Federal Bonds to the Rescue of Three Cities in San Bernardino County
July 29th, 2009
Federal bonds hold out hope for rescue to three cities in San Bernardino County. $50 million will be available as loans in the form of low interest bonds – it being a part of the federal stimulus plans.
The cities eligible for the loans are San Bernardino, Ontario and Fontana. The money has to be utilized in the “Recovery Zones”. The latter are neighbourhoods with high concentrations of poverty, joblessness and residential foreclosures. Jim Morris the chief official attached to the Mayor of San Bernardino, Patrick Morris said, “It’s another incentive, another tool in the tool bag by which you can try to stimulate the economy in an otherwise down economy.”
Two kinds of bonds were created by the federal stimulus – one was for the use by the governments and the other meant for private firms. The package permits counties and cities across USA to take bond debts totaling to $10 billion. Companies can take $15 million bond debt.
Fontana is qualified for $5.4 million and $8.1 million in public and private bonds respectively. Ontario is qualified for $7.1 million and $10.7 million in public and private bonds respectively. San Bernardino is qualified for $7.1million and $10.6 million in private bonds.
The federal government is not providing for the loans but is helping the entities pay the interest. It thus amounts to a cheap way to borrow dollars for jumbo projects. Grant Yee the Finance Director of Ohio City said, “It’s saying, `Here’s a low-interest credit card you can use if you want, but you have to use it in areas that need it. But you have to ask yourself, do you I really want to borrow the money?”
Morris together with Yee feels that the measure does not have enough incentive to give the go to cities and firms to start on new project. The plan however can help the existing ones to take off and be pulled out from the state of limbo they have fallen into. Many projects have paused half way causing untold damage to the economy. One of them is a plan to develop a theatre that got stalled because of lack of finance. Morris said, “In the private credit markets, the spigot is turned off.” He added that the bonds carrying low interest “may make a significant difference to a project that’s already planned and couldn’t get financing.”
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