County Treasurer Calls for Widespread School Bonds Reform

County Treasurer Calls for Widespread School Bonds Reform

Photo by Sam Hodgson

The headquarters of the Poway Unified School District.

 

County Treasurer-Tax Collector Dan McAllister announced this morning that his office plans to push for a slew of legislation to fix glaring holes in the law surrounding school bonds.

Public attention has focused in on a controversial form of bond financing called capital appreciation bonds in the two weeks since our story explained the extraordinarily expensive borrowing at the Poway Unified School District.

These bonds, which don’t get paid back for as long as 40 years, often result in school districts paying back many times what they borrowed in the first place. In Poway’s case, the district will pay back more than nine times what it borrowed. Poway has become the poster child for this kind of borrowing, but isn’t alone across San Diego County or the state.

McAllister announced an eight-point plan to tackle the increased use of capital appreciation bonds by school districts, and called on local legislators to aid him in the effort to make the process of issuing school bonds more transparent and, ultimately, more sensible.

“We’re here to help the process along and bring a little bit of sense and sanity to this issue,” McAllister said. “It seems there are a lot of situations now that have gone riding afar from the original intent of what was provided as a vehicle to do financings.”

Among the things McAllister called for:

• Legislation requiring school districts to get approval from either the county Board of Supervisors or the county Superintendent of Schools before issuing bonds.

• Legislation requiring school district boards to disclose interest rates and total repayment rates to their constituents.

• A mandate that all future school district capital appreciation bonds contain a provision allowing them to be refinanced. (The lack of an ability to refinance is one of the most controversial and unusual aspects of Poway’s bond.)

• A requirement that the Treasurer-Tax Collector’s Office post a summary of all future school district bond issuances on its website.

I called a few local legislators to gauge their reaction to McAllister’s announcement.

So far, I’ve only heard back from Assemblywoman Toni Atkins. Her spokeswoman emailed me the following quote:

I look forward to discussing County Treasurer McAllister’s proposal with him as well as to speaking with the school districts in my assembly district to get their views.

I also spoke briefly with Brian Maienschein, who’s running for Assemblyman Nathan Fletcher’s seat. He said he wanted more time to look at McAllister’s plan.

McAllister isn’t the first county treasurer to kick up a stink about capital appreciation bonds. Last year, Los Angeles County Treasurer Mark Saladino issued a white paper on the bonds, and Saladino has been outspoken about what he sees as irresponsible lending practices by school districts.

If I hear that any local legislators plan to support McAllister’s plan, I’ll update this story.

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.

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Will Carless

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.

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12 comments
john stump
john stump subscriber

Dan Mc Allister's proposal would limit these Bonds to a "4 to 1 ratio" that's $4 dollars of interest for $1 dollar of building or 400%. School districts would be better off getting a Pay Day Loan or some help from a Pawn Shop.

jwstump
jwstump

Dan Mc Allister's proposal would limit these Bonds to a "4 to 1 ratio" that's $4 dollars of interest for $1 dollar of building or 400%. School districts would be better off getting a Pay Day Loan or some help from a Pawn Shop.

Jim Jones
Jim Jones subscriber

Come on Richard, nothing crazy about pushing the debt forward to your kids and grandkids, when it won't be your problem anymore. It's brilliant and diabolical, and those little 5 year olds who will have to bear the brunt of this don't appreciate you anyway. Who the heck do they think they are? They deserve this debt for being allowed to be born anyway.

Jim Jones
Jim Jones

Come on Richard, nothing crazy about pushing the debt forward to your kids and grandkids, when it won't be your problem anymore. It's brilliant and diabolical, and those little 5 year olds who will have to bear the brunt of this don't appreciate you anyway. Who the heck do they think they are? They deserve this debt for being allowed to be born anyway.

Richard Rider
Richard Rider subscribermember

Don't give 'em another dime until this madness is declared illegal. Vote NO on ALL school bonds this November.

Richard Rider
Richard Rider

Don't give 'em another dime until this madness is declared illegal. Vote NO on ALL school bonds this November.

Mark Giffin
Mark Giffin subscribermember

SDUSD.......Good luck with your bond.

mgland
mgland

SDUSD.......Good luck with your bond.

Don Wood
Don Wood subscriber

Before voting on the November school construction bonds, voters should first look at their own property tax bills and see how much money they are already paying every year for previous school construction bonds the districts are still paying off. They will find out that the majority of their property taxes are already being spent paying off school constuction bonds that didn't do a thing to improve their children's educations. That money goes straight into the pockets of local construction contractors, who use a small percentage of those profits to bankroll the campaigns of other friiendly school board members who agree to shill for them.

Don Wood
Don Wood

Before voting on the November school construction bonds, voters should first look at their own property tax bills and see how much money they are already paying every year for previous school construction bonds the districts are still paying off. They will find out that the majority of their property taxes are already being spent paying off school constuction bonds that didn't do a thing to improve their children's educations. That money goes straight into the pockets of local construction contractors, who use a small percentage of those profits to bankroll the campaigns of other friiendly school board members who agree to shill for them.

Craig Nelson
Craig Nelson subscribermember

Better late than never. Clearly there needs to be a grownup in the room to point out the emperor has no clothes.

Craig Nelson
Craig Nelson

Better late than never. Clearly there needs to be a grownup in the room to point out the emperor has no clothes.