Milford's, Comprehensive Audits Indicate Excessive Liabilities

The idea of Muni debt came front and center yesterday morning when I tuned in to CNBC and heard Merideth Whitney of the Meridith Whitney Advisory Group. There has been much controversy over the health of Municipal bonds, and Bond defaults. These defaults could total in the 100's of billions throughout America.

There has been talk and concern over our Cities bonding debt, and when the new Woodmont Firehouse was built, there was no groundbreaking ceremony. Some conservatives in town said that the ceremony was skipped because they did not want to "draw attention" to the fact that our Mayor and Democratic Boards agreed to Bond another $4M Dollars to get the site built.

The problem prompted my attention to pull the comprehensive audit reports available on the Milford city website at this link http://www.ci.milford.ct.us/Public_Documents/MilfordCT_Finance/statement/
The sections depicted above come from pages 14 and 15 of the Balance Sheet for the city of Milford. These are the Comprehensive Audited Financial Reports or CAFR's. They are not to be confused with the Mayor's budget presented to the public each year at City Hall. Members of the public are not freely given CAFR's they have to do some work to get them. Thankfully Milford puts them on the Town Website.

The graph below (Double Click to Enlarge) that I constructed for you all today shows a trend that any accountant would be very concerned with. That trend is the one highlighted for you below. It represents annualized growth of our "Total liabilities" at an average rate of 17.5% per year. Should this trend continue into 2011 the total city liabilities can be estimated to top $283M or in other words about 100% of all our assets in 2007.

There is however a paradox, because we have no idea what the city is claiming as "Depreciable assets." What we do know is that they keep growing at a rate of 6.6% Vs. Liabilities growing at 17.5%. The present pace will have the city of Milford Bankrupt, whereby Assets exceed all liabilities, by the year 2014-2015.

Serious attention has to be given to this growing imbalance. The era of of what departments need built and what services must be rendered and the usual way of doing business must be fundamentally changed. The tables presented by our towns comprehensive audits are challenging to deal with to say the least. The proper ratio of assets to liabilities is keenly out of balance and when those liabilities are left unchecked to grow as they have in the last Four years we are headed for some tough times.

Candidates running for mayor especially should address these imbalances and offer solutions that demonstrate a commitment to the future of our city. In the coming years the job of our Mayor will be much more than a Glamor Job, it is going to have more in common with a reign of bankruptcy rather than a keeper of misplaced promises. Video clip below is from CNBC's Kutlow and Kramer. It pertains to the interview of Meredith Whitney who is warning bond holders on the risk of Municipal Defaults.

To Hear The CNBC interview Click HERE

First Time Homeowner Credit Stirs Milford Real Estate Market

The Obama administration introduced many capital injections into our economy. From "Cash For Clunkers, Unemployment Extensions, Banker Bailouts, and the First Time Home Buyer Credits."

The "Home Buyer Credit" gives $8,000.00 to first time home buyers who have decided to purchase a modest home. Realtors have been pushing otherwise unwilling buyers to get into that first house and quit renting. The $8,000.00 credit has been a great selling tool and we have seen "ups and downs" in the property transfers here in town.

The property transfers seem to have either less than ten properties sold or in some cases 20-30. Their seems to be very little consistency in the numbers from week to week.

This is especially true on the lower priced homes that have become more affordable thanks to the homeowner credit. This program, although a great program for a new buyer has had a significant effect. This effect has resulted in artificially skewing real estate numbers in Milford and putting our Real Estate marked into an uncertain future.

If anyone looked at the stats they will see that smaller energy efficient homes have retained their value much better than larger three and four bedroom homes that have actually declined significantly in value.

A local realtor I spoke with said that the "First time home buyer credit" has been a stellar program and has helped sell many homes that otherwise may have not been sold. She fears that when the program ends and without additional incentives or improvement in the overall economy home sales may return to being sluggish.

This is an assertion that is, some what contradicted by a Yale New Haven professor who said this months increase was good news, and that the uptick in markets is better news. However, we should not go and celebrate a rebirth in the Real estate market just yet because the economy is still on shaky ground. He believes that we may be entering a new bubble and confidence may be the answer not the First time Home Owner tax credit.

Robert Schiller was formerly a quantitative forecaster of the real estate market indexes and he said that the monumental shift in the index to the upside has caused him to put his expertise aside. Shiller states the numbers are beyond what he was taught as a forecaster and until we see solid momentum we may be looking at the beginning of another bubble.

While we all instinctively know things in the Real Estate market are different, those out there looking to develop property for profit, or relocate to a new house should consider their actions much more carefully. The Real Estate Market will continue to be volatile, and since for many buying a house is likely to be the largest financial transaction in a persons life, the extra due diligence could not hurt.

(Photo of quantitative forecaster Robert Shiller of Yale University)

Link on this page goes to video

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Schiff Adds His Thoughts On Real Estate
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Take Our Mayoral Election Poll

In the box located on the top right corner of this page you will find a poll bearing the names of all four candidates for Mayor in Milford CT. Take the time to place your vote in the box. The more people who vote the more likely we will get an accurate feeling of who is going to win this November 3rd.

The poll will be active right up until election day. If you do not live in Milford but know someone who does, ask them who they think the best candidate is and vote on their behalf. You can only place one vote per IP address, so please vote honestly and encourage your family and friends to do the same.

The purpose of this poll is to come up with an accurate way of predicting election outcomes, and coming up with margin of errors. If we can make it work it will be used again in the state election for our local Milford representatives. Thanks for voting in advance.

To find your polling location in Milford, CT refer to the bottom of this page for the new innovative gadget that tells you where to go and vote. Or you may just click HERE.