An investigative report probing Poway Unified School District’s extraordinary bond deals concludes the district acted responsibly, but provides scant information to back up its findings.

The district remained secretive about the investigative report into its controversial bond deals until the last minute.

The district, which provided few details about the investigation, refused to let reporters, or the public, see the document prior to Tuesday night’s meeting of the board of trustees. An hour into the meeting, a spokeswoman for the district handed out a few copies of the report to the media, and the school board announced it would be holding another meeting in two weeks to fully discuss the findings. That meeting will be held on Feb. 4 at 4 p.m.

The report, which was commissioned in August by Poway Superintendent John Collins in response to criticism of the district’s sale of capital appreciation bonds, offers few details about the consultant’s methodology or evidence to bolster his findings. The report was led by Robert Price, founder and manager of the firm, according to a press release from the district.

Here are a few takeaways from the document:

• ESI International interviewed the officials involved in the controversial bond deals, but there is no indication the company consulted any independent experts or other school officials outside of Poway.

• The report concludes that Poway used the controversial extra cash it raised in its bond deals to pay the related costs of issuing its bonds (costs like legal fees and interest). That backs up a claim Poway has made repeatedly, but the district has refused to provide documentation outlining what those costs were. The legality of Poway’s deals rests on the district proving it spent the extra money in this way. The report provides no evidence to substantiate this finding.

• The consultants concluded that the district financed its deals in a timely manner, and found no fault in Poway’s tactic of squeezing millions of dollars in extra cash out of its deals. That is despite a 2011 letter from the state attorney general’s office stating that this course of action was illegal.

• The document concludes the district’s consultant costs “exceed median amounts reported in a published study.” It doesn’t name the study, but states that “there was no effort to account for differences in the type or level of services provided by members of the financing team.” The report concludes that the district was satisfied with how much it was paying, but doesn’t opine on whether it was excessive.

• ESI International didn’t weigh in on whether the district should have made its bonds “callable,” which would mean they could be refinanced. The company said it could not accurately recreate the conditions at the time of the sale, so it couldn’t say whether the district should have provided an opt-out clause. This has been one of the most controversial aspects of Poway’s deal.

• In an interesting admission, the report states that Poway sold its capital appreciation bonds to rid the district of the risk that its general fund, or everyday budget, could be impacted by the debt it had incurred in its bond program. The district had incurred a large amount of debt in interim loans prior to selling its bonds. According to the report, Poway “saw an opportunity” in 2011 to shift the responsibility for paying those loans from the district’s operating budget to the taxpayers.

• The report praises the district for making the 2011 deal, saying it “avoided possible downturns in market conditions for bond issuers and possible adverse regulatory changes.” It doesn’t provide any evidence for this statement.

• The report says that if the district had included a “redemption provision” (i.e. the ability to pay back its bonds early or refinance them) it would have “decreased the amount that the district would realize from the bond sale.” Again, it provides no evidence for this. In the past, district officials have said that including the provision would have cost more in interest, but have not said they would have been able to raise less money by doing so.

Municipal bond experts contacted by Voice of San Diego throughout the duration of this story, including county and state treasurers, have stated that Poway’s deals were extraordinary and irresponsible. State Treasurer Bill Lockyer opined last year that the officials who crafted Poway’s deal should be fired.

Bond attorneys we contacted while covering this story helped explain why Poway’s deals are so irregular. The issuance of $21 million in extra upfront cash, or premium, in particular sets the district apart, they said. Poway’s billion-dollar bond deal caused an uproar that shook up California’s municipal bond market. Last week, Lockyer and the State Superintendent of Schools Tom Torlakson issued a moratorium on school districts issuing capital appreciation bonds while legislation to curb the use of the loans is being shaped in Sacramento.

For a primer detailing why Poway’s bonds are so unusual, see this Fact Check, in which we labeled a statement by Collins “Huckster Propaganda.”

VOSD has sent the district’s attorneys a request under the California Public Records Act to try and learn more about the report and its authors, and how they were selected.

We have also asked the district to make the public document public by putting it on their website.

Update: The report was posted Wednesday to Poway Unified’s website, after this initial post was published. It can be found here.

Will Carless is an investigative reporter at Voice of San Diego currently focused on local education. You can reach him at or 619.550.5670.

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

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