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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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