An Oct. 15, 2009 Santa Barbara News-Press article addresses the Goleta Water District CIT bond issue and provides CIT options presented to the district for consideration. Understanding the CIT need to restructure the current pay-out dates for the district investments between 2013 and 2017, at a guaranteed rate of 7.0 percent, instead of 2010 and 2012, it appears that they are making a good-faith effort to ensure the district’s investments. By accepting this offer, the district would agree to accept a refinancing of the current bonds, paid over an extended period of time at a higher earned interest rate than currently being received.
There are additional options presented by CIT for consideration, all of which offer opportunities to prevent the district from incurring deficits on its investments. It is obvious that CIT, in an attempt to increase their immediate cash-flow requirements by refinancing existing bond disbursements and guaranteeing bond value to its investors, is acting in a responsible manner. Is there a risk involved to the investor? The answer is yes! Is there a potential gain to the investor? The answer is yes. Is the financial community rebounding since the crisis in January and are stock values rising? The answer to this question is also yes.
Board president Bert Bertrando is recommending that the district sell the bonds at their current value. This action would guarantee an immediate loss in value of approximately $450,000 and the immediate elimination of annual earnings interest of approximately $85,625. While Bertrando voices that it is his fiduciary responsibility to protect the district from further investment losses, it is also his fiduciary responsibility to understand the financial safeguards against any loss to the original investments through appropriate investment counsel and recommendations. The district’s own investment brokerage firm, Great Pacific Securities, is suggesting that the potential of greater bond earnings is available through restructuring.