Certificates-of-participation are political and financial deception
Certificates-of-participation, at great expense to a healthy government budget, at great expense for all tax payers, are far too expensive to ever consider in the first place.
With certificates-of-participation we’re spending approximately 3 times the tax dollars per dollar of actual service, an enormous waste of government revenue, an enormous waste of tax-payer money.
We lose 60-70% of future budget dollar per dollar of certificate-of-participation debt that we participate in — money taken from the tax payers and then given to Chase bank and all the other banks.
Colorado has approximately $5 billion in this very expensive form of debt. Colorado has been here for 150 years now; we should have zero debt by now.
Denver has much more of this debt now than they did when Mayor Mike Johnston took office. We’re researching the total amount of this form of government debt owed by Denver, we’ll post this soon.
Financial policy should not require complex financial engineering, too much financing is too much “financing” (scam). The People lose, the banks get more money and power.
This form of debt is interestingly stupid, an enormous waste of tax-payers’ money. It’s worth a quick read.
Let’s take a look at Investopedia
Black ink is Investopedia
Red ink is my reporting, Jason Bailey
Investopedia
Certificate of Participation (COP): Definition, Uses, Taxation
By JAMES CHEN, Updated August 17, 2024
Reviewed by THOMAS J. CATALANO
What Is a Certificate of Participation (COP)?
A certificate of participation (COP) is 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. Certificates of participation are, therefore, secured by lease revenues.
A certificate-of-participation is a type of financing in which Colorado’s Governor Jared Polis and Denver’s Mayor Mike Johnston can avoid Tabor laws that require any debt longer than one year to go to the voters for approval.
The State of Colorado and the City of Denver are using this financial instrument at an alarming rate because they have tight budgets and they just want to keep spending money that they do not have.
Key Takeaways
- A certificate of participation (COP) allows investors to participate in a pro-rata share of a lease-financing agreement.
- The very idea that our State and local governments sell-out to “investors” makes no sense to begin with.
- A lease-financing agreement is used by a municipality or local government to acquire real property.
- Made especially for State and local government (wow, so sweet of finance and banking to care so much about us).
- As opposed to bond participation, COPs pay investors via lease revenues as opposed to bond interest.
- Money from the teachers, the nurses, the restaurant workers, the retail workers, the truck drivers and then given to Chase bank and all the other banks. Certificates-of-participation waste even more hard earned tax payer money than using bond debt.
- A certificate of participation is also a tax-exempt lease-financing agreement.
- Another tax break for the banks and billionaire “investors” (takers) who own the “certificates” (stock). They literally own our common structures with these “certificates” (stock). Our common wealth is being owned by the banks.
Understanding a Certificate of Participation
A lease-financing agreement is used by a municipality or local government to acquire real property. Under the agreement, the local government makes regular payments over the annually renewable contract for the acquisition and use of the property. A lease-financing contract is typically made available in the form of a certificate of participation.
Our Greedy and predatory financial system created this financial crap especially for one of their very profitable market segments – our local government. We the People, we lease public infrastructure, and they, the banks, they own.
A municipal government will typically issue bonds from which the proceeds from the bond investors will be used to undergo a project. The certificate of participation is an alternative to municipal bonds in which an investor buys a share in the improvements or infrastructure the government entity intends to fund.
Government is where common good should happen, not private profit/ social cost as we lease public resources from rich “investors” (takers). If you believe in the idea of government to begin with, then the very idea that we sell shares in public infrastructure makes no sense to begin with.
The authority usually uses the proceeds from a COP to construct a facility that is leased to the municipality, releasing the municipality from restrictions on the amount of debt that they can incur. The COP contrasts with a bond, in which the investor loans the government or municipality money in order to make these improvements.
“Releasing the municipality from restrictions on the amount of debt that they can incur.”
Exactly. And even though these financial predators are calling it debt, they just pretend its short-term debt, less than one year. The politicians and bankers call it short-term because the local government is not technically forced to “renew” the lease on a yearly basis.
Of course, the local government will renew the lease. The local government is generally, most every time, going to renew for 20 years, 30 years, whatever the term of the deal is.
We all know it’s a long-term deal to begin with or the two parties would never entertain this financial crap to begin with. Calling it debt “less than one year” is just deception, financial deception.
The financial reality (what actually happens) of the situation is very expensive, far too expensive, long-term debt.
COPs and Taxation
A certificate of participation is a tax-exempt lease-financing agreement that is sold to investors as securities resembling bonds. In a COP program, a trustee is typically appointed to issue the securities that represent a percentage interest in the right to receive payments from the local government under the lease-purchase contract.
Bank profit from certificates-of-participation is tax exempt. Oh this makes so much sense so that the bankers have even more money to trickle down. If trickle down was real wouldn’t the financial divide get smaller over time.
Our government will not receive tax money on the profit taken by the “investors” (takers). Our government, our common wealth, loses tax revenue as private profit continues to grow without taxation.
Tax money is the only thing that pays for all things government. Debt is not revenue, it never will be revenue, as a matter of fact debt is the exact opposite of revenue since every time we build a bridge with debt we burn twice as much revenue, and more. Debt cuts our revenue in half, half for actual service, half for debt service.
Tax-free government debt is exactly backwards. Tax money is the only way to revenue for a government budget.
Investors that participate in the program are given a certificate that entitles each investor to a share, or participation, in the revenue generated from the lease-purchase of the property or equipment to which the COP is tied. The lease and lease payments are passed through the lessor to the trustee, who oversees the distribution of the payment to the certificate holders on a pro-rata basis.
“Given a certificate” Another name for stock. Our governments are giving in to banking Greed and selling our future, or should I say, leasing our future – from the bank. Wtf.
Special Considerations
Certificates of participation do not require voter approval and also can be issued more quickly than referendum bonds.
No voter approval? Then who will the politicians blame for all that debt? We’ll see. Stay tuned. Time will tell.
In addition, COP financing is more complex and generally resembles bond financing. An underwriter of the COPs will be required, as will various fiscal agents.
“More complex” – this means another layer of leech.
“Various fiscal agents” – this means double the financial payroll.
All financial expenses are overhead and most financial overhead is a waste of valuable budget money – tax payer money – same thing. Most financial overhead should be reduced by 80% because it’s just financial crap.
An official statement providing disclosure to investors must be approved by the municipal government and, in most cases, the government must contract to make continuing disclosures to SEC Rule 15c2-12 under the Securities Exchange Act of 1934.
More overhead – more forms, more paperwork, more accountants, more attorneys, more insurance corporations, more banking, more financial predators taking too much money. We will all be better off when we reduce the enormous financial crap by 80%.
COPs are also used as credit instruments by banks to raise funds from other banks in order to ease liquidity. Short-term funds are raised by issuing participation certificates that involve sharing credit assets with other banks. The rate at which these certificates can be issued will be negotiable depending on the interest rate scenario.
Wow, yet another layer of leech between the banks. Another way to try to out-do the other person and get his money before he gets your money. Another way to trickle money up. Money gets money, money uses this money to get more money, the rich get richer and the poor get poorer. Every coin has two sides.
A rising tide lifts all boats relies on gravity and other scientific discoveries and innovations. Well money couldn’t care less about gravity and uses science and innovation to take more money. A rising tide lifts all boats is because of science, discovery and innovation.
What Is COP Debt?
COP debt is a certificate of participation debt. This type of debt is issued by state authorities and secured by revenues from leases; either equipment or property/facility. This allows state authorities or local municipalities to raise financing for projects within the jurisdiction without having to issue bonds/long-term debt.
Yes, certificates-of-participation are debt – exactly.
Yes, Governor, yes, Mayor, these certificates-of-participation are long-term debt as these lease payments are a liability that will be paid. The terms are paid, 20 years, 30 years, they’re generally fully paid, almost without exception.
Our government officials, such as Denver’s Mayor, Mike Johnston, will say (does say), that these “certificates” are not long-term debt.
Why Would Someone Buy a Bond Over a Stock?
Investors that choose bonds over stocks are looking for a guaranteed and predictable income stream, which bonds pay out at regular intervals. In addition, if bonds are held to maturity, then an investor receives back the full principal amount. Bonds are a way to receive income while preserving the initial investment.
All forms of government debt stem from the same problem – our government does not have money to buy something so rather than waiting or cutting back in other areas, our government continues to borrow more money from Chase bank and all the other banks even though this debt is far too expensive in terms of interest, fees, and other expenses.
“Bonds are a way to receive income” This income, going to the Wall-street banks, is coming from the teachers, the nurses, the restaurant workers, the retail workers, the truck drivers – and then given to the Wall-street “investors” (takers).
What Are the Advantages of Municipal Bonds?
Municipal bonds are tax-exempt, they are used for positive ends, such as building infrastructure within a locality, they are fairly low risk with a low default rate, and they are also fairly liquid investments.
“What are the advantages of municipal bonds” This question refers to the advantages for the “investors” (takers) – not our government – not the taxpayer.
If building infrastructure is a positive end, and it is, then we should not use debt to build infrastructure as we build twice as much infrastructure, per tax dollar, when we do not use debt to get it done. Basic math my friends.###
Conclusion
The idea that we “finance” our government (take on more debt) makes no sense to begin with. Revenue is the only thing that pays for anything government.
All types of government debt are the opposite of revenue as when we build a bridge using debt we need twice as much revenue, and more, per build. Basic math.
With certificates-of-participation we’re spending approximately 3 times the tax dollars per dollar of actual service.
The politicians, the bankers, they will make up fake numbers, fake property values, fake future values, they will lack to account for the overly expensive financial overhead to get the deal done, they will argue that 3 times the tax dollar per spend is too high.
They will publish an artificially low, fake, “True Interest Rate” (so Orwellian) – made up from a bunch of financial nonsense. The enormous costs of this debt are covered up with fake financial nonsense.
Enormous amounts of financial overhead are required to think-up, type-out, and actually do such a stupid form of long-term debt, and then add this to the enormous amounts of debt service built into the lease price.
Excessive complexity comes from our financial system in order to take even more money from the People and our government. Financial predators sucking up all the money so that they can buy that third home and fourth home.
Certificates-of-participation are long-term debt, very expensive debt, far too expensive to ever be worth considering. Certificates-of-participation feed profit, private profit, at great expense for all tax payers. Finance always loves another layer of leech.
We need to protest this terrible waste of money as the Colorado courts have sided with the financial predators (courts being part of government and government always wanting more money and all).
Certificates-of-participation, legal or not, are a rip-off to begin with, and the financial predators get away with it.
This form of financing is comical, just foolish financial garbage. We’re in a vortex of debt that needs to be addressed immediately. Zero actual service comes from every dollar of debt service.
A quick interesting read, only 2 pages, Issue Brief from Colorado’s Legislative Council on the history of certificates-of-participation.
