bike-voice
help-us-raise
donate-button

     

    The Poway Unified School District may be California’s poster child for exotic school bond financing, but it is by no means alone in San Diego County.

    As I detailed in my story yesterday, Poway Unified borrowed $105 million last year using a form of financing called a capital appreciation bond. The district won’t start making payments on the loan until 2033, and by the time it’s paid off in 2051, taxpayers will have paid back almost $1 billion, or almost 10 times the original loan.

    As I point out in my story, capital appreciation bonds have become increasingly popular across the state, since they allow school districts to borrow money now without raising taxes on current residents. Instead, the burden for paying for the bonds is pushed to future generations, who are left on the hook for loans that are wildly more expensive than conventional bonds.

    I’ve been digging through public records to try and find some other examples of these bonds in San Diego County. I haven’t come across anything quite as extreme as Poway’s deal, but I have found some bonds with very similar rates of interest and repayment schedules.

    The deals elsewhere in the county mirror Poway’s deal in other ways, too. All three districts had recently passed bond measures to complete previous renovation and modernization efforts that were behind because of cost overruns and delays.

    The three bond measures, passed in 2008, all made the same promise to voters: Tax rates would stay the same.

    San Diego Unified — Borrowed: $164 Million. On the Hook For: $1.25 Billion

    In 2010, the county’s largest school district borrowed almost $164 million from investors using capital appreciation bonds.

    The loan was part of 2008’s Proposition S, in which voters approved the district to borrow more than $2 billion to complete district-wide renovations and modernization.

    Just like Poway, San Diego unified won’t start paying back those bonds for 20 years. The first payment is due in 2030. By the time the loan is fully paid back, in 2050, San Diego taxpayers will have paid back $1.25 billion, or about 7.6 times what the district borrowed in the first place.

    That’s much more expensive than a typical school bond which, like a home mortgage, is paid back every year of the loan. In a more typical bond, a district would pay back two or maybe three times the total amount of the initial loan.

    Oceanside Unified — Borrowed: $30 Million. On the Hook For: $280 Million

    Further north, in Oceanside, the payback ratio for taxpayers is even bigger, though the district’s loan is significantly smaller.

    Oceanside Unified borrowed $30 million in 2008. By 2049, the district’s taxpayers will have paid back almost $280 million. That’s more than nine times what they originally borrowed.

    Escondido Union High School District — Borrowed: $27 Million. On the Hook For: $247 Million

    Escondido Union High School District has a similar deal.

    The district borrowed almost $27 million in 2009 using capital appreciation bonds. Taxpayers in the district will pay back almost $247 million by the time that debt is paid. Again, that’s more than nine times the initial debt.

    Making the Same Deal

    Apart from their sheer cost, there are other stark similarities between these three deals and Poway Unified’s 2011 bond.

    All three districts passed bond measures that paved the way for their capital appreciation bonds in 2008.

    And, all three of those bond measures were floated for the same reason: To finish off previous bond programs that had been started in the districts years before but hadn’t yet finished because of cost overruns and delays.

    All three districts also promised voters their tax rates wouldn’t increase to pay for the new swath of borrowing. As I explain in detail in yesterday’s story, the same promise of steady tax rates led Poway Unified to seek out this creative form of financing.

    There’s one more similarity between two of the three deals and Poway’s deal: The San Diego County Taxpayers Association gave its backing to the bond measures that paved the way for both San Diego Unified and Escondido Union High School District’s sales of capital appreciation bonds.

    The association didn’t back Oceanside’s bond, saying the ballot language for the bond was too vague.

    Correction: This story originally identified the incorrect school district in Escondido. The district that issued capital appreciation bonds is the Escondido Union High School District, not the similarly named Escondido Union School District. We regret the error.

    Will Carless is an investigative reporter at Voice of San Diego currently focused on local education. You can reach him at will.carless@voiceofsandiego.org or 619.550.5670.

    Follow @voiceofsandiego

    Like VOSD on Facebook.

      This article relates to: Corrections, Education, Government, Investigations, News
      Tags: , , , , , , , , , , , ,

      Written by Will Carless

      Will Carless is the former head of investigations at Voice of San Diego. He currently lives in Montevideo, Uruguay, where he is a freelance foreign correspondent and occasional contributor to VOSD. You can reach him at will.carless.work@gmail.com.

      42 comments
      Sydney Allen
      Sydney Allen subscriber

      It appears that Wall Street bankers have made chumps of us again.

      YoLaTengo
      YoLaTengo

      It appears that Wall Street bankers have made chumps of us again.

      Richard Rider
      Richard Rider subscribermember

      These committees have been proven to be toothless and useless. All they can do is make sure the money is spent as promised -- and are limited even within that narrow function. They have NO say otherwise.

      Richard Rider
      Richard Rider

      These committees have been proven to be toothless and useless. All they can do is make sure the money is spent as promised -- and are limited even within that narrow function. They have NO say otherwise.

      Richard Rider
      Richard Rider subscribermember

      I doubt it, Mike. You put a TAX FREE bond (paying below market interest BECAUSE it is tax free) in a 401k plan where the proceeds will be taxable upon withdrawal? I don't think so.

      Richard Rider
      Richard Rider

      I doubt it, Mike. You put a TAX FREE bond (paying below market interest BECAUSE it is tax free) in a 401k plan where the proceeds will be taxable upon withdrawal? I don't think so.

      Jim Jones
      Jim Jones subscriber

      Higher achievement will require real school competition. Without competitive pressures effort stagnates, which is what happened to our schools. Money has nothing to do wit it.

      Jim Jones
      Jim Jones

      Higher achievement will require real school competition. Without competitive pressures effort stagnates, which is what happened to our schools. Money has nothing to do wit it.

      Allen Hemphill
      Allen Hemphill subscribermember

      The numbers say that we MUST use more technology, and fewer humans in the classroom. Since we already test at Louisiana level, we have nothing to lose by innovating.

      Akamai
      Akamai

      The numbers say that we MUST use more technology, and fewer humans in the classroom. Since we already test at Louisiana level, we have nothing to lose by innovating.

      Michael Reaves
      Michael Reaves subscriber

      Well, if that's the case then who cares about the terms of the bond.

      MikeNSantee
      MikeNSantee

      Well, if that's the case then who cares about the terms of the bond.

      bigdprender
      bigdprender subscriber

      OK genius, so what's the takeaway? That educational austerity is going to lead to higher achievement? Complaining is useless until you present reasonable solutions...and don't even think about using the "V" word...

      bigdprender
      bigdprender

      OK genius, so what's the takeaway? That educational austerity is going to lead to higher achievement? Complaining is useless until you present reasonable solutions...and don't even think about using the "V" word...

      Allen Hemphill
      Allen Hemphill subscribermember

      We simply are not getting any bang for our buck!

      Akamai
      Akamai

      We simply are not getting any bang for our buck!

      bigdprender
      bigdprender subscriber

      The last time I checked, there are volunteer oversight committees for every bond...get off your butt and volunteer instead of issuing ignorant armchair complaints...Your hypocritical actions are whats guaranteed to screw younger generations, when the so-called "job creators" should be making investments to groom their future customers.

      bigdprender
      bigdprender

      The last time I checked, there are volunteer oversight committees for every bond...get off your butt and volunteer instead of issuing ignorant armchair complaints...Your hypocritical actions are whats guaranteed to screw younger generations, when the so-called "job creators" should be making investments to groom their future customers.

      Don Wood
      Don Wood subscriber

      I wouldn't touch these bonds with a ten foot pole. The school districts will go bankrupt long before they begin paying them off, and bondholders will get screwed.

      Don Wood
      Don Wood

      I wouldn't touch these bonds with a ten foot pole. The school districts will go bankrupt long before they begin paying them off, and bondholders will get screwed.

      David Cohen
      David Cohen subscriber

      As I noted when you made the same comment on the other article about the Poway bond, school bond payments are not "the majority" of my property tax bill, but a bit less than 10% of the total. Is there anyone with a property tax bill that has bond costs at 50+% of the total?

      fryefan
      fryefan

      As I noted when you made the same comment on the other article about the Poway bond, school bond payments are not "the majority" of my property tax bill, but a bit less than 10% of the total. Is there anyone with a property tax bill that has bond costs at 50+% of the total?

      Bernardo Vasquez
      Bernardo Vasquez subscriber

      Amazing that Trustes would mortgage the future for the present to this extreme. Please keep an eye on the Sweetwater Union High School District. We are not on this list yet, but if our community and Bond Oversight Committee don't keep an eye on things, we could be next.

      Bvavsae
      Bvavsae

      Amazing that Trustes would mortgage the future for the present to this extreme. Please keep an eye on the Sweetwater Union High School District. We are not on this list yet, but if our community and Bond Oversight Committee don't keep an eye on things, we could be next.

      Scott Hasson
      Scott Hasson subscriber

      Wil could you research and see if Project Labor Agreements where also part of the SDUSD bond in 2008 and when you talk about cost overruns that caused the need for the additional bond in the first place in 2008 for SDUSD, can you be much more specific please.

      scotthasson
      scotthasson

      Wil could you research and see if Project Labor Agreements where also part of the SDUSD bond in 2008 and when you talk about cost overruns that caused the need for the additional bond in the first place in 2008 for SDUSD, can you be much more specific please.

      Michael Reaves
      Michael Reaves subscriber

      Also, I love these bonds - When I heard about them I called fidelity, took a portion of my 401k and bought some of them... people wake up... get on the receiving side of the transaction - go buy the bonds yourself. That way the community funds the bonds and you get paid for it.

      MikeNSantee
      MikeNSantee

      Also, I love these bonds - When I heard about them I called fidelity, took a portion of my 401k and bought some of them... people wake up... get on the receiving side of the transaction - go buy the bonds yourself. That way the community funds the bonds and you get paid for it.

      Jon Osborn
      Jon Osborn subscriber

      Why would you think this is related to project labor agreements? Your comment (disguised as a question) is just mindless union-bashing.

      Jon Osborn
      Jon Osborn

      Why would you think this is related to project labor agreements? Your comment (disguised as a question) is just mindless union-bashing.

      Don Wood
      Don Wood subscriber

      That money goes straight into the pockets of local construction contractors, who use a small percentage of those profits to fund the campaigns of friiendly school board members.

      Don Wood
      Don Wood

      That money goes straight into the pockets of local construction contractors, who use a small percentage of those profits to fund the campaigns of friiendly school board members.

      Kimberley Beatty
      Kimberley Beatty subscriber

      Since multiple school districts in this area have invested in Capital Appreciation bonds, I am curious to know who the investors are and if it's the same group investing in all 4 schools and what connections they may have to these school districts.

      Kimberley
      Kimberley

      Since multiple school districts in this area have invested in Capital Appreciation bonds, I am curious to know who the investors are and if it's the same group investing in all 4 schools and what connections they may have to these school districts.

      Jerry Tseng
      Jerry Tseng subscriber

      Will, absolutely fantastic investigative journalism exposing the rotten underbelly of the school board. Sadly, it seems like the only way out is certain BK in 20 years.

      Scrippsbruin96
      Scrippsbruin96

      Will, absolutely fantastic investigative journalism exposing the rotten underbelly of the school board. Sadly, it seems like the only way out is certain BK in 20 years.

      David Cohen
      David Cohen subscriber

      No, it doesn't, but thanks for asking.

      fryefan
      fryefan

      No, it doesn't, but thanks for asking.

      Bill Bradshaw
      Bill Bradshaw subscribermember

      You don't suppose this has anything to do with Project Labor Agreements, do you?

      toulon
      toulon

      You don't suppose this has anything to do with Project Labor Agreements, do you?

      Mark Giffin
      Mark Giffin subscribermember

      There is no checks and balances on this kind of toxic financing.

      mgland
      mgland

      There is no checks and balances on this kind of toxic financing.


      ×

      Log In or Register

      If you’ve never logged in before, you must first create an account. If you’re a VOSD donor, please use the email address associated with your membership.

      Registered users can check donation history, follow narratives, comment on stories, and RSVP for events.

      Forgot Password?
      New to VOSD? Create an account

      ×
      Test Modal
      • Note: You cannot change your username.

      ×

      cow-modal