palani
23rd October 2012, 05:26 PM
Sign that things are getting desperate. In what world does anyone think these bonds will EVER be repaid?
http://www.voiceofsandiego.org/app/credentialedimg/poway_test2012.jpg
http://www.nctimes.com/business/budget-tax-collector-blasts-poway-unified-bonds-calls-for-reform/article_5dc53f49-9551-5dc3-bc4c-a7319a4f6f62.html
Poway Unified School District's exorbitantly expensive bonds shouldn't be allowed by law, Dan McAllister, San Diego County's treasurer-tax collector said Tuesday.
Last year, Poway Unified issued $105 million of bonds that will eventually cost taxpayers $982 million to fully repay.
The financial structure of the bonds allows Poway Unified to avoid making payments on the debt for 20 years, and then repay it in full over a subsequent 20 years. In an era when school districts and cities are getting loans at interest rates of less than 2 percent, Poway Unified will pay an average annual rate of 7.45 percent, and it will have a repayment to principal ratio of 9.5-to-1, according to bond issuance documents.
McAllister wants the state Legislature to change the law to give county governments approval power over local school bonds, and to forbid such long repayment times.
"The county usually gets 1.5-to-1 (repayment ratio)," he said. "The balloon payment that comes due at 20 years, forces 40 years of payments (into) 20 years. That's an onerous burden on the taxpayer."
Poway Unified's bond structure, called "capital appreciation bonds" are common among California school and higher education districts. Escondido Union High School District, Oceanside Unified School District, and San Marcos Unified School District are also among six local districts that use them, McAllister said.
The MiraCosta, Del Mar, and San Dieguito districts will all have bond measures on the ballot in November's election, though the ballot language was not yet available Tuesday. MiraCosta Community College District has committed to not using capital appreciation bonds.
Poway Unified's bonds stand out because they funded a new school building entirely with these bonds, and voters agreed to a deal in which the school district can't repay early or refinance. Neither Poway Unified's spokeswoman nor the president of the Poway school board returned calls for comment by deadline.
Some districts, such as San Marcos Unified, used a blend of bonds. Last year, San Marcos Unified issued $167 million in traditional bonds, and it will issue $65 million next year, all of which will be paid off at a ratio of 1.7-to-1. But in 2015 it will issue $55 million in bonds that it won't start paying until 2046. Those bonds will cost $350 million to repay, or a ratio of 6.4-to-1.
Districts like this bond structure because it lets them manage their annual payments. San Marcos Unified's annual payments will rise steadily from $5.7 million to $40.1 million between 2012 and 2045, but for the subsequent seven years the bills will hold steady at $44 million, according to bond issuance documents. Poway Unified used the structure so it could start making payments only after it had paid off older bonds, allowing it to avoid raising taxes.
McAllister and other observers don't oppose all capital appreciation bonds, just ones with such a long repayment timeline.
"They do fit within the model of financing for school districts if it's done appropriately," said Chris Cate, a vice president for the San Diego County Taxpayers Association, a nonprofit.
Cate said capital appreciation bonds with a five-year repayment work fine, but otherwise the interest rates are too high and the terms too restrictive.
The taxpayers association supported the Poway Unified bond measure in 2008, but Cate said the group didn't have the correct information when it made its endorsement.
McAllister said California law places a limit of 25 years on school borrowing, but that local school districts such as Poway Unified and San Marcos Unified sidestep the limit by making it a government bond, which has a 40-year time limit. He'd like to see that loophole closed.
He'd also like to see a rule requiring the county Board of Supervisors, the county superintendent of schools, or the board of a community college district sign off on all bond documents for school districts.
"We would like to see the state Legislature take this issue up, but the soonest they can do that is in January," he said.
CORRECTION: The Escondido Union High School District has capital appreciation bonds. The story originally said incorrectly that the Escondido Union School District had the bonds. We apologize.
http://www.voiceofsandiego.org/app/credentialedimg/poway_test2012.jpg
http://www.nctimes.com/business/budget-tax-collector-blasts-poway-unified-bonds-calls-for-reform/article_5dc53f49-9551-5dc3-bc4c-a7319a4f6f62.html
Poway Unified School District's exorbitantly expensive bonds shouldn't be allowed by law, Dan McAllister, San Diego County's treasurer-tax collector said Tuesday.
Last year, Poway Unified issued $105 million of bonds that will eventually cost taxpayers $982 million to fully repay.
The financial structure of the bonds allows Poway Unified to avoid making payments on the debt for 20 years, and then repay it in full over a subsequent 20 years. In an era when school districts and cities are getting loans at interest rates of less than 2 percent, Poway Unified will pay an average annual rate of 7.45 percent, and it will have a repayment to principal ratio of 9.5-to-1, according to bond issuance documents.
McAllister wants the state Legislature to change the law to give county governments approval power over local school bonds, and to forbid such long repayment times.
"The county usually gets 1.5-to-1 (repayment ratio)," he said. "The balloon payment that comes due at 20 years, forces 40 years of payments (into) 20 years. That's an onerous burden on the taxpayer."
Poway Unified's bond structure, called "capital appreciation bonds" are common among California school and higher education districts. Escondido Union High School District, Oceanside Unified School District, and San Marcos Unified School District are also among six local districts that use them, McAllister said.
The MiraCosta, Del Mar, and San Dieguito districts will all have bond measures on the ballot in November's election, though the ballot language was not yet available Tuesday. MiraCosta Community College District has committed to not using capital appreciation bonds.
Poway Unified's bonds stand out because they funded a new school building entirely with these bonds, and voters agreed to a deal in which the school district can't repay early or refinance. Neither Poway Unified's spokeswoman nor the president of the Poway school board returned calls for comment by deadline.
Some districts, such as San Marcos Unified, used a blend of bonds. Last year, San Marcos Unified issued $167 million in traditional bonds, and it will issue $65 million next year, all of which will be paid off at a ratio of 1.7-to-1. But in 2015 it will issue $55 million in bonds that it won't start paying until 2046. Those bonds will cost $350 million to repay, or a ratio of 6.4-to-1.
Districts like this bond structure because it lets them manage their annual payments. San Marcos Unified's annual payments will rise steadily from $5.7 million to $40.1 million between 2012 and 2045, but for the subsequent seven years the bills will hold steady at $44 million, according to bond issuance documents. Poway Unified used the structure so it could start making payments only after it had paid off older bonds, allowing it to avoid raising taxes.
McAllister and other observers don't oppose all capital appreciation bonds, just ones with such a long repayment timeline.
"They do fit within the model of financing for school districts if it's done appropriately," said Chris Cate, a vice president for the San Diego County Taxpayers Association, a nonprofit.
Cate said capital appreciation bonds with a five-year repayment work fine, but otherwise the interest rates are too high and the terms too restrictive.
The taxpayers association supported the Poway Unified bond measure in 2008, but Cate said the group didn't have the correct information when it made its endorsement.
McAllister said California law places a limit of 25 years on school borrowing, but that local school districts such as Poway Unified and San Marcos Unified sidestep the limit by making it a government bond, which has a 40-year time limit. He'd like to see that loophole closed.
He'd also like to see a rule requiring the county Board of Supervisors, the county superintendent of schools, or the board of a community college district sign off on all bond documents for school districts.
"We would like to see the state Legislature take this issue up, but the soonest they can do that is in January," he said.
CORRECTION: The Escondido Union High School District has capital appreciation bonds. The story originally said incorrectly that the Escondido Union School District had the bonds. We apologize.