Oxnard, Ca. faces a bind with a $150-million bill to fix cracking and crumbling streets and no way to pay for the work without cutting services. City Hall attempted and failed to get voter approval to a bond measure for street repair. Meanwhile, it had borrowed money against almost all of its public property, which includes a soccer stadium, three fire stations, and its library - even the Police Department’s evidence-storage building.

The Los Angeles Times reports that, “with virtually nothing left to hock, the city came up with an ingenious way to take on more debt: it borrowed against future revenue by ‘selling’ its streets to a city-controlled financing authority.”

Oxnard’s public works director, Ken Ortega, said, “we had way too much construction work and way too little money. We really pulled every creative financing string we could to come up with the money.”

Desperate for funds in a shattered economy, local governments throughout California are digging themselves deeper into debt, and those cities are doing so through exotic financing schemes designed to avoid the need for voter approval.

Last year, California cities, counties and other agencies borrowed $54 billion nearly twice as much as in 2000, and government are burdened by the load.

According to the LA Times, “statewide, 24 cities and public agencies missed scheduled debt payments this year or were forced to tap reserves or credit lines to stay current, records show. That’s up from nine in 2006, according to the bond industry’s self-regulatory agency.”

In May, the city of Vallejo, burdened with huge debt obligations, became the largest city in California history to file for bankruptcy protection. Among the other cities and counties staring at red ink are Chula Vista, Orange County and Palmdale.

Much of the borrowing binge had been made possible by complex financial schemes similar to what Oxnard used. The nontraditional debt methods cost more over the long-term, since they are considered riskier than general-obligation bonds that governments stand fully-behind. Therefore investors demand higher interest rates.

To read the entire article from the Los Angeles Times, link here:

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