Nine Years After Notorious Deal, Poway Wants Voters to OK Another School Bond - Voice of San Diego

Education

Nine Years After Notorious Deal, Poway Wants Voters to OK Another School Bond

It’s been several years since Poway Unified School District passed a bond that ignited outrage and led to statewide reforms. Now district leaders hope residents in March send millions more bond dollars their way with a promise it will be different this time around.

Poway High School could receive security and technology upgrades, as well as building renovations if 55 percent of voters approve a new $448 million bond measure in March. / Photo by Adriana Heldiz

It’s been several years since Poway Unified School District became a cautionary tale and poster child of what not to do with school bond funds, but new district leaders are hoping residents in March send millions more bond dollars their way with a promise it will be different this time around.

Poway is asking voters this year for $448 million to renovate schools, which will cost an estimated $650 million to repay over 28 to 30 years, or $1.45 for every $1 borrowed.

That’s a far cry from the 2011 bond deal that made the district infamous following a 2012 report by Voice of San Diego. That debt — known as a capital appreciation bond — still looms large on the district’s balance sheet today and will cost nearly $1 billion to repay $105 million the district received for school construction projects years ago.

The deal — which also pushed repayment 20 years down the road — was lambasted by state officials, good government advocates and many local residents, who will ultimately pay the price. It also inspired new state laws barring districts from entering such bond debt deals ever again.

Now, less than 10 years later, Poway’s new leaders say more money is needed, and point to crumbling infrastructure to justify a new bond, as well as a lack of state funding for facilities upkeep. They also link quality facilities to educational outcomes and, in a familiar turn, argue there are new security needs in an era of school lockdowns.

“The focus and the definition of safety and security is much different than it was 10 years ago,” said Poway assistant superintendent of business services Ron Little. “Now we are really focused on single points of entry and security cameras. … While it’s true in the 2002 and 2008 bond, we did do some safety and security projects, they were very different projects.”

A Poway Unified School District bond FAQ webpage says, “PUSD has worked hard to increase test scores, graduation rates, and overall student success. However, outdated and deteriorating classrooms and buildings are making it harder to continue this progress.”

District officials are also hoping good money management and transparency with this bond — which will fund less than half of the $1.25 billion facility needs identified districtwide — will rebuild trust in the community.

Here’s what you need to know about where things stand with past Poway school bonds and where things are headed if the new 2020 bond, dubbed Measure P, passes with at least 55 percent approval in March.

The Billion-Dollar Debacle

Residents are already on the hook for nearly $1.43 billion in general obligation bond debt that will come due between now and 2054, on top of the millions already paid to bondholders since 2002 to repay $373 million the district received for past facilities construction and renovation projects, district records show.

The payments to come will come from future local property taxes and are the lingering effects of several bond deals made since 2002, particularly a 2011 capital appreciation bond deal that will cost taxpayers nearly $1 billion to repay $105 million.

Notably, voters do not approve — and until recently were not always made aware of — the total bond debt costs when they consider a school bond measure. Voters merely give districts the right to levy a new local tax to pay back a specified amount of money obtained from the bond market for capital projects. The debt repayment details are worked out later and subject to market conditions, like interest rates.

But a 2014 state law brought additional transparency to the ballot by requiring government agencies to tell voters their best debt guess before the bond is approved. No such estimates were put before Poway’s voters when they approved the $198 million Proposition U bond measure in 2002, nor the $179 million Proposition C bond in 2008 — the bond that ultimately included the costly CAB.

Part of the reason Poway’s 2011 CAB deal is so expensive is the district agreed to put off making any payments for 20 years and agreed to repay everything with interest in the final 20 years — with no ability to pay off the debt early. The first payment comes due in 2031. The deal kept resident tax rates low, but the nearly 10 times repayment cost attracted outrage among locals and public officials.

Then-state treasurer Bill Lockyer advocated firing the Poway district staff and voting out of office the board that approved the 2011 CAB deal, the latter of which largely happened during the 2014 school board election. But the superintendent, John Collins, remained until he was fired in July 2016, for conduct unrelated to the bond deal.

Poway’s new leaders addressed the previous bond scandal directly in an FAQ page posted on the district website and endeavored to distance current leadership from the past.

“We agree that this was not a wise financing strategy made by former District leadership,” the webpage says, referring to the CAB. “We have new administration and new leadership here at Poway USD and there are strict policies in place now to make sure it never happens again … We work hard every day to maintain our fiscal integrity as a District and to earn back the trust of our constituents. There will be no CABs in a future District bond.”

Poway was not the only district to use costly capital appreciation bonds. San Diego Unified, for instance, also entered a CAB deal that gave the district $164 million and will cost $1.25 billion to pay back by 2050. Oceanside received $30 million for school construction and will repay $280 million by 2049. The list goes on.

Public attention on the debt deals spurred change. State legislators passed a law in 2013 to prevent schools from entering similar deals. California school districts using capital appreciation bonds are now limited to debt repayment costs of no more than 4-to-1, a repayment timeline of no more than 25 years and they must allow for early repayment if the repayment timeline is longer than 10 years — an option Poway doesn’t have.

Here is a look at the Poway district’s general obligation bond debt load as it stands today.

Existing bond debt from Poway’s past school bond measures currently cost $18 million a year. That amount will eventually rise and average above $50 million a year, before dropping to an average of $33 million from 2050 through 2054, district audit records show.

Add them all up and you get $1.43 billion in remaining general obligation bond debt. But a new bond would add to the debt load.

Enter Measure P

For homeowners, Measure P could add up to $33.90 in taxes per $100,000 assessed value, or nearly $170 for a $500,000 home and $254 for a $750,000 home. District records indicate the typical homeowner would pay less than $200 a year for the new bond once all debt is issued.

District officials told VOSD they plan to sell Measure P bonds in multiple rounds if approved, so taxes would go up incrementally before maxing out at $33.90 per $100,000, rather than rising all at once.

They circulated a tax rate chart showing what could happen if they did go up all at once, though.

The new bond combined with the prior bonds could increase bond taxes to a high point of around $150 per $100,000 in assessed value. That means the extra taxes would come in at $750 for a $500,000 home or $1,125 for a $750,000 home, according to district numbers.

The impact on the district’s debt load would be sizeable, too.

Adding a new $448 million bond estimated to cost $650 million could add about $22.4 million to the district’s annual bond debt load for 29 years on average, according to district estimates. That would mean general obligation bond debt payments could exceed $76 million for several years.

But district officials say that’s a small price to pay for repairs and renovations that will help students succeed. They also argue nicer schools increase local property values.

What’s more, Poway Unified Superintendent Marian Kim Phelps told the school board in November that not putting Measure P on the ballot in March will cause the district to lose out on $90 million in state matching funds that would go to other districts instead.

Little, the assistant superintendent, told VOSD he is confident the district would get the state money if the new bond goes through, even if it comes as a reimbursement years later like last time.

The Pitch

The pitch being made for Measure P is similar to bond measures passed by other schools in the region in recent years that came with an emphasis on student safety projects. Some projects from the last Poway bond also make a repeat appearance, the ballot measures show, although district officials said they couldn’t locate the ballot language for the 2002 bond.

Things like video surveillance, locks, fencing and alarm and communication systems appear in both the 2008 and proposed 2020 bond measures. So do restroom renovations, portable classroom removal, upgraded fields, plumbing, electricity, air conditioning and asbestos and lead paint removal, among many others.

The new bond could reach “the schools that weren’t touched by that last bond” and also renovate schools that had past bond projects done, but have aged in the last 10 years and now need things like locks, paint or a new roof, said Phelps, the superintendent.

“Many of our schools are 30-45 years old and deteriorating, and even schools 20 years old require upgrades,” the new bond measure says.

A recent districtwide facilities assessment found that without facility improvements, at least 23 of the district’s 39 campuses will be in poor condition by the year 2023.

As for the repeat security projects, a past bond measure might have added perimeter fencing at a school, but not a single point of entry like this bond would do, district officials said.

In addition to security and typical aging building projects, new technology and tech infrastructure is also being emphasized in the new bond “to create future-focused learning environments to support science, technology, engineering and math curriculum and career/technical education training.” Among other things, the district would create dedicated career technical education classrooms, as well as labs and new collaboration spaces in libraries.

Phelps said people don’t move to Poway for beachfront property, but for good schools, and funding for facilities is scarce.

“People don’t realize we get no money for facilities,” she said. “There’s not a lot you can do. Our general fund covers people and programs.”

Though the bond can’t pay for teachers or programs, “it could free up money in our general fund that would otherwise be going to facilities needs. That extra general fund money could then go toward funding priority programs and positions,” the district bond FAQ page says.

Phelps made an even clearer connection between the bond and teaching at a community meeting Jan. 30, according to the Pomerado News. She also signaled the bond would return in November if it doesn’t pass in March, and failure to pass will have consequences.

“If (the bond measure) doesn’t pass, we will have to increase class sizes, cut programs, cut employees,” Phelps said, according to the report. “If we fail in March, we have to do it again in November. If we fail in November, (we have to) start making cuts.”

Moving against the local tide of school bonds, the Poway district promised to not impose a project labor agreement mandating that workers on bond projects pass through union halls unless required to do so by law.

The San Diego County Taxpayers Association endorsed Measure P in December “with trepidation,” but also a willingness “to move beyond the bad decisions of the previous administration and give the new administration a chance to move forward,” the group’s announcement said.

The Poway Federation of Teachers is organizing support for the bond, and the San Diego County Democratic Party is also backing it, while the Republican Party of San Diego County opposes the bond measure.

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