Bell Tolls for California Cities and Their Creative Borrowing Schemes

"Desperate for cash in a sputtering economy, local governments throughout California are digging themselves deeper into debt, and many are doing so through exotic financing schemes designed to sidestep the need for voter approval."

"California cities, counties and other agencies borrowed $54 billion last year, nearly twice as much as in 2000, and governments are straining under the load."

"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."

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

"Much of this borrowing binge was made possible by complex financial schemes such as the one Oxnard used. These nontraditional debt vehicles cost more over the long run because they are considered riskier than general-obligation bonds, which governments stand fully behind. Investors therefore demand higher interest rates."