The Morning Report
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Voters reading through school and college bond measures in their ballots this year may see something they haven’t before: estimated debt costs.
In years past, voters were asked to raise their local property taxes to pay for a certain amount of school and college construction projects. One big multimillion-dollar number was advertised in bond campaigns and shown in the ballot.
What voters didn’t see was how much that money – on loan from bond holders – could cost taxpayers in the long run. Factor in interest rates and debt repayment terms and the amount ultimately paid by taxpayers grows, sometimes exponentially.
Such a revelation shocked residents of Poway Unified, who learned a single bond sale in 2011 for $105 million would cost taxpayers nearly $1 billion to pay back over 40 years. San Diego Unified School District entered into a similar deal in 2010, obtaining $164 million that will cost $1.25 billion to repay over 40 years. Santee school district agreed to repay $58.6 million for just $3.5 million obtained in 2011.
Protections in state law now hold districts to more realistic debt limits for certain kinds of costly bond deals, called capital appreciation bonds.
Another state law enacted in 2014 is bringing additional transparency to the ballot. School districts and community colleges must now tell voters their best debt guess before the bond measure is approved.
They call it estimated “total debt service.” The number is non-binding, since exact bond costs aren’t known until after the new taxes are approved and all the bonds are sold. But sharing the estimates with voters may put pressure on agencies to keep their bond deals reasonable and repayment terms low.
At the outset, things are looking better for San Diego County school bonds.
In total, San Diego County’s public schools and community colleges are seeking approval for $1.6 billion in bonds. They estimate paying the money back will require $2.95 billion in tax money in the coming years, less than double the principal money obtained.
Here is the breakdown of all 10 local education bond measures proposed:
But while some things about school bonds are changing, others stay the same.
School construction contractors are still funding campaigns promoting the bond measures.
According to a recent report by inewssource: “top donors include construction companies and contractor trade groups, which may not be surprising given that much of the bond revenue will pay for new buildings. Business interests account for about 82 percent of the contributions in favor of the measures.”
As a 2013 Voice of San Diego investigation found, those campaign donations may pay off for donors:
“If you donate more than $5,000 to a school bond campaign in San Diego County, you have a good chance of getting the often lucrative contracts that follow. … Overall, more than 70 percent of companies that donated more than $5,000 to those campaigns also won bond-funded contracts.”
Campaign donations and wining and dining of public officials by contractors can attract concern that the money buys favor. Efforts at the state level to curtail certain kinds of politicking by public officials haven’t always been successful.
Despite the recent high-profile prosecution of public school officials at the Sweetwater Union High School District, San Ysidro School District and Southwestern College for alleged pay-to-play contracting, some local officials continue to blur the line and fraternize with contractors outside the workplace.
On Aug. 30, Grossmont Union High School District contractors EC Constructors Inc. and Erickson-Hall Construction hosted a Mexican fiesta “Fundraiser & Mixer” to raise money for the Grossmont school bond campaign.
The event featured Grossmont’s superintendent, Tim Glover, deputy superintendent, Scott Patterson, and executive director of facilities, Katy Wright, as “special guests,” giving donors the opportunity to mingle with the district’s top employee decision-makers.
Only Patterson responded to a request for comment. He wrote in an email:
“We fully understand and follow the prohibition against using public resources to advocate for or against a ballot measure. There is a clear separation between the district and the campaign. We were invited to this fundraiser in order to provide information and answer questions about the upcoming school bond, Measure BB, which is on the ballot for November. All of our construction contracts have been and will continue to be awarded on a competitive basis, precluding any actual or implied ‘pay to play’ effect. This assures the public that their tax dollars are deployed in the most efficient manner allowed by law in improving the facilities for our students.”