What is a lien:
A lien is an encumbrance on one person's property to secure a debt the property owner owes to another person. The statement that someone's property is "tied up" describes the effect of liens on both real and personal property. By voting in a general obligation bond for over three decades until paid off, you have legally tied-up your property during that term. Source: The Free Dictionary
What is a bond:
The contract between the borrower and the lender. By approving this debt on August 26, 2014, you (the property owner), are promising to repay the monies borrowed. This will be done via taxes. The Lake Worth 2020 General Obligation Bond is for $63.5 million along with a humongous debt service with a final payment in year 2049. It is estimated that you will be paying $131 million by the end of the term. Whoever holds the deed on the property that this bond affects will be obligated ("tied-up") for 34 years.
Bond Ratings:
In the purest sense, the credit analysis of a General Obligation bond centers on two issues: (1) the municipality’s willingness to pay and (2) its willingness to pay its debts in a timely manner. The two main ratings companies for municipal bonds are Moody’s and S&P. The basic difference between the ways that the two ratings companies analyze bonds is that, while Moody’s concentrates on debt burdens and debt ratios, S&P focuses on the socioeconomic base of a community (e.g. per capita growth trends, total personal income). We already have been told that we are among the poorest city in Palm Beach County with 2,000 foreclosures and abandoned properties. These properties, owned by banks that have not foreclosed, will generate NO taxes towards this obligation. Source: The Muni Bond Adviser
According to our Finance Director: "The city does not have a current debt rating for we have no outstanding debt for our general government operations." So, look for Lake Worth to pay a higher rate based on Lake Worth being known for its poverty, the number of foreclosures and the number of abandoned properties.
If Property owners can't or don't pay
If local property owners do not pay their property taxes on time in any given year, a government entity is required to increase its property tax rate by as much as is legally allowable in a following year to make up for any delinquencies. In the interim between the taxpayer delinquency and the higher property tax rate in the following year, the general obligation pledge requires the local government to pay debt service coming due with its available resources. Source: Wikipedia
Security Lien:
If you don't pay, you could be foreclosed upon. Land-based municipal bonds have many of the characteristics of real estate loans. However, the security lien is senior to all real estate loans on the property, because the bonds are secured via the property tax lien. Second, the funds from the bond issue are customarily used to fund public infrastructure (streets, sidewalks, sewer and water lines, etc.) that directly benefits the property responsible to pay off the bonds. Therefore, the bond proceeds directly enhance the value of the property. And that is what Lake Worth wants you to believe. Source: Fidelity
Finally, if some property owner(s) should default on this tax, it is customary and highly likely that a judicial foreclosure process will occur. You don't/can't pay, look to lose your property.
1 comment:
We need to kick these crazy,greedy Commissioners out of office. And we need to fire city manager Mike Bornestein ,along with some others on staff!Maybe they can all become travel agents. They've sure traveled enough.
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