$12M notes sale today is a puzzle

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Late Tuesday evening, PT received an email from a reader inquiring about a curious document they noticed on the city's website: A Notice of Intent to Sell $12.6M in Anticipatory Notes, and wondered what that was about. The document is a one-page PDF outlining who will be doing what THIS MORNING in the online auction of these notes.

PT recently visited a nun friend whose convent has been sold. The sisters gave a 'going-away' party for friends and supporters. PT judged the sisters were fond of jigsaw puzzles, seeing several in various stages of solution on adjacent tables in their parlor.

A perfect metaphor for the Anticipatory Notes sale? PT will let you decide, gentle reader. Here are the pieces PT has found. How do YOU think they fit together?


Why Anticipatory Notes? When borrowing money, as PT understands it, a municipality may either commit the town to paying bonds at an upfront interest rate over a long term or use anticipatory notes (which must be rolled over annually or converted into bonds) as a bet that future interest rates will be more favorable to the community and can be locked in at a better time.

How did this all get started? The online sale of $11.7M in anticipatory notes last November was the genesis of Plainfield Today, as you can see from the first posts ( "Plainfield offers $11.7M in notes online, a first") and ( "Online Notes Auction Goes Without A Hitch"). The money was earmarked for a new Senior Center, road improvements and various capital purchases. The Senior Center money is still 'parked' in a designated account -- or WAS, last PT knew.

Why not bonds? Good question. When the new administration took office in January, there was a great deal of disparagement of Mayor McWilliams' administration -- and Administration and Finance Director Ron West in particular -- for having used the tool of anticipatory notes INSTEAD OF bonds. The buzz at the time was that the new City Administrator, Carlton McGee, who had previously been Business Administrator in Jersey City, was dead-set against them, supposedly vowing he would NEVER use anything but bonds. West was not carried over to the new administration, the dustup over the anticipatory notes cited as the reason.

Why $12.6M? Last November's note sale was for $11.7M. Why is today's sale of notes for $900,000 more? If this is just a 'rollover' of last year's anticipatory notes, wouldn't the dollar amount be the same -- $11.7 million?



Why wasn't the offer online as stated? The city's Statement of Intent said that the information package would be online "on or prior to Tuesday, September 12." This is what got PT started. First thing after reading the city's statement was to look for the online documents. This was Tuesday evening, about 10:30 PM. Nada. Waited until 12:30 AM. Nada. Captured a screen shot for file. On Wednesday, PT called the number in Chicago given for Charlotte Knight-Marshall, listed as the city's financial adviser. Many ringy-dingies later, got a recorded message. PT left word that the online documentation could not be found and would someone please call back. No callback, but PT noticed about 8:30 PM WEDNESDAY that the documentation was finally online. Only a day late. Giving investors about 15 hours or so to decide on the investment. Does that mean investors don't rely on this stuff, and that it's all smoke-and-mirrors? The documents are available as a hefty (6+ MB) PDF file at the Munios website. You will have to register (free) in order to read or download them. Easiest way is to use the map to locate NJ, then scroll through the alphabetical listings to 'City of Plainfield.'

So who is TKG? The city's financial adviser is given as TKG & Associates, 440 North Wabash Avenue, Suite 3909, Chicago, IL 60611. Not finding the documents online Tuesday evening, PT turned to...Google. What else! The devil finds work for idle hands. Googling TKG turned up a few interesting bits of information:

• The current Chicago business listings website has a different address from Plainfield's Letter of Intent;
  
  
• The firm is listed in Houston and San Francisco as having LOCAL business addresses, but calls to the listed phone number get a disconnect after one ring;
  
  
• The firm is listed with the San Francisco Human Relations Commission as not only WOMAN and MINORITY owned, but as a LOCAL business;
  
  
• The firm has participated in several governmental bond issues as an adviser to the issuer in various locations around the country: Kansas City, Houston, St. Louis, San Francisco, and Jersey City.

JERSEY CITY?! Ding! Or maybe ka-ching!? Turns out that Ms. Knight-Marshall was the financial adviser to Jersey City when Carlton McGee, as Business Administrator, was involved in trying to arrange an enormous restructuring of Jersey City's debt -- blocked at the time by Mayor Cunningham's opponents from the Hudson County Dem machine.

So how did TKG get selected for Plainfield? Assuming the Council approved the selection of TKG, were they apprised of the prior working relationship between Mr. McGee and TKG? And is the current relationship an 'arm's length' one?



When did the Council approve the Notes auction? No one seems to recall a public discussion at any Council meeting of this Anticipatory Notes auction. We may have missed it. But if there was a discussion, did the Council adopt a resolution? Wouldn't they have to in order to commit the City to a deal, especially if the dollar amounts year-to-year do not match up?


Why no bond issue (2)? So, if Mr. McGee believes BONDS are the better way to go, why hasn't the City gone down that road instead of rolling over the notes? If indeed that is what is being done. Some suggest that the process -- which PT knows is lengthy, maybe needing 3 or 4 months of preparation -- just escaped the administration's notice until it was TOO LATE to bond. Or is there another explanation?

So, there are the puzzle pieces. Good luck!

Let me know how you make out.

-- Dan Damon

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