The Morning Report
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In the second of our parents’ guides to the November election, we’re taking a look at Proposition Z, the big bond proposal from the San Diego Unified School District.
The district says it needs $2.8 billion more of your money to help repair and upgrade local schools, build new facilities and pay for new technology to help kids learn.
And the district says passing the bond will save it from millions of dollars in impacts to its day-to-day budget, a savings that will protect teachers in the classroom.
Let’s break the bond down:
How Does it Work?
It’s a simple concept: If voters approve Prop. Z, property taxes will increase on every homeowner in the district. The increase is $60 a year for every $100,000 of a home’s assessed value. So, the owner of a $300,000 home will see his or her taxes increase by $180 a year if the bond passes.
The district then borrows money up front against that revenue stream. Every year or two, it will borrow a chunk of cash by selling bonds, and will pay those loans off with the money it gets in each year from the new property taxes.
What Will The Money Be Spent On?
There are four main things the district wants to spend the money on: New construction, repairs and maintenance to existing buildings, new technology for students and repairs and upgrades to charter schools. Here’s a graphic showing how much the district estimates spending on these:
(This is a very basic presentation of a pretty complex plan. For more details, check out the district’s information page on the bond.)
Criticism of the Bond
The San Diego Taxpayers Association has been very critical of Prop. Z and has urged its defeat. Lani Lutar, the association’s president, said the group’s concern falls into three broad categories. I’ve outlined each of these below, with a brief response from the district on each.
• The district still has the potential to tap $1.7 billion from its previous bond, Proposition S, which was issued just four years ago. The district needs to fulfill its promises on this bond first.
• The district’s response: For some pretty complicated reasons (primarily connected to the dismal real estate market over the last few years) the district admits it has only been able to tap a small fraction of the funds it may eventually borrow under Prop. S.
And much of the money the district has borrowed has come via controversial long-term loans called capital appreciation bonds. As we pointed out in this story, the district will end up paying back $1.2 billion on a $164 million loan it took out in 2010 using capital appreciation bonds.
Provided property values start rising again within the next few years, however, the district says it should be able to borrow more Prop. S money, without using these expensive instruments. But in the short term, board member Scott Barnett says the only option the district has to borrow more money is via capital appreciation bonds.
• This is a tax increase, which, when combined with several other potential tax increases on the ballot, will have a significant impact on residents’ tax bills. (Lutar pointed San Diegans toward this website, which lets you calculate how much your taxes could rise if all the tax increases pass.)
• The district’s response: True, it has used expensive financing before, officials said, but this time the district is being much more responsible. Schools need money and the way to get additional revenue is to ask taxpayers to invest in their kids’ education, they said.
Rather than keep the tax rate the same, and borrow money in exotic and expensive ways, district officials said they’re hoping to increase the tax rate to create a new revenue stream to pay for the work they want to do.
• The district has proven itself irresponsible when it comes to spending bond money in the past, and it’s been unable to provide detailed plans for how it will spend any new money it gets. And Lutar said the district should provide a plan outlining the schedule in which projects on its wish list will be completed.
• The district’s response: While the district may have taken out capital appreciation bonds, that was because it wanted to fulfill promises it made to voters who passed the last bond, district officials said.
As for how it will spend Proposition Z money, the district says it has laid out extensive details, including this map showing what projects are planned for neighborhood schools.
It may not have a comprehensive schedule yet, but district Chief of Staff Bernie Rhinerson said creating such a schedule would be premature and a waste of time and money.
“Why would we do that before we even know if it’s going to pass?” Rhinerson said.
The school board also passed a resolution in August saying it would only use regular pay-as-you-go bonds for Prop. Z.
Saving by Spending
The district and its political consultant have touted Prop. Z as a way to save money from the district’s day-to-day budget. They’ve said that if the bond passes, the district will be able to save tens of millions of dollars in future years that could be used to keep teachers in classrooms.
For a quick analysis of this claim, check out this edition of San Diego Explained:
Coming from a district that has been in financial tatters for the last few years, the prospect of saving money and protecting teachers from layoffs resonates.
But is it true?
We took a close look at the claim that the district can save by spending in this explainer. Our conclusion: The district may be able to save money in the future in the ways it describes, but those savings will likely go toward preserving programs and equipment for classrooms and will probably not result in fewer layoffs or threatened layoffs.
Prop. Z is all about whether a) voters trust the school district to manage their bond money and b) they think it’s worthwhile to pay more taxes to invest in local schools.
If it passes, much of the $2.8 billion raised by the initiative will be paid to contractors, developers, lawyers and consultants who build school facilities. But the kids of the district will ultimately benefit from those facilities. Even students who attend charter schools will benefit, since $350 million of the bond money is earmarked for charters.
Students will also benefit, at least in the short term, from the technology the district plans to buy with the money.
All of those improvements will have to be paid for, however, and the criticism from the Taxpayers Association won’t help the district’s chances of passing the bond. To help counter that criticism, the district could provide more than just a list of potential projects and draw up a timeline or spreadsheet outlining the order in which those projects will be completed.
Such a schedule would also help tamp down the criticism that the district has spent a good chunk of its previous bond money on things like iPads while some district students are still being taught in temporary classrooms with no air conditioning.
We’ll see if the district gets on that between now and the election.
Correction: This post originally stated homeowners would be taxed based on the value of their home. That is incorrect. Homeowners will be taxed based on the assessed value of their home, which may be significantly lower than the actual value of the home. 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 firstname.lastname@example.org or 619.550.5670.
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