In May 2011, the Poway Unified School District Board of Education was faced with a difficult decision in the midst of a national recession and one of the worst budget years in California’s history.
The district needed to pay off a short-term construction loan originally taken out in 2008 that was coming due in December 2011. That construction loan included a set of short-term borrowings – part of an ongoing program designed to save taxpayers money by accelerating school construction and avoiding inflation-driven cost increases. This short-term debt was an obligation of the district’s general fund which is used to pay for teachers, text books, and other resources for the classroom. The board wanted to avoid any decision that would further deplete this fund.
That is why the district considered two options to refinance its short-term borrowing. One option was current interest bonds, or CIBS, which begin paying bond-holder interest immediately and are generally paid back within 25 years. CIBs require an immediate increase in taxes to pay for the interest and principal as it comes due.
The second option was capital appreciation bonds, or CABs, which do not require interest payments until the bonds mature in 20 to 40 years, which is why CABs do not require an immediate tax increase. CABs can be set up so that their payback uses the continuation of an existing tax rather than requiring a new tax.
In February 2008, voters approved a proposition that authorized the board to issue bonds to modernize school facilities. They did so believing that the district would not increase the tax rate.
Instead, the district’s intention, as stated on the ballot, was to extend the existing property tax at the existing tax rate by 11 years, making 2058 the latest the tax could be levied. This commitment to taxpayers combined with the economic climate, high inflation expectations, and the pressing need to refinance our short-term borrowing, convinced the board that CABs were the best option available at the time.
We Stand Up for You. Will You Stand Up for Us?
poor management combined with over optimistic fiscal projections leading to an overleveraged position.
The result being the equivalent of going to a loan shark in an attempt to avoid being honest with the taxpayers of the district.
I leave anything out?
Todd Gutschow is a dangerous sweet talker - his election campaign "speak" is very evident of that. What he, and his other partners in crime avoid discussing at any cost is the following:
1) The CABs
did not contribute a single thing to the quality of education in PUSD.
We wasted a billion dollars on paint and Feng Shui. Can Todd and his
cohorts show us quantitative results on the effect on quality of education the
2) Todd and his cohorts claim it was the "best they could do at the time". Sometimes the best course of action is no course of action. If you can't afford it, you don't buy it.
3) Everyone should keep in mind that the "best" plan Todd and his cohorts could come up with was to START paying for the bonds when additional bonds would be needed to pay for additional paint that would be needed by then.
4) If Todd wasn't so cozy with the Unions, perhaps the operating budget would be sufficient to pay for maintenance and improvements - as it is in fiscally responsible school districts. But Todd is a union sweetheart, and he will spend as much of the budget as possible to benefit the unions.
5) The PUSD current strategy is to
win PUSD tax payer votes by perpetuating inequality. Tax payers that
pay Mello Roose are exempt from current bonds, CABs, and the proposed
NEW taxes. Everyone should share the burden since this is not a fee,
this is a tax. Todd knows very well that the only way to gain support
is to have Mello Roose voters tax the rest of us.
5) Regardless of all the sweet talking Todd is making, one point is very clear. Todd and his cohorts have betrayed the public trust, and have demonstrated that they should not hold public office. Todd's insistence to keep his seat is a slap in the face of PUSD tax payers.
The CABs should not be re-financed. Todd and his cohorts should go home.