The Morning Report
San Diego news and info
you need to take on the day.

Statement: “Poway has done nothing different than every other district in the state of California,” John Collins, Poway Unified School District superintendent told Investigative Newsource last week.

Determination: Huckster Propaganda

Analysis: Poway Unified School District Superintendent John Collins sat down for an interview last week with Investigative Newsource reporter Kevin Crowe.

The bulk of the interview focused on the use of Mello-Roos fees to fund new schools in Poway. But Collins also addressed the controversy over Poway’s bond deals.

He said Poway’s 2011 bond, which resulted in a cost to taxpayers of almost $1 billion to borrow $126 million, had been “taken out of context.” That’s a claim Collins has made repeatedly since the scandal broke, but in last week’s interview he bolstered it with a new argument.

“Poway has done nothing different than every other district in the state of California,” Collins said. “On the payback of the capital appreciation bonds, there are thousands of those that have been issued by school districts, many with much worse deals than the one we got.”

The second part of Collins’ statement is mostly true. There have been thousands of capital appreciation bonds issued by school districts in recent years.

But to say that Poway’s deal was run-of-the-mill is not true.

Poway’s 2011 bond was extraordinary not just because of the high interest the district will pay, but because of its sheer size.

School bond sales of more than $100 million are relatively rare in the state. Capital appreciation bond sales of this size are rarer still. State data shows there have been just six such bond sales to three districts in California since 2007. That’s out of more than 1,000 districts statewide.

The only district has come even close to replicating Poway’s 2011 deal is San Diego Unified.

San Diego Unified has done a couple of deals of a similar size, with repayment ratios close to — but still lower than — Poway’s. In terms of scale and extraordinarily high interest, Poway is therefore essentially in a league of its own.

That’s why the district has become known as the poster child for exotic school bonds in California. And that’s why the state treasurer has singled the district out for criticism.

But that’s not even considering the really exotic element of Poway’s bond deals.

As we outlined in this story, Poway also squeezed tens of millions of dollars in extra upfront cash out of its last two deals. The district did so even though it was warned by the state Attorney General’s Office that getting extra money in such a way was illegal.

As we wrote in our story:

The district’s tactics caught the attention of bond lawyers across the state. Three California bond attorneys, who spoke on condition of anonymity because they didn’t want to jeopardize their ability to work on school bonds, said Poway’s two deals were extraordinary.

“Everybody was shocked by that,” one of the attorneys said. “Nobody’s ever done that before.”

The district’s 2011 deal is currently being audited by the Internal Revenue Service.

That deal pushed the boundaries of state law.

Poway tried out new tactics to squeeze as much money from its deals as possible. To say the district was merely replicating what other districts had done before is therefore also inaccurate.

To be labeled huckster propaganda, a statement needs to meet two requirements: It must be 1) untrue and 2) reasonable to expect that the person who made the statement knew it was untrue, but made the claim anyway to gain an advantage.

Collins received a letter last year from the state Attorney General’s Office informing him that Poway’s proposed bond deal was illegal.

Prior to that letter, in 2010, Poway had also taken a proactive step known as a “validation action” to test the legal validity of its deal. The district called on any interested parties to challenge its bond in court. Ultimately, nobody did, and a judge signed off on the bond.

The fact that district officials decided to bring a validation action shows that they knew the 2011 bond was extraordinary. They knew they were testing the limits of state law, and they wanted to secure legal backing before proceeding.

If Collins still thought in 2011 that the deal was a run-of-the-mill school bond issuance, it’s reasonable to believe that the letter from the attorney general should have warned him that it wasn’t.

Collins didn’t just claim that some other districts have made similar deals. He claimed that every other district in the state has done the same deals as Poway.

For the reasons above, it’s reasonable to believe that Collins knew that was inaccurate, but made the statement anyway to try and gain an advantage.

If you disagree with our determination or analysis, please express your thoughts in the comments section of this blog post. Explain your reasoning.

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.

Like VOSD on Facebook.

Disclosure: Voice of San Diego members and supporters may be mentioned or have a stake in the stories we cover. For a complete list of our contributors, click here.

Will Carless

Will Carless was formerly the head of investigations at Voice of San Diego.

Leave a comment

Your email address will not be published.

This site uses Akismet to reduce spam. Learn how your comment data is processed.