professional football’s political activity has of late proven particularly notable, with various league and team executives, employees and players donating more than $1.72 million to federal candidates and committees during the 2008 election cycle alone.
That figure represents nearly a fourth of all professional football-related political contributions during the past 20 years, according to the Center’s analysis.
The NFL last year also created a political action committee – the Gridiron PAC – and opened an office in Washington, D.C., from which to better lobby lawmakers.
“Like any large business, a presence in Washington is a good thing to have for us,” Jeff Miller, the NFL’s vice president for government relations and public policy, told Capital Eye.
Miller noted that the NFL now employs two full-time staffers in Washington who lobby on and track a variety of governmental issues that interest the league: labor law, media policy, illegal gambling, communications and performance-enhancing drugs.
The NFL’s lobbying activity has increased considerably during the past two years, with lobbying expenditures on pace this year to reach $1.4 million – easily exceeding the league’s previous high of $1.15 million in 2007.
The Gridiron PAC serves to bolster this effort. Since its inception last year, the PAC has contributed $63,500 to 19 different federal candidates through June 30. About two-thirds of the PAC’s political donations went to Democrats.
Sens. Chris Dodd (D-Conn.), Orrin Hatch (R-Utah), Patrick Leahy (D-Vt.) and Bill Nelson (D-Fla.) all received the $5,000 maximum the PAC can give during an election cycle.
On the House side, recipients of $5,000 are: Mary Bono Mack (R-Calif.), Howard Coble (R-N.C.), Edward Markey (D-Mass.), Gregory Meeks (D-N.Y.), Bobby Rush (D-Ill.), Debbie Wasserman Schultz (D-Fla.) and Fred Upton (R-Mich.).
Now, it doesn’t take a rocket scientist to figure out that when a professional sports league needs to lobby government, it is doing so because it is really a for-profit entity – in this case one that ensures the multi-billion dollar industry of “legal” sports book betting. And trust me when I say, when the loosing team suddenly scores four touchdowns in the last two minutes of a football game after being shut out for the rest of the game, this wasn’t just a stroke of good luck. This is organized and orchestrated for only one reason – to cover the point spread in order to ensure that the casino sports books and other betting corporations who cover the bets always come out with a profit. This is what they call legal gambling, as opposed to the illegal gambling for which they can’t control and that they lobby against.
You see, “legal gambling” is simply the government giving permission for these casinos and bookies to commit an illegal act. They lobby government, you see, and in return are allowed to commit the illegal act of sports betting. And government allows only itself to create State Lotteries as a government monopoly of “legal” gambling.
But for some reason, despite all of the publicly known and prosecuted falls purposefully taken in boxing for bet coverage purposes, the masses of fans either don’t know, don’t care, or don’t want to know that these games are rigged. And apparently they just believe that multi-million dollar salaries for players are paid just to go out and try their darnedest to win. Yeah, right…
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(Page 88-89) 5. CAPITAL ASSETS
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A quick note about the two graphs shown in this section called “Capital Assets”.
Remember, a capital asset is generally the land, buildings, warehouses, equipment, vehicles fleets, and other physical assets that are not in a liquid investment fund. In other words, these assets are permanent and not necessarily for sale, though there are exceptions. Therefore, they are not liquid assets in the sense that they can be liquidated to pay for debt or other taxpayer obligations, and so we are not nearly as interested in these capital assets for our bankruptcy purposes simply because they are one of the few necessities of government.
What is important for our purposes is the way in which capital assets are reported in these financial statements.
The concept of “depreciation” is the key for government reporting of its infrastructure. Depreciation can simply be defined as the decrease in value of an asset over time, often due to wear and tare. An automobile, for instance, depreciates the second you drive it off the new car lot.
But for government, this determined value of its capital assets through depreciation is a very important part of its creative accounting process.
Here we have listed depreciated capital assets including “infrastructure, buildings and improvements, and machinery and equipment”, for a total of $809,511,000 in reported asset value.
Total listed depreciation on these assets is listed at $202,416,000, leaving a listed asset value of $599,811,000 for capital assets after depreciation.
Note here that this equates to a 25% devaluation in these capital assets. If this were a true representation of the actual average yearly depreciation of the value of these assets per fiscal year, then within 5 years these assets would be virtually worthless after depreciation of 25% per year, and in fact would have a negative value.
But we must realize the creative accounting benefits of this type of financial reporting. That’s over $202 million dollars of assets that can now be hidden from the actual assets presented in the budget and CAFR. Remember, this depriciation value represents the amount of money paid for the asset minus depreciation of that asset due to old age or cost of improvements made to the asset. But the paradoxical fact of the matter is that these assets will not actually be affected by this depreciation unless they go up for sale and are purchased. Thus, the fact that $202 million dollars are being subtracted from the TOTAL NET ASSETS of the entire City corporation – including its investment fund totals that have absolutely nothing to do with these capital assets – means that the virtual depriciation that doesn’t really exist is again affecting the fund ballances of current assets that really do exist on this fiscal year end day. That’s over $200 million in creative accounting that can be reported as a loss to the people, without the City corporation ever losing a thing!
And under its business-type activities for its “customers”, Stockton corporation is reporting an extra $204,424,000 in net depreciation of its business-type capital assets, representing about a 30% devaluation of its capital assets. Take notice here that these assets are deliberately separated between governmental and business-type assets. This is the difference between taxpayer and customer assets, clear as day for your consumption.
And so, in the end, City of Stockton is reporting a loss on its total infrastructure and other capital assets of over $406 million dollars, even though nothing has really changed in cash. And of course, while the City corporation reports the expenses of the improvements to the taxpayers, it doesn’t seem to report the value of those improvements as “appreciation” to the infrastructure, just the expense of it. One more example of government’s creative accounting.
For when we go back to the Statement of Net Assets graph on page 40, we can see that the capital assets are reported only after this 25-30% depreciation has been shaved off from their value. This is why the Notes to the Financial Statements are so important to consider for a more detailed description of the organized crime of government.
And when the budget report is presented to the people each year, all they see is debt, deficit, depreciation, and deceit.
And the cry of the government is always we need to raise taxes and charge higher rates for services.
In this authors opinion, the reporting of Capitl Assets should be completely separate from the reporting of cash and investments, in that these capital assets should not be representative of the “Total Net Assets” unless these capital assets are sold for profit (thus creating a cash or investment fund asset). But right now, they are being used simply as an accounting trick to lower the overall value of all assets of the City in a purposefully deceiving way.
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(Page 90-) Note 6. LONG-TERM DEBT
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In Note 6, we get an insight into the long-term debt purposefully being held by “City of Stockton” corporation.
Starting with this graph based only on “Governmental Activities”, we see that the “Total governmental activities – long term liabilities” are reported in two columns:
Balance (as of) June 30, 2010 – $499,883,000
Due Within One Year – $31,315,000
Here we have another look at long-term liabilities compared to the reality of what is actually currently due per the current assets of the corporation. While technically only 1/12 of this “Due Within One Year” amount should be listed as a current liability (because that would be this months current payment due – less than $3 million dollars), instead, the whole balance due of $499,883,000 + $31,315,000 is listed as a future liability and used to bring down the balance of the actual current assets by nearly half a billion dollars in these financial statements.
And this is the excuse for declaring bankruptcy – a deficit of current assets.
Notice here that new Lease Revenue Bonds were issued for 2009 and reported as new in these statements, signifying that they were created or funded within this fiscal year ending June 30, 2010.
Here is a description of those bonds:
Lease Revenue Bonds
The 2009 Lease Revenue Bonds Series A were issued in the amount of $35,080,000 by the Stockton Public Financing Authority (SPFA) on September 9, 2009. As of June 30, 2010, bonds totaling $35,080,000 are due in installments ranging from $525,000 to $2,750,000 beginning September 1, 2014 through September 1, 2038, with interest rates ranging from 6.75% to 7.0% on the bonds outstanding. The Bonds were issued to finance various capital improvements located throughout the City. Repayment of the Bonds is financed from lease payments pledged by the City to the SPFA. The primary sources for repayment are the Fire Stations, Police Stations, Parklands and Street Improvements Public Facilities Fees funds’ revenues. The principal amount due is reported net of an unamortized discount $754,000.
**A participation certificate (PC) is a financial instrument of a form of financing used by municipal or government entities which allows an individual to buy a share of the lease revenues of an agreement made by these entities. It is different from a bond issued by these agencies since these are secured by those revenues. Municipal and Government entities use this instrument to circumvent the restrictions that might exists on the amount of debt other forms of instruments able to take on.
(Source: www.placer.courts.ca.gov/grandjury/2001-2002/COPS.pdf)
A type of financing where an investor purchases a share of the lease revenues of a program rather than the bond being secured by those revenues.
The authority usually uses the proceeds to construct a facility that is leased to the municipality, releasing the municipality from restrictions on the amount of debt that they can incur.
Notice here that this description states: “Repayment of the Bonds is financed from lease payments pledged by the City to the SPFA”.
But we should always remember that these schemes are generally coming from one place: that private association called the Government Accounting Standards Board (GASB). This is the association that, if you remember, stated that taxes are “involuntary”.
Summary of Interpretation No. 2 – Disclosure of Conduit Debt Obligations—an interpretation of NCGA Statement 1
(Issued 8/95)
Summary
This Interpretation provides disclosure requirements for conduit debt obligations. Conduit debt obligations are certain limited-obligation revenue bonds, certificates of participation, or similar debt instruments issued by a state or local governmental entity for the express purpose of providing capital financing for a specific third party that is not a part of the issuer’s financial reporting entity. Although conduit debt obligations bear the name of the governmental issuer, the issuer has no obligation for such debt beyond the resources provided by a lease or loan with the third party on whose behalf they are issued.
The required disclosures include a general description of the conduit debt transactions, the aggregate amount of all conduit debt obligations outstanding at the balance sheet date, and a clear indication that the issuer has no obligation for the debt beyond the resources provided by related leases or loans.
The provisions of this Interpretation are effective for financial statements for periods beginning after December 15, 1995. Earlier application is encouraged.
Unless otherwise specified, pronouncements of the GASB apply to financial reports of all state and local governmental entities, including general purpose governments, public benefit corporations and authorities, public employee retirement systems, utilities, hospitals and other healthcare providers, and colleges and universities. Paragraph 2 discusses the applicability of this Interpretation.
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To Be Continued…
**This brings us to the end of my presentation and research into the Stockton CAFR thus far. The Notes to the Financial Statements continue for many pages, and show even more corruption and hidden wealth within this report, and in the way that it is reported. Of course, this information as provided is more than enough to clearly show the lie and obfuscation of the bankruptcy claims of City of Stockton corporation.
–=–
Conclusion:
The City Of Stockton Is Certainly Not Bankrupt
–=–
If you’ve made it this far, then you should have a clear understanding that what City of Stockton corporation’s appointed City Manager reports in his budget report is not the same as what he is required to report in his Comprehensive Annual Financial Report (CAFR).
And you should now understand that this obfuscation is uniform throughout the entirety of government financial reporting as regulated by private non-governmental associations like the Government Accounting Standards Board (GASB) through its Generally Accepted Accounting Practices (GAAP).
Most of all, you should certainly grasp the fact that City of Stockton is hiding from the public the majority of its actual wealth in the form of liquid investment funds that restrict most of the General Fund taxmoney for purposes other than what that fund is designated for. And this simple little designation from unrestricted to restricted is the basis for this whole shell game being played – and is responsible for the lie that City of Stockton is insolvent or bankrupt.
Solutions:
The more you stretch something the weaker its core becomes. The longer a flower grows, the more difficult it is for the roots to support the whole plant. The concept that governments need to constantly be in the process of expanding and developing and redeveloping so as to increase the revenue tax-base of the City needs to be put to its illogical and fallacious rest. The people must say no – no more debt to fund the expansion of the profit margin of the municipal corporation at the expense of the taxpayers as forced customers. No more revenue bonds issued on expansion until all current and future debt bonds are paid off or voided… let’s pay off all debt before new debt can be created; that is, if for some strange reason there would actually be a need for any government to ever go into debt in the first place. Not with all of these investment funds! Imagine a government that operates only with cash on hand, the people (the governed) never allowing their government to put the taxpayers into perpetual debt for the continuity and expansion of the corporate federal government. What a beautiful world that would be…
Perhaps the problem is that people can’t even imagine what an honest politician, attorney, banker, or accountant would actually look like. Perhaps the problem is that the people can’t even imagine themselves doing the job honestly, and for their own families future.
Or perhaps it is just that the people are so discombobulated when it comes to their understanding of the legal language that governs them that they have never before considered even the legal definition of the word solution…
SOLUTION, civil law. Payment. 2. By this term, is understood, every species of discharge or liberation, which is called satisfaction, and with which the creditor is satisfied. This term has rather a reference to the substance of the obligation, than to the numeration or counting of the money. Vide Discharge of a contract. –Bouvier’s Law Dictionary, 1856
But for our current dilemma, it is perhaps more proper to ask the legal question: Is Stockton insolvent?
SOLVENCY. The state of a person who is able to pay all his debts; the opposite of insolvency.
PERSON. A corporation which is an artificial person.
SOLVENT. One who has sufficient funds to pay his debts, and all obligations. Able to pay all legal debts as they become due.
SOLVENT – 2. Able or sufficient to pay all just debts; as, a solvent merchant; the estate is solvent. —Webster’s Revised Unabridged Dictionary (1913)
SOLVENT – 1. capable of meeting financial obligations –Collins English Dictionary – Complete & Unabridged 10th Edition
Etymonline – Word Origin & History – solvent – 1653, “able to pay all one owes,” from Fr. solvent, from L. solventem (nom. solvens), prp. of solvere “loosen, dissolve” (see solve). Noun meaning “substance able to dissolve other substances” first recorded 1671.
INSOLVENT \In*sol”vent\, a. [Pref. in- not + solvent: cf. OF. insolvent.] (Law)
(a) Not solvent; not having sufficient estate to pay one’s debts; unable to pay one’s debts as they fall due, in the ordinary course of trade and business; as, in insolvent debtor.
(b) Not sufficient to pay all the debts of the owner; as, an insolvent estate.
(c) Relating to persons unable to pay their debts.
—Webster’s Revised Unabridged Dictionary (1913)
Now that we have specifically and legally defined what the word insolvent means, and that we can easily see that City of Stockton could pay off all of its debt tomorrow and still be well in the black (if only the law would allow it) , let’s take a look at the rules and requirements for a municipal corporation to declare Chapter 9 reorganization in bankruptcy court.
For this, we go to the U.S. Government website called USCOURTS.GOV and click on the Chapter 9 rules.
Here’s what it says:
Only a “municipality” may file for relief under chapter 9. 11 U.S.C. § 109(c). The term “municipality” is defined in the Bankruptcy Code as a “political subdivision or public agency or instrumentality of a State.” 11 U.S.C. § 101(40). The definition is broad enough to include cities, counties, townships, school districts, and public improvement districts. It also includes revenue-producing bodies that provide services which are paid for by users rather than by general taxes, such as bridge authorities, highway authorities, and gas authorities.
Section 109(c) of the Bankruptcy Codes sets forth four additional eligibility requirements for chapter 9:
- the municipality must be specifically authorized to be a debtor by state law or by a governmental officer or organization empowered by State law to authorize the municipality to be a debtor;
- the municipality must be insolvent, as defined in 11 U.S.C. § 101(32)(C);
- the municipality must desire to effect a plan to adjust its debts; and
- the municipality must either:
- obtain the agreement of creditors holding at least a majority in amount of the claims of each class that the debtor intends to impair under a plan in a case under chapter 9;
- negotiate in good faith with creditors and fail to obtain the agreement of creditors holding at least a majority in amount of the claims of each class that the debtor intends to impair under a plan;
- be unable to negotiate with creditors because such negotiation is impracticable; or
- reasonably believe that a creditor may attempt to obtain a preference.
–=–
Ok, so we now now that any government municipality must be insolvent in order to declare bankruptcy under Chapter 9, which is the chapter specifically related to municipal corporations.
But we need to follow the instructions above, for that insolvency must be as defined in the U.S. CODE of the Federal Government.
And so let’s take a look at Chapter 11 of U.S. CODE, Section 101 (32) (C):
(32) The term “insolvent” means—
(A) with reference to an entity other than a partnership and a municipality, financial condition such that the sum of such entity’s debts is greater than all of such entity’s property, at a fair valuation, exclusive of—
–=–
Well I must admit, when I read this I was honestly shocked at the corruption that this section spells out here in U.S. CODE.
Paragraph (C) doesn’t state here that the municipality is insolvent if it cannot financially make it payments, but instead simply refers to the action of the municipality of not making payments for any and all reasons. Whereas the definition as it applies to a corporation that is not a municipality is very specific that its “financial condition (is) such that the sum of such entity’s debts is greater than all of such entity’s property, at a fair valuation.”
What an incredible distinction to make!
For apparently a municipality is not required by US CODE to fall under the legal definition of an insolvent corporation in bankruptcy.
Unless I am translating this incorrectly, the municipality has only to voluntarily stop making payments to its creditors at any time it wishes for any reason it wishes to without any legally defined basis for being insolvent. And that is what defines insolvency in US CODE for a municipality?
This is nothing more than a get out of jail free card where everyone else must pay or prove their claim of being insolvent!
Perhaps part (ii) of this section is the saving grace here, for it states that City of Stockton must show that it is “unable to pay its debts as they become due”. And that’s where I come in…
You see, the City of Stockton has more than enough fund balances to pay off any debt that “becomes due”, and in fact can pay all of that future debt that will become due off right now. But in order for the court to see this as true, someone is going to have to introduce both the CAFR report and what I have written here as evidence for this case, lest the judge only consider the budget report by the corrupt City Manager and complicit council and mayor.
There are two options for what this term “become due” might mean, and in both cases the City of Stockton is certainly not insolvent.
Scenario #1 – A CURRENT bill (debt payment) is due and is paid with the current assets either collected or invested in the City’s investment funds. Remember, these investment funds are able to be liquidated if there is no cash on hand. After looking at this CAFR, there is absolutely no way that City of Stockton cannot pay its bills with its current fund balances and total net assets.
Scenario #2 – A FUTURE bill in the form of a loan that is suddenly called in so as to be paid in full by City of Stockton immediately. But as we have shown, City of Stockton has more than enough liquid assets to more than pay off all of its debt, but this would required for the City to cash in its liquid investments, call in its own loans, etc.
So according to paragraph (ii) of this US CODE, it appears that City of Stockton cannot even pretend to be insolvent through the word magic of the Federal Government’s codes. But only if someone presents these facts to the bankruptcy court as evidence of the absolute solvency of City of Stockton.
The truth of the matter is that Stockton (as all governments) wishes to retain its debt and interest payments (usury) for future profit on the backs of taxpayers while defaulting on these same creditors.
The conclusion: Ultimately, the City of Stockton has well over $1 billion in just its investment funds that are first listed as assets and then fraudulently hidden by future liabilities that are not current and are not “balanced” with future revenues… the very thing that the City is claiming insolvency for. The council, mayor, and entire appointed staff of City of Stockton should be prosecuted for fraud, and Walter Burien should be hired by the people to implement a TRF system that will literally change the world, end taxation, and benefit all the people.
And this has been a glimpse into every City, County, District, and State in the Untied States who claims to be broke. The whole proclamation of debt and bankruptcy is fraud through creative accounting supported by government standards setting boards that are 100% private non-governmental associations.
Ultimately, since this CAFR report was of the 2010 fiscal year, the only way that City of Stockton could possibly be broke is if massive fraud took place within the 2-year period between this audit and the current case of bankruptcy – where no CAFR has been released to show the actual current assets of the City.
And so the final conclusion is this: No bankruptcy proceeding for any government should be taking place without the publication of the current fiscal year CAFR so as to show the true financial disposition of that government, as the CAFR is so vastly different than the limited budget report of the unelected City Manager.
–=–
I want to personally thank each and every one of you who have read this excerpt, and again would ask you to share this information with all you can – especially the people of Stockton and their council and attorneys in this case!
I’ll say it again… if we do not collectively push to stop this fraudulent string of bankruptcy proceedings from taking place and defaulting on so many American people, pensioners, and corporations by simply hiding the wealth that would otherwise be used to completely get America out of debt tomorrow, then we deserve the economic depression and financial consequences that befall us in such financial terrorism as this – the criminal standard of government accounting.
The people must stand up…
For only the legal codes created by these criminals themselves protects them from themselves.
To learn more about the CAFR, please see my documentaries at:
Or search this blog for the term “CAFR SCHOOL” and for other informative breakthroughs of these reports.
Also, please visit:
.
–Clint Richardson (realitybloger.wordpress.com)
–Friday, April 5th, 2013
–All Rights Reserved Without Predjudice
REALITY BLOG 
paul dahmen
/ April 7, 2013I would like to support your efforts, yet over the last 6 months or so none of my emails to you have been returned. what gives? pablo.damon@gmail.com
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realitybloger
/ April 7, 2013My email was hacked and has been down for a few months.
New email: temporaryinsanity4848@yahoo.com
Thanks…
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Greg W
/ April 7, 2013Damn I’m glad i understand cafrs so I didn’t have to read all that LOL. Good job Clint, 5***** blog post.
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Billy Summercloud
/ April 9, 2013The ‘Bankrupt’ procedure with Stockton is simply an act of Political Foreplay. Foreplay is the act of seducing a target in a sweet persuasive scheme, with the final results ending the same – someone scores, someone gets screwed.
Stockton has been a ‘target’ for quite some time. Just a means of acquiring it had to be put into place. Bankruptcy is a most acceptable term, and less harsh than Take-over, Sell-Out or even America Rape.
Not only is it the largest City take over … so far, its most attractive appeal is its farthest inland deep-channel port. What a score for shipping in the goods.
This is a major piece to loose on our Chess board of America. As Pawns, our aggression is limited. But we can block an attack and provide a presence to win. Check.
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realitybloger
/ April 9, 2013Well said… accept the “acceptable” part! Lol!
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Billy Summercloud
/ July 12, 2014Zugzwang –
Today ‘Chinese investors could bring jobs to Stockton’.
Now who seen that coming? And, why aren’t we all jumping for joy? They claim the new manufacturing companies will provide 60 new jobs! Wait…. with a 300K population and 20% unemployment (reality number), isn’t that just a drip in the Port of Stockton.
Speaking of which, will now become a thriving import facility. Not so much on the US export function. Other than all of our discarded, defective and broken ‘Made in China’ garbage we’ve been buying for years and all of our Freely Recycled Plastics (because we are responsible Americans) and any other recyclable materials and packaging we so devotingly contribute to some billionaire out there, that ships it over to Non EPA Controlled China, then back to US in the form of an even cheaper plastic product.
And coincidentally, the new plants in Stockton will be manufacturing ‘Plastic Bags’. cough..
More good new just in….. ‘Chinese investors spotted, souring over other prospective California locations’. ‘..if you lie very still, they will suspect we are defeated, and land’
I don’t know how many moves you perceive in your game of Chess. But the path becomes most obvious toward the Mate.
Trébuchet
‘If you believe China is a great opponent in today’s silent, stealth War – step back, look deeper, there is a much greater, destructive force at work, of which China is but a Puppet to.’
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Billy Summercloud
/ April 9, 2013Only the Drones will accept the Bankruptcy Plot legitimate. Those with minds will see deceit. Those with Will, fight for nothing less except the acceptable. zugzwang
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http://www.wolfspiritradio.com/
/ April 10, 2013Greetance and Salutations Clint … excellent work as always
… would you care to join this radio host Jaguar on a 2 hour radio show PLATINUM PARTY (every thurs 2-4 pst) http://www.wolfspiritradio.com/ .. idea here is to turn this story into a talking book archive. Just so you know this is an official public notice radio show on behalf of a foreign authority state/local government http://www.sos.state.co.us/biz/BusinessEntityCriteriaExt.do …
The Parent Body Politic is that of Platinum Party of Employers Who Think and Act to Increase Awareness is a registered political party out of BC Canada http://www.elections.bc.ca/docs/fin/Registered-Political-Parties-Information.pdf
running for BC Election this may 14th, 2013 and our object is to challenge the current government on the release of surplus funds ….
Candidate for Vancouver-Langara
ESPAVO SOZO per: Trust
treasurer@platinumparty.org
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Dayna
/ April 22, 2013Hey Clint! I have been reading this essay for what feels like weeks now, and am still not done. It is a lot to take in. But I wanted to show you some interesting things I have found in the Alberta Health Services Financial Reports based on this essay. http://www.albertahealthservices.ca/Publications/ahs-pub-annual-rpt-2012.pdf
First off, if you look on page 88, you will actually see a section on “Non-current assets”. I was probably as surprised as you! But…it doesn’t seem to define what non-current assets exactly are…whatever they are did increase by $309 million dollars tho! I am guessing it is (as listed on page 91) “DEFERRED CONTRIBUTIONS -> Restricted contributions are a key source of revenue for AHS. Through these funds, AHS is able to implement various operating and capital initiatives intended to improve the quality of health care in Alberta. Restricted contributions are subject to timing and purpose restrictions imposed by funding agencies, which are deferred and recognized as revenue in the year the related expenses are incurred.”
And what happens to this money as it sits, awaiting it “intended time”? Invested heavily I’m sure.
Also, not sure why they would add net assets and liabilities together? Other than of course to “balance” the books of course…
I also found this interesting, on page 93:
“CHANGE IN ACCOUNTING FRAMEWORK IN FISCAL 2012-13
The Public Sector Accounting Board of the CICA (PSAB) issued a framework for financial reporting by government not- for-profit organizations (GNFPOs). As provided by the Public Sector Accounting Standards (PSAS), AHS as a GNFPO had the following options regarding the choice of accounting framework to adopt:
• to adopt the current public sector accounting standards used in Alberta (the same as what Alberta Health and Wellness is currently using) or
• to continue using the former not-for-profit accounting standards with some modifications (very similar to what AHS has been using in the past).
AHS was directed by Alberta Health and Wellness (AHW) to adopt the first option. AHS will adopt this framework effective April 1, 2012 and therefore the Consolidated Financial Statements for the periods ended June 30, 2012 and thereafter, will be under the new framework.
The five-year funding commitment with AHW has not taken into consideration this change in accounting framework. The impact estimated at this time for the change in accounting framework may create a projected accumulated deficit at March 31, 2015. This possibility has been discussed with AHW and will be monitored as the impacts of the change in accounting framework are finalized and as future financial results are realized.”
But then it says “AHS has developed a PSAS transition plan and has identified the following key differences and issues in the standards that will impact the financial statements:
• Sick leave obligations – Under the Public Sector Accounting Standards (PSAS) will be required to record accumulating non-vesting sick leave obligations. AHS will record this adjustment retroactively with restatement to relevant prior years.
• Controlled foundations – Under PSAS, AHS will be required to consolidate its controlled foundations currently disclosed in Note 21 (c) (i). AHS will record this adjustment retroactively with restatement to relevant prior years.”
Non vested sick leave means they ARE NOT required to pay sick out leave that is not used by employees. To me that translates into MORE dollars not less.
Then the Controlled foundation, of which you can find more information of page 134, are both in VERY healthy positions, with over $100 MILLION in Net assets. So not quite sure how these will add up to a “projected accumulated deficit at March 31, 2015”.
Anyways just wanted to say thanks for sharing this essay, it has helped me uncover a few interesting things in the tax funded health care system of Alberta, without even reading 1/100th of the document!
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realitybloger
/ April 22, 2013Absolutely. I only hope that more like you take the plunge and uncover these lies and obfuscations.
-Clint-
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Dayna
/ April 23, 2013The thing that got me looking at this in particular is the Emergency Medical Services (which I utilized, not at my own behest, when my child was bit by our dog). Even tho the EMS is taxpayer funded, I got a bill in the mail for “treatment” for $183. Even tho $379 million dollars was allocated to the “Ambulance” budget! The thing that really gets me here, is that for administration, IT and “support services” for Alberta Health Services they budgeted a combined $2.295 BILLION dollars! But they can’t cover the costs of an ambulance showing up at my house to treat my child. They didn’t even transport her! If I had transported her myself in the first place, the “treatment” would have been “free”. Makes no sense to me.
Oh wait, yes it does.
“Provincial Framework for Emergency Medical Services
In March 2012, Alberta Health Services signed contracts for the provision of emergency medical services (EMS) with the for-profit EMS operators. ” (http://www.health.alberta.ca/documents/Annual-Report-12.pdf_
So why is $379 MILLION of publicly funded money going towards “Ambulance”?
I’m really feeling your frustration when I see these things Clint!
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http://www.wolfspiritradio.com/
/ April 25, 2013Dayna
Please see above http://www.wolfspiritradio.com/ reply and contact us,
Candidate for Vancouver-Langara
ESPAVO SOZO per: Trust
treasurer@platinumparty.org
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