If you have experience in finance or just look up online the definition of “pledged assets”, you will note that typically a pledged asset (real estate) is an asset for which an encumbrance against the property is recorded for the benefit of the lender for the purpose of securing a debt; the lender maintains its right to possess the asset until the debt is paid in full or the lease expires, but never takes ownership of the asset. Pretty standard stuff when you think about this.
So, how does this apply to the City of Riverside, you might ask? I’ve attached a list of City Assets that have been pledged as a part of various financings that the City has undertaken- the list is 29 assets and as you can see, we have a number of very important facilities that have been pledged. The obvious question that comes to mind based upon the standard definition of “pledged assets” is this: If the City defaults on these payments, are we going to lose a Fire Station or two??
Fortunately, the bottom line answer for public entities (like the City of Riverside) in this regard is “no” because the California Constitution doesn’t allow for it. The assets are pledged as a security enhancement for the lender, but due to the limitations of the State Constitution, the lender may only access the property for the term of the lease. The lender’s specific remedies involve taking possession of the property and reusing it for another purpose, but include only limited facility modifications and reuse for a different purpose… and the property returns to the City at the end of the defined lease term. There is no provision that would “hand the keys” over to a third party permanently. And given the importance of these facilities, the City is very motivated to make certain we make all of our payments.
If you don’t subscribe to “15 Favorite Things to Do”, I highly recommend that you consider it (you can sign up at www.inlandarts.com); just a couple of great items from this-
- Terrific Exhibit: 2012 UCR 1st and 2nd Year MFA Exhibit at the Riverside Arts Museum;
- Riverside Reads Farewell to Manzanar at the Riverside Public Library
Have a look at the website for more details… and stop by downtown Riverside this weekend for the “Show and Go” car show (May 4th, 5th and 6th).