School Construction Bonds Need More Oversight, Taxpayers Association Says
Debbie L. Sklar
July 28, 2017
Fewer independent oversight committees at school districts in the county are maintaining high transparency standards in their construction bond programs than last year, the San Diego Taxpayers Education Foundation reported Friday...
The Fallbrook Union High School District, Chula Vista Elementary School District and National School District were rated the worst. The National School District was criticized in the report for having no information online about its 2016 bond measure... Read more HERE
Showing posts with label school bonds. Show all posts
Showing posts with label school bonds. Show all posts
Saturday, July 29, 2017
Saturday, February 21, 2015
San Ysidro Board Moves Swiftly To Regain Public Trust
See more Lora Duzyk blog posts.
Ms. Duzyk's most controversial actions relate to the San Diego County Office of Education's Joint Powers Authority (SDCOE-JPA).
San Ysidro Board Moves Swiftly To Regain Public Trust
February 20, 2015
By Barbara Zaragoza
La Prensa
Ever since Edward Velasquez became the new interim superintendent of the San Ysidro School District on February 2nd, board members have moved swiftly to regain public trust after reeling from a pay-to-play scandal, a near takeover by the state due to negative certification and a teacher’s strike.
On February 3rd, the San Ysidro School District filed a lawsuit against former superintendent Manuel Paul, demanding that he return the approximately $210,000 he received after stepping down from the position. Paul faced misdemeanor charges for allegedly taking $2,500 in cash from a contractor who wanted to get work with the district. Last month, Paul was found guilty, fined $5,000 and sentenced to two months in jail. The lawsuit argues that because Paul was found guilty, he is obligated to pay the district back for the money he received from a retirement agreement.
At the February 12th board meeting, Velasquez then made a suggestion to trustees: refinance the district’s Proposition C bond.
Proposition C was passed in 1997 when, fed up with crumbling infrastructure, a grass roots campaign convinced voters to authorized $250 million for the district, the largest bond ever issued in California history. Velasquez explained that refinancing the Prop C bond from a 7.2% interest rate down to a 5.2% interest rate could be a first step in building back trust within the community. A retired educator of 35 years, he is credited with taking the Lynwood Unified School District out of near bankruptcy within three months.
Velasquez said, “If things go right, we’ll be able to do a great job in saving millions of dollars to the property taxpayers.”
He brought in a group of legal and financial advisors to explain the refinance. Frank Vega of RBC Capital Markets said that the maximum tax rate has been reached for property owners. “So because the way the ballot measure was written, the district cannot sell any bonds today. You’re over your maximum legal tax and there’s nothing the district can do about that… So one option is to stop building, stop construction. Other option, and many districts do this is, can we refinance our debt, can we lower our payments so that the tax rate goes down with it. And if you execute a bond refinancing, then the payments will go down, ideally the tax rate goes down with it, and then that might allow you to sell bonds at some point in the future.”
The rate reduction would save property taxpayers anywhere from $51 to $71 million over the next thirty-five years. Vega said, “Every dollar of savings goes to the community.”
Lora Duzyk, Assistant Superintendent of Business Services for the San Diego County Office of Education, sat in the audience and made it clear to board members that the county would have to review and approve the refinance...
Still pending is the $12 million owed to solar company EcoBusiness Alliance due to a breach-of-contract lawsuit. San Diego Superior Court records show that the district filed an appeal, which was certified on January 16, 2015.
On February 7th the board held a special meeting, where they entered into a legal service agreement with Long Beach lawfirm Leal & Trejo, PC. Velasquez said: “We brought in special council for two things. One is to deal with the EcoBusiness, and the other is to deal with the bond. General council didn’t want to handle the EcoBusiness lawsuit.”
He was referring to the law firm Stutz Artiano Shinoff & Holtz that represented the district in the breach-of-contract lawsuit and lost. Now, trustees have agreed that attorney William Trejo will take over at a rate of $180 per hour. Community members are waiting to see if Trejo will go forward with the appeal, settle with EcoBusiness, or pay the $12 million in a district whose overall budget is about $33 million per year.
Monday, July 14, 2014
Poor Grades for Encinitas, Julian Schools on Transparency
Times of San Diego
July 14, 2014
When it comes to sharing information on how their school bonds are working out, most San Diego County school districts are doing fine, a taxpayer group said Monday — with the San Diego Unified and Sweetwater Union High School districts earning perfect marks.
But a Transparency Scorecard released Monday by the San Diego Taxpayers Educational Foundation found Encinitas and Julian lagging badly. (Complete report is here.)
“Overall, the findings are positive,” the report said. “In fact, there has been marked improvement since the last update to this study in 2011.”
Of the 21 districts examined, only five failed to meet at least half of the criteria examined. Local community college districts were among those surveyed...
Thursday, April 17, 2014
Witness says Sweetwater officials wanted to bypass the entire list of underwriting firms picked by selection committee and give job to Gary Cabello
Witness: District pushed poor underwriter
The county official says she was told he 'has to be on that list'
By Aaron Burgin
June 14, 2013
Gary Cabello, 54, bond financier, is accused of offering thing of value to a school official and bribery
A former San Diego County investment officer was taken aback when Sweetwater schools officials pushed to have the least qualified bidder selected to market Proposition O construction bonds, she testified to the grand jury.
Michelle Durgy, now the chief investment officer for the city and county of San Francisco, served on a panel to help select the underwriter.
The committee did not select Gary Allen Cabello, who is now charged with bribing officials at Sweetwater and Southwestern College to obtain multimillion dollar underwriting contracts for his company, Alta Vista Financial. He has pleaded not guilty.
Durgy testified that Sweetwater officials told her Alta Vista would have to be selected.
“And I said, 'Oh no, that is not happening,’” Durgy told the grand jury.
South County Grand Jury transcripts Vol. 5 Download .PDF
Her testimony was among the 4,000 pages of grand jury transcripts a judge released last month, amid objections from defense attorneys who claimed the release would prejudice potential jurors against their clients.
Durgy was on the selection committee for the Sweetwater Union High School District’s $644 million bond because the county advises districts on certain financial matters such as bond issuances and investment management.
Following the firms’ interviews, the selection committee picked two major underwriting firms and two minority-owned firms as their recommendations to the board. The list did not include Alta Vista.
When former Sweetwater Chief Financial Officer Dianne Russo saw this, she quickly objected and said that Alta Vista must be included, Durgy testified.
“At that point, Diane spoke up again and said, “Oh, (former Sweetwater Superintendent) Jesus Gandara... is not going to like this,” Durgy said. “And I said, ‘Well, too bad. That’s who we selected.’ She said, ‘No, no, Michelle, you don’t understand. Alta Vista has to be on that list.’”
Of the 10 firms that interviewed, Durgy said that Alta Vista performed the worst. They were admittedly unprepared and she described their presentation as thin.
“They started off by saying, ‘Wow, we are not really prepared today, we kind of pieced this,’” Durgy said. “And I thought, oh, you know, this is not professional at all.
“And I ... came away thinking... I gave them an opportunity to redeem themselves and that certainly was not the case, and I am unimpressed with this. And I scored them the lowest out of all the firms because they were — it was pretty sad.”
Durgy testified that she thought Russo was kidding at first, but then Russo said that not only did Gandara expect them to be on the list — he wanted them to be the lead underwriter.
Durgy said she was eventually overruled by the rest of the selection committee, and Alta Vista was included.
Durgy said that the recommendation was that Alta Vista play a minor role in the underwriting. Ultimately, however, Cabello’s firm participated in underwriting nearly $350 million in bonds at Sweetwater and Southwestern College.
Durgy said she compiled all relevant correspondence in a memo at the request of her boss, County Treasurer Dan McAllister, after Durgy raised concerns about the integrity of the process.
The county official says she was told he 'has to be on that list'
By Aaron Burgin
June 14, 2013
Gary Cabello, 54, bond financier, is accused of offering thing of value to a school official and bribery
A former San Diego County investment officer was taken aback when Sweetwater schools officials pushed to have the least qualified bidder selected to market Proposition O construction bonds, she testified to the grand jury.
Michelle Durgy, now the chief investment officer for the city and county of San Francisco, served on a panel to help select the underwriter.
The committee did not select Gary Allen Cabello, who is now charged with bribing officials at Sweetwater and Southwestern College to obtain multimillion dollar underwriting contracts for his company, Alta Vista Financial. He has pleaded not guilty.
Durgy testified that Sweetwater officials told her Alta Vista would have to be selected.
“And I said, 'Oh no, that is not happening,’” Durgy told the grand jury.
South County Grand Jury transcripts Vol. 5 Download .PDF
Her testimony was among the 4,000 pages of grand jury transcripts a judge released last month, amid objections from defense attorneys who claimed the release would prejudice potential jurors against their clients.
Durgy was on the selection committee for the Sweetwater Union High School District’s $644 million bond because the county advises districts on certain financial matters such as bond issuances and investment management.
Following the firms’ interviews, the selection committee picked two major underwriting firms and two minority-owned firms as their recommendations to the board. The list did not include Alta Vista.
When former Sweetwater Chief Financial Officer Dianne Russo saw this, she quickly objected and said that Alta Vista must be included, Durgy testified.
“At that point, Diane spoke up again and said, “Oh, (former Sweetwater Superintendent) Jesus Gandara... is not going to like this,” Durgy said. “And I said, ‘Well, too bad. That’s who we selected.’ She said, ‘No, no, Michelle, you don’t understand. Alta Vista has to be on that list.’”
Of the 10 firms that interviewed, Durgy said that Alta Vista performed the worst. They were admittedly unprepared and she described their presentation as thin.
“They started off by saying, ‘Wow, we are not really prepared today, we kind of pieced this,’” Durgy said. “And I thought, oh, you know, this is not professional at all.
“And I ... came away thinking... I gave them an opportunity to redeem themselves and that certainly was not the case, and I am unimpressed with this. And I scored them the lowest out of all the firms because they were — it was pretty sad.”
Durgy testified that she thought Russo was kidding at first, but then Russo said that not only did Gandara expect them to be on the list — he wanted them to be the lead underwriter.
Durgy said she was eventually overruled by the rest of the selection committee, and Alta Vista was included.
Durgy said that the recommendation was that Alta Vista play a minor role in the underwriting. Ultimately, however, Cabello’s firm participated in underwriting nearly $350 million in bonds at Sweetwater and Southwestern College.
Durgy said she compiled all relevant correspondence in a memo at the request of her boss, County Treasurer Dan McAllister, after Durgy raised concerns about the integrity of the process.
Saturday, March 02, 2013
Southwestern College board member resigns in protest of secrecy regarding financial information
I've been wondering why school board members ALWAYS accept the corruption in schools, and simply join the club when they get elected. I thought that perhaps the idea of standing up for ethics, the rule of law and the public good had gone out of fashion. But Bill Stewart has proved me wrong.
Several officials have been charged with crimes related to relationships with contractors and Proposition R expenditures, including board member Yolanda Salcido.
How to solve the problem? Recall Yolanda Salcido and replace her with Bill Stewart. And if that doesn't give enough votes for transparency about finances, recall any other board members who are opposing it and replace them with people who believe in transparency.
Bill Stewart served as a Southwestern trustee for four months, December 2012 to March 2013.
Southwestern College trustee resigns in protest
By Susan Luzzaro
San Diego Reader
March 2, 2013
The latest at Southwestern College is the sudden resignation of trustee William Stewart, who gave an exclusive interview to the student newspaper, the Sun, on March 1. He told news editor Thomas Baker that he was quitting in protest; he said he is frustrated with the district’s lack of transparency and lack of shared governance.
Stewart, who is a realtor and a professor of philosophy at San Diego City College, was elected in November 2012 and began serving in December; his campaign rhetoric was optimistic. He told the Sun in October, “I think I bring to the board a very student-centric perspective because the questions are: how are the students being served? Is our budget best focused on meeting the needs of our students?”
Barely four months later, in his letter of resignation addressed to the faculty and staff of Southwestern, Stewart wrote:
“I hoped to bring a level of board oversight that was unprecedented in this district…to provide you, the stake holders, with a true sense of assurance that the numbers with which you were provided were real and reliable. I wanted to provide you with a board member that with certainty could tell you that income projections were reflective of most likely case scenarios, and not worst case scenarios, which can lead to significant underestimations in projected funding.
“I wanted to provide you with assurance that the information on our college expenses provided accurate information on real time savings, and did not look artificially inflated due to positions that were on the books but were not filled. In my judgment, such accurate numbers should not be withheld from anyone and certainly should not be withheld from the scrutiny of the board. Such real numbers should be used as the proper framework by which to plan the future and to work with its employees and their bargaining units. It is my opinion that Southwestern has a precious resource in its employees, not dangerous adversaries.”
Last week, faculty members protested to the board that incorrect data was being used to drive the education plan — which in turn is driving the Proposition R facilities plan.
Prior to Stewart’s resignation, a special board meeting — which many fear will pertain to pink slips — was called for March 4.
Southwestern articulation officer Veronica Burton commented on Stewart’s resignation and on the state of the campus:
...“We have all worked so hard to make positive change and this is a huge setback. We are once again making news because of questionable practices at Southwestern. This further perpetuates the atmosphere of lack of transparency and trust...”
Read more.
Several officials have been charged with crimes related to relationships with contractors and Proposition R expenditures, including board member Yolanda Salcido.
How to solve the problem? Recall Yolanda Salcido and replace her with Bill Stewart. And if that doesn't give enough votes for transparency about finances, recall any other board members who are opposing it and replace them with people who believe in transparency.
Bill Stewart served as a Southwestern trustee for four months, December 2012 to March 2013.
Southwestern College trustee resigns in protest
By Susan Luzzaro
San Diego Reader
March 2, 2013
The latest at Southwestern College is the sudden resignation of trustee William Stewart, who gave an exclusive interview to the student newspaper, the Sun, on March 1. He told news editor Thomas Baker that he was quitting in protest; he said he is frustrated with the district’s lack of transparency and lack of shared governance.
Stewart, who is a realtor and a professor of philosophy at San Diego City College, was elected in November 2012 and began serving in December; his campaign rhetoric was optimistic. He told the Sun in October, “I think I bring to the board a very student-centric perspective because the questions are: how are the students being served? Is our budget best focused on meeting the needs of our students?”
Barely four months later, in his letter of resignation addressed to the faculty and staff of Southwestern, Stewart wrote:
“I hoped to bring a level of board oversight that was unprecedented in this district…to provide you, the stake holders, with a true sense of assurance that the numbers with which you were provided were real and reliable. I wanted to provide you with a board member that with certainty could tell you that income projections were reflective of most likely case scenarios, and not worst case scenarios, which can lead to significant underestimations in projected funding.
“I wanted to provide you with assurance that the information on our college expenses provided accurate information on real time savings, and did not look artificially inflated due to positions that were on the books but were not filled. In my judgment, such accurate numbers should not be withheld from anyone and certainly should not be withheld from the scrutiny of the board. Such real numbers should be used as the proper framework by which to plan the future and to work with its employees and their bargaining units. It is my opinion that Southwestern has a precious resource in its employees, not dangerous adversaries.”
Last week, faculty members protested to the board that incorrect data was being used to drive the education plan — which in turn is driving the Proposition R facilities plan.
Prior to Stewart’s resignation, a special board meeting — which many fear will pertain to pink slips — was called for March 4.
Southwestern articulation officer Veronica Burton commented on Stewart’s resignation and on the state of the campus:
...“We have all worked so hard to make positive change and this is a huge setback. We are once again making news because of questionable practices at Southwestern. This further perpetuates the atmosphere of lack of transparency and trust...”
Read more.
Saturday, October 27, 2012
Meet the Players Who Shaped Poway Schools' Bond Deals
I'm also curious about the identities of the lucky dogs who BOUGHT these bonds, and whether they have links to the people in this article. Heaven forbid that they might BE some of the same people in this article.
Meet the Players Who Shaped Poway Schools' Bond Deals
In August, dozens of residents showed up to a Poway Unified school board meeting to voice their concern over the district’s controversial bond program.
Oct 9, 2012
By SANDY CORONILLA
Voice of San Diego
Over the last few weeks, we’ve learned a lot about the Poway Unified School District’s controversial bond deals. We’ve learned they will saddle future residents with more than $1 billion worth of debt. We know the district squeezed $21 million in extra up-front cash to pay attorney’s fees and other costs associated with the bonds. But what we haven’t focused on, until now, are the people behind these extraordinary deals.
We decided to put together a quick guide to Poway’s players, so we could share what we know about the individuals responsible for putting together Poway’s bonds. Here’s more information about the players in our suburban saga.
John Collins, superintendent
• Collins began his career in education at the San Diego Unified School District in 1976. In 1989, he was hired by Poway as an assistant principal and worked in school administration at three different schools during the next seven years. For nine years he was the deputy superintendent in charge of business and learning support services and he became Poway’s superintendent in July 2010, following the retirement of Don Phillips.
• Late last year, local media reported that Collins’s home was in foreclosure after a public notice stated an auction would be held to settle $1.1 million in unpaid obligations.
• In his own words: “We want to be open, transparent and forthright in our responsibility to the district. If only one member of the community comes forward with questions and concerns, it’s one too many.” Yet, Collins has so far refused to provide even basic information about a proposed review of the district’s bond deals. He won’t say who’s doing the review, how much it costs or why the individual or company conducting it was chosen.
Linda Vanderveen, board president
• Vanderveen has served three consecutive four-year terms on Poway Unified’s board and is up for re-election this year.
• In her own words: “Our newly renovated schools are testimony to the community's commitment to our Building for Success program. People move to [Poway] for the schools. Clearly, we are doing something right.”
• My colleague Will Carless has called and emailed Vanderveen several times seeking comment or an interview. Vanderveen has ignored all of his requests.
Andy Patapow, board vice president
• Patapow has served four consecutive terms on Poway’s board and is up for re-election this year. He was the principal of Poway’s continuation school for 28 years.
• U-T San Diego reported that he accepted more than $300 in meals from Stone & Youngberg, the underwriter of last year’s controversial bond deal.
• Patapow has also ignored repeated calls and emails from Carless requesting comment.
Marc Davis, board clerk
• Davis is the newbie of the group. This is Davis’s first term as a board member; in 2014 he will be up for re-election.
• Davis promoted himself as a businessman and financial adviser during his campaign in 2010. He is the president and founder of Davis & Seiley Wealth Management.
• In his own words: “I am running to share my financial and business expertise to help address the monumental budget problems that we have now and will have in the future. I understand financial markets, contracts, employment rules, pension plans … and tax issues.”
• Davis is one of three board members who has responded to interview requests. In an Aug. 8 e-mail to Carless regarding the extra money Poway squeezed out of its bond deals, he wrote: “[Poway Unified] did not circumvent the will of the people in doing this but followed long standing legal precedent in doing so and the advice of our bond counsel.” Three attorneys not affiliated with the district who were contacted by Carless said Poway’s deals were, in fact, extraordinary, since they pushed the boundaries of state law. The district’s 2011 deal was also deemed illegal by the state Attorney General’s Office.
Todd Gutschow, board member
• Gutschow is in the middle of his second term as a board member; he’ll be up for re-election in 2014. He was appointed to the Citizens’ Oversight Committee for Proposition U.
• In his own words: He told Voice of San Diego in an Aug. 14 interview: “I think most people who take a moment to think about things before they vote would have said, ‘Well, gee. We’re going to be paying more money for a longer period of time. And that’s probably going to mean that’s going to be more expensive.’ I think that general idea is something most people could have and should have recognized. Would they be able to estimate how much? Would they have been able to have that kind of level of detail? No.”
• Of the five board members, Gutschow has been the most willing to communicate with us on this story. He, Collins and Board Member Penny Rantfle met for an interview last month, and Gutschow is the only board member to respond to Carless’s calls. He has, however, ceased communicating with us as of late.
Penny Ranftle, board member
• Ranftle has been on the board the longest; she’s in the middle of her fifth consecutive term, meaning she has spent the past two decades in her position.
• She has virulently defended Poway from criticism over its bond deals. During the Aug. 14 interview, she said the board had acted in good faith and had delivered what voters wanted: more money to construct schools, without raising taxes.
• Rantfle has spoken out against scrutiny of Poway’s bond deals at school board meetings, including one held on Sept. 10, when she said: “It saddens me to see a couple of members of the media that have turned their scrutiny of this district into some sort of a sport. They have taken a single aspect of this massive rebuilding and modernization program and wrapped it into innuendo and inaccurate reporting, without regard to the damage or expense it is causing the district.”
The Consultants: The Dolinka Group: Benjamin Dolinka
• Poway used this group of financial consultants, which specializes in advising school districts about general obligation bonds, for Proposition C.
• According to its LinkedIn profile, the privately held company employs fewer than 50 employees.
• For the past 20 years, Benjamin Dolinka, the group’s president, has served as a financial adviser to Poway. On March 22 last year, a few weeks after receiving the warning letter from the state Attorney General’s Office, Collins submitted a letter of recommendation for the Dolinka Group praising Dolinka:
“[W]orking with Benjamin Dolinka and the finance team, we have been able to minimize our risks while maximizing the benefits,” he wrote.
• According to the group’s website, Dolinka “focuses on creating new financial and demographic services, identifying potential public-public and private-public partnerships.”
The Consultants: California Financial Services: Michael Ogburn
• This small financial planning firm has advised school districts and local governments for 26 years, according to its website.
• Its founder Michael Ogburn specializes in school district finance in Southern California, and has worked with at least two local districts: Escondido Union and Poway.
The Lawyers: Bowie, Arneson, Wiles & Giannone
• Poway used this Newport Beach law firm for advice on its bond deals.
• According to its website, the firm employs 10 attorneys and has been around for about 40 years and provides public agencies, like school districts, with legal services involving planning, financing and construction of school facilities.
• The firm was the recipient of a letter from state Attorney General Kamala D. Harris’s office last year warning that the deal it was helping Poway Unified put together was illegal.
ClarieceT posted at 3:16 pm on Tue, Oct 9, 2012.
...[Board member] Jeff Mangum was part of the 2009 Series A which had excessive premiums and he was one the one who moved and Vanderveen seconded the resolution approving the Series B bond which had a premium of $21 million dollars...
Meet the Players Who Shaped Poway Schools' Bond Deals
In August, dozens of residents showed up to a Poway Unified school board meeting to voice their concern over the district’s controversial bond program.
Oct 9, 2012
By SANDY CORONILLA
Voice of San Diego
Over the last few weeks, we’ve learned a lot about the Poway Unified School District’s controversial bond deals. We’ve learned they will saddle future residents with more than $1 billion worth of debt. We know the district squeezed $21 million in extra up-front cash to pay attorney’s fees and other costs associated with the bonds. But what we haven’t focused on, until now, are the people behind these extraordinary deals.
We decided to put together a quick guide to Poway’s players, so we could share what we know about the individuals responsible for putting together Poway’s bonds. Here’s more information about the players in our suburban saga.
John Collins, superintendent
• Collins began his career in education at the San Diego Unified School District in 1976. In 1989, he was hired by Poway as an assistant principal and worked in school administration at three different schools during the next seven years. For nine years he was the deputy superintendent in charge of business and learning support services and he became Poway’s superintendent in July 2010, following the retirement of Don Phillips.
• Late last year, local media reported that Collins’s home was in foreclosure after a public notice stated an auction would be held to settle $1.1 million in unpaid obligations.
• In his own words: “We want to be open, transparent and forthright in our responsibility to the district. If only one member of the community comes forward with questions and concerns, it’s one too many.” Yet, Collins has so far refused to provide even basic information about a proposed review of the district’s bond deals. He won’t say who’s doing the review, how much it costs or why the individual or company conducting it was chosen.
Linda Vanderveen, board president
• Vanderveen has served three consecutive four-year terms on Poway Unified’s board and is up for re-election this year.
• In her own words: “Our newly renovated schools are testimony to the community's commitment to our Building for Success program. People move to [Poway] for the schools. Clearly, we are doing something right.”
• My colleague Will Carless has called and emailed Vanderveen several times seeking comment or an interview. Vanderveen has ignored all of his requests.
Andy Patapow, board vice president
• Patapow has served four consecutive terms on Poway’s board and is up for re-election this year. He was the principal of Poway’s continuation school for 28 years.
• U-T San Diego reported that he accepted more than $300 in meals from Stone & Youngberg, the underwriter of last year’s controversial bond deal.
• Patapow has also ignored repeated calls and emails from Carless requesting comment.
Marc Davis, board clerk
• Davis is the newbie of the group. This is Davis’s first term as a board member; in 2014 he will be up for re-election.
• Davis promoted himself as a businessman and financial adviser during his campaign in 2010. He is the president and founder of Davis & Seiley Wealth Management.
• In his own words: “I am running to share my financial and business expertise to help address the monumental budget problems that we have now and will have in the future. I understand financial markets, contracts, employment rules, pension plans … and tax issues.”
• Davis is one of three board members who has responded to interview requests. In an Aug. 8 e-mail to Carless regarding the extra money Poway squeezed out of its bond deals, he wrote: “[Poway Unified] did not circumvent the will of the people in doing this but followed long standing legal precedent in doing so and the advice of our bond counsel.” Three attorneys not affiliated with the district who were contacted by Carless said Poway’s deals were, in fact, extraordinary, since they pushed the boundaries of state law. The district’s 2011 deal was also deemed illegal by the state Attorney General’s Office.
Todd Gutschow, board member
• Gutschow is in the middle of his second term as a board member; he’ll be up for re-election in 2014. He was appointed to the Citizens’ Oversight Committee for Proposition U.
• In his own words: He told Voice of San Diego in an Aug. 14 interview: “I think most people who take a moment to think about things before they vote would have said, ‘Well, gee. We’re going to be paying more money for a longer period of time. And that’s probably going to mean that’s going to be more expensive.’ I think that general idea is something most people could have and should have recognized. Would they be able to estimate how much? Would they have been able to have that kind of level of detail? No.”
• Of the five board members, Gutschow has been the most willing to communicate with us on this story. He, Collins and Board Member Penny Rantfle met for an interview last month, and Gutschow is the only board member to respond to Carless’s calls. He has, however, ceased communicating with us as of late.
Penny Ranftle, board member
• Ranftle has been on the board the longest; she’s in the middle of her fifth consecutive term, meaning she has spent the past two decades in her position.
• She has virulently defended Poway from criticism over its bond deals. During the Aug. 14 interview, she said the board had acted in good faith and had delivered what voters wanted: more money to construct schools, without raising taxes.
• Rantfle has spoken out against scrutiny of Poway’s bond deals at school board meetings, including one held on Sept. 10, when she said: “It saddens me to see a couple of members of the media that have turned their scrutiny of this district into some sort of a sport. They have taken a single aspect of this massive rebuilding and modernization program and wrapped it into innuendo and inaccurate reporting, without regard to the damage or expense it is causing the district.”
The Consultants: The Dolinka Group: Benjamin Dolinka
• Poway used this group of financial consultants, which specializes in advising school districts about general obligation bonds, for Proposition C.
• According to its LinkedIn profile, the privately held company employs fewer than 50 employees.
• For the past 20 years, Benjamin Dolinka, the group’s president, has served as a financial adviser to Poway. On March 22 last year, a few weeks after receiving the warning letter from the state Attorney General’s Office, Collins submitted a letter of recommendation for the Dolinka Group praising Dolinka:
“[W]orking with Benjamin Dolinka and the finance team, we have been able to minimize our risks while maximizing the benefits,” he wrote.
• According to the group’s website, Dolinka “focuses on creating new financial and demographic services, identifying potential public-public and private-public partnerships.”
The Consultants: California Financial Services: Michael Ogburn
• This small financial planning firm has advised school districts and local governments for 26 years, according to its website.
• Its founder Michael Ogburn specializes in school district finance in Southern California, and has worked with at least two local districts: Escondido Union and Poway.
The Lawyers: Bowie, Arneson, Wiles & Giannone
• Poway used this Newport Beach law firm for advice on its bond deals.
• According to its website, the firm employs 10 attorneys and has been around for about 40 years and provides public agencies, like school districts, with legal services involving planning, financing and construction of school facilities.
• The firm was the recipient of a letter from state Attorney General Kamala D. Harris’s office last year warning that the deal it was helping Poway Unified put together was illegal.
ClarieceT posted at 3:16 pm on Tue, Oct 9, 2012.
...[Board member] Jeff Mangum was part of the 2009 Series A which had excessive premiums and he was one the one who moved and Vanderveen seconded the resolution approving the Series B bond which had a premium of $21 million dollars...
Wednesday, August 22, 2012
Community college districts' bonds inflate cost to taxpayers
Community college districts' bonds inflate cost to taxpayers
Erica Perez
California Watch
Aug. 22, 2012
Several California community college districts have sold bonds that allow them to put off payments for up to 40 years, causing the total repayment to cost taxpayers from five to nine times the principal.
Poway Unified School District, while not a community college district, made headlines this month for issuing a bond for $108 million that will end up costing taxpayers nearly $1 billion over 40 years.
Poway Unified has become the poster child for long-term capital appreciation bonds, increasingly common but controversial tools that enable districts to get cash now for voter-approved construction programs, while delaying the payments and tax levy for decades.
A retired Detroit Free Press reporter, Joel Thurtell, reported on Poway Unified's bond sale on his blog. After Voice of San Diego reported in-depth on the deal Aug. 6, the story garnered national attention.
The Los Angeles treasurer and tax collector's office has taken an aggressive stance against long-term versions of these bonds.
"Once you see a repayment obligation that materially exceeds the principal amount, by that I mean four, five or 10 times more, you have to question why they did it," said Douglas Baron, director of public finance at the Los Angeles County treasurer and tax collector's office.
More standard bond sales cost closer to $3 per dollar borrowed.
California Watch reviewed bond sales at several community college districts in search of similar deals. Although few appear to match the size of the Poway Unified example, several districts financed construction programs using long-term capital appreciation bonds that will end up costing much more than traditional financing because of compounded interest.
San Bernardino Community College District issued $56 million in bonds that will cost $493 million by the time they're paid back in 2048 ---- nine times the principal.
Victor Valley Community College District borrowed $34 million in bonds that will end up costing $271 million to pay back by 2049 ---- eight times the principal.
Yosemite Community College District's $78 million bond issue will cost $453 million by 2042 ---- six times the principal.
Chabot-Las Positas Community College District will pay $850 million by 2046 on $169 million in bonds ---- totaling five times the principal.
District officials chose the more expensive bonds for a number of reasons. Some said they saw the bonds as the best way to maximize buying power without exceeding legal or promised limits on tax rates.
Here's the difference between capital appreciation bonds and the standard variety: With traditional current interest bonds, districts borrow money and start paying interest right away. The money for the debt payments comes from taxes on residents.
They can only borrow so much this way because state law says community college districts can't levy more than $25 per $100,000 of property value.
With capital appreciation bonds, districts get the cash up front, but don't have to pay interest or levy taxes right away. The interest on these bonds compounds over time, without being paid out, until the bond comes due. The further out the bonds come due, or mature, the bigger the payoff for investors and the higher the price tag for districts and future taxpayers.
State law prohibits districts from selling bonds that come due more than 40 years out. The Los Angeles County treasurer and tax collector's office published a white paper stating it would not support capital appreciation bonds in that county with maturities greater than 25 years.
And Baron said the office would advocate changes in the law that would set a cap at 25 to 30 years.
California Watch
Aug. 22, 2012
Several California community college districts have sold bonds that allow them to put off payments for up to 40 years, causing the total repayment to cost taxpayers from five to nine times the principal.
Poway Unified School District, while not a community college district, made headlines this month for issuing a bond for $108 million that will end up costing taxpayers nearly $1 billion over 40 years.
Poway Unified has become the poster child for long-term capital appreciation bonds, increasingly common but controversial tools that enable districts to get cash now for voter-approved construction programs, while delaying the payments and tax levy for decades.
A retired Detroit Free Press reporter, Joel Thurtell, reported on Poway Unified's bond sale on his blog. After Voice of San Diego reported in-depth on the deal Aug. 6, the story garnered national attention.
The Los Angeles treasurer and tax collector's office has taken an aggressive stance against long-term versions of these bonds.
"Once you see a repayment obligation that materially exceeds the principal amount, by that I mean four, five or 10 times more, you have to question why they did it," said Douglas Baron, director of public finance at the Los Angeles County treasurer and tax collector's office.
More standard bond sales cost closer to $3 per dollar borrowed.
California Watch reviewed bond sales at several community college districts in search of similar deals. Although few appear to match the size of the Poway Unified example, several districts financed construction programs using long-term capital appreciation bonds that will end up costing much more than traditional financing because of compounded interest.
San Bernardino Community College District issued $56 million in bonds that will cost $493 million by the time they're paid back in 2048 ---- nine times the principal.
Victor Valley Community College District borrowed $34 million in bonds that will end up costing $271 million to pay back by 2049 ---- eight times the principal.
Yosemite Community College District's $78 million bond issue will cost $453 million by 2042 ---- six times the principal.
Chabot-Las Positas Community College District will pay $850 million by 2046 on $169 million in bonds ---- totaling five times the principal.
District officials chose the more expensive bonds for a number of reasons. Some said they saw the bonds as the best way to maximize buying power without exceeding legal or promised limits on tax rates.
Here's the difference between capital appreciation bonds and the standard variety: With traditional current interest bonds, districts borrow money and start paying interest right away. The money for the debt payments comes from taxes on residents.
They can only borrow so much this way because state law says community college districts can't levy more than $25 per $100,000 of property value.
With capital appreciation bonds, districts get the cash up front, but don't have to pay interest or levy taxes right away. The interest on these bonds compounds over time, without being paid out, until the bond comes due. The further out the bonds come due, or mature, the bigger the payoff for investors and the higher the price tag for districts and future taxpayers.
State law prohibits districts from selling bonds that come due more than 40 years out. The Los Angeles County treasurer and tax collector's office published a white paper stating it would not support capital appreciation bonds in that county with maturities greater than 25 years.
And Baron said the office would advocate changes in the law that would set a cap at 25 to 30 years.
Sunday, August 12, 2012
Joel Thurtell exposed the Poway Schools bond scam 3 months before Voice of San Diego wrote about it
Poway board members and administrators were trying to advance their own careers at the expense of taxpayers when they scammed voters into approving over $100 million in capital appreciation bonds with a 1000% interest rate (not 10%, not 30%, but one thousand per cent). My friend Karen Horwitz has a name for this kind of thing: white chalk crime. The voters should get rid of the board members, lawyers and administrators who planned this deception.
This secret bond deal reminds me of the famous City of San Diego pension scam. Where's Bonnie Dumanis' Public Integrity Unit when citizens need it? Down in South Bay, going after Mexican Americans that Greg and Cheryl Cox don't like.
Click on the following link to see Joel's well-done graphic:
CAB scam in Poway
May 12, 2012
By Joel Thurtell
Joel on the Road blog
The nicest thing I can write about the language used by Poway schools in San Diego is that it was shrewdly phrased. But when framed with the ‘no new taxes” promises flung out by bond supporters, the bond proposal amounts to a brazen lie.
Whether they put down “yes” or “no” on the 2008 ballot proposal, voters in the Poway school district in San Diego could not have known that the “legal interest rate” on some of the bonds they approved would amount to an eye-popping, wallet-ripping 2200 percent.
How a $100 million loan turns into a $1 billion payoff at 1000 percent interest
Proposition C
To provide safe and modern school facilities, improve student learning, and qualify for approximately $20 million in State matching money, shall School Facilities Improvement District No. 2007-1 of the Poway Unified School District issue $179 million in bonds at legal interest rates to upgrade aging classrooms, libraries, science & computer labs; replace roofs, plumbing, heating, ventilation and electrical systems; improve fire alarms and school security; remove hazardous materials; fund needed facilities, subject to mandatory audits, independent citizens’ oversight and without an estimated increase in tax rates?
Nowhere in the ballot language was it spelled out to voters that the majority of the debt that was approved would be in the form of Capital Appreciation Bonds with interest rates so usurious that CABs were banned in one state — Michigan — when the monstrosity was exposed.
Neither promised “mandatory audits” nor “independent citizens’ oversight” captured the reality for citizens — that these pernicious instruments of debt could only fulfill the promise of “no new taxes” if property values increase by hundreds of percent.
Nor were voters made aware that there is no escape from this hall of financial horror. A term of the bond official statement states that they may not be re-financed to better terms.
Here in Michigan, I watched the value of our house in Plymouth plunge by 42 percent from its 2005 peak. Around the nation, similar drops in home value make California CAB promoters’ arguments for continuously increasing value seem delusional. Yet since 2000, California schools have issued more than 1,000 CABs with principal of $20 billion and interest that could be triple or more of principal.
All justified by hallucinations about growth in real estate value.
Now, here’s another unpleasant fact about the Poway CAB issue: It is written into the official statement of the bonds that they cannot be refunded. Poway is stuck with these parasites until 2051.
There were opponents to the Poway bond proposal, but they were unaware of how bad the plan really is. They may have had suspicions. In “Arguments Against Proposition C,” opponents stated, “Would you take out a 25 to 40 year mortgage to buy computers that last maybe 5 years, to trim trees, or to make plumbing repairs?”
The opponents had a good point: Had they known how costly these bonds would turn out to be, they could have re-stated their argument: “Would you take out a 25 to 40 year mortgage to buy computers that last maybe 5 years, trim trees, or make plumbing repairs at an interest rate of 1000 percent?”
Here is the real question: If school officials had told voters the truth — that they were obligating taxpayers for 40 years to a sky-high interest rate to pay for short-term projects and that taxes might indeed go up — would the proposal have been approved?
What was so important about this proposal that school officials chose to scam voters?
That’s a question for elected trustees of the Poway Unified Board of Education:
President: Penny Ranftle
Vice President: Linda Vanderveen
Clerk: Andy Patapow
Member: Mark Davis
Member: Todd Gutschow
This secret bond deal reminds me of the famous City of San Diego pension scam. Where's Bonnie Dumanis' Public Integrity Unit when citizens need it? Down in South Bay, going after Mexican Americans that Greg and Cheryl Cox don't like.
Click on the following link to see Joel's well-done graphic:
CAB scam in Poway
May 12, 2012
By Joel Thurtell
Joel on the Road blog
The nicest thing I can write about the language used by Poway schools in San Diego is that it was shrewdly phrased. But when framed with the ‘no new taxes” promises flung out by bond supporters, the bond proposal amounts to a brazen lie.
Whether they put down “yes” or “no” on the 2008 ballot proposal, voters in the Poway school district in San Diego could not have known that the “legal interest rate” on some of the bonds they approved would amount to an eye-popping, wallet-ripping 2200 percent.
How a $100 million loan turns into a $1 billion payoff at 1000 percent interest
Proposition C
To provide safe and modern school facilities, improve student learning, and qualify for approximately $20 million in State matching money, shall School Facilities Improvement District No. 2007-1 of the Poway Unified School District issue $179 million in bonds at legal interest rates to upgrade aging classrooms, libraries, science & computer labs; replace roofs, plumbing, heating, ventilation and electrical systems; improve fire alarms and school security; remove hazardous materials; fund needed facilities, subject to mandatory audits, independent citizens’ oversight and without an estimated increase in tax rates?
Nowhere in the ballot language was it spelled out to voters that the majority of the debt that was approved would be in the form of Capital Appreciation Bonds with interest rates so usurious that CABs were banned in one state — Michigan — when the monstrosity was exposed.
Neither promised “mandatory audits” nor “independent citizens’ oversight” captured the reality for citizens — that these pernicious instruments of debt could only fulfill the promise of “no new taxes” if property values increase by hundreds of percent.
Nor were voters made aware that there is no escape from this hall of financial horror. A term of the bond official statement states that they may not be re-financed to better terms.
Here in Michigan, I watched the value of our house in Plymouth plunge by 42 percent from its 2005 peak. Around the nation, similar drops in home value make California CAB promoters’ arguments for continuously increasing value seem delusional. Yet since 2000, California schools have issued more than 1,000 CABs with principal of $20 billion and interest that could be triple or more of principal.
All justified by hallucinations about growth in real estate value.
Now, here’s another unpleasant fact about the Poway CAB issue: It is written into the official statement of the bonds that they cannot be refunded. Poway is stuck with these parasites until 2051.
There were opponents to the Poway bond proposal, but they were unaware of how bad the plan really is. They may have had suspicions. In “Arguments Against Proposition C,” opponents stated, “Would you take out a 25 to 40 year mortgage to buy computers that last maybe 5 years, to trim trees, or to make plumbing repairs?”
The opponents had a good point: Had they known how costly these bonds would turn out to be, they could have re-stated their argument: “Would you take out a 25 to 40 year mortgage to buy computers that last maybe 5 years, trim trees, or make plumbing repairs at an interest rate of 1000 percent?”
Here is the real question: If school officials had told voters the truth — that they were obligating taxpayers for 40 years to a sky-high interest rate to pay for short-term projects and that taxes might indeed go up — would the proposal have been approved?
What was so important about this proposal that school officials chose to scam voters?
That’s a question for elected trustees of the Poway Unified Board of Education:
President: Penny Ranftle
Vice President: Linda Vanderveen
Clerk: Andy Patapow
Member: Mark Davis
Member: Todd Gutschow
A Creative Borrowing Boom: Poway Not Alone in High-Interest Financing
A Creative Borrowing Boom: Poway Not Alone in High-Interest Financing
August 7, 2012
By WILL CARLESS
Voice of San Diego
The Poway Unified School District may be California’s poster child for exotic school bond financing, but it is by no means alone in San Diego County...
San Diego Unified — Borrowed: $164 Million. On the Hook For: $1.25 Billion In 2010, the county’s largest school district borrowed almost $164 million from investors using capital appreciation bonds.
The loan was part of 2008’s Proposition S, in which voters approved the district to borrow more than $2 billion to complete district-wide renovations and modernization. Just like Poway, San Diego unified won’t start paying back those bonds for 20 years. The first payment is due in 2030. By the time the loan is fully paid back, in 2050, San Diego taxpayers will have paid back $1.25 billion, or about 7.6 times what the district borrowed in the first place.
That’s much more expensive than a typical school bond which, like a home mortgage, is paid back every year of the loan. In a more typical bond, a district would pay back two or maybe three times the total amount of the initial loan.
Oceanside Unified — Borrowed: $30 Million. On the Hook For: $280 Million Further north, in Oceanside, the payback ratio for taxpayers is even bigger, though the district’s loan is significantly smaller. Oceanside Unified borrowed $30 million in 2008. By 2049, the district’s taxpayers will have paid back almost $280 million. That’s more than nine times what they originally borrowed.
Escondido Union High School District — Borrowed: $27 Million. On the Hook For: $247 Million
Escondido Union High School District has a similar deal.
The district borrowed almost $27 million in 2009 using capital appreciation bonds. Taxpayers in the district will pay back almost $247 million by the time that debt is paid. Again, that’s more than nine times the initial debt.
Making the Same Deal
Apart from their sheer cost, there are other stark similarities between these three deals and Poway Unified’s 2011 bond.
All three districts passed bond measures that paved the way for their capital appreciation bonds in 2008.
And, all three of those bond measures were floated for the same reason: To finish off previous bond programs that had been started in the districts years before but hadn’t yet finished because of cost overruns and delays.
All three districts also promised voters their tax rates wouldn’t increase to pay for the new swath of borrowing. As I explain in detail in yesterday’s story, the same promise of steady tax rates led Poway Unified to seek out this creative form of financing.
There’s one more similarity between two of the three deals and Poway’s deal: The San Diego County Taxpayers Association gave its backing to the bond measures that paved the way for both San Diego Unified and Escondido Union High School District's sales of capital appreciation bonds.
The association didn’t back Oceanside’s bond, saying the ballot language for the bond was too vague.
August 7, 2012
By WILL CARLESS
Voice of San Diego
The Poway Unified School District may be California’s poster child for exotic school bond financing, but it is by no means alone in San Diego County...
San Diego Unified — Borrowed: $164 Million. On the Hook For: $1.25 Billion In 2010, the county’s largest school district borrowed almost $164 million from investors using capital appreciation bonds.
The loan was part of 2008’s Proposition S, in which voters approved the district to borrow more than $2 billion to complete district-wide renovations and modernization. Just like Poway, San Diego unified won’t start paying back those bonds for 20 years. The first payment is due in 2030. By the time the loan is fully paid back, in 2050, San Diego taxpayers will have paid back $1.25 billion, or about 7.6 times what the district borrowed in the first place.
That’s much more expensive than a typical school bond which, like a home mortgage, is paid back every year of the loan. In a more typical bond, a district would pay back two or maybe three times the total amount of the initial loan.
Oceanside Unified — Borrowed: $30 Million. On the Hook For: $280 Million Further north, in Oceanside, the payback ratio for taxpayers is even bigger, though the district’s loan is significantly smaller. Oceanside Unified borrowed $30 million in 2008. By 2049, the district’s taxpayers will have paid back almost $280 million. That’s more than nine times what they originally borrowed.
Escondido Union High School District — Borrowed: $27 Million. On the Hook For: $247 Million
Escondido Union High School District has a similar deal.
The district borrowed almost $27 million in 2009 using capital appreciation bonds. Taxpayers in the district will pay back almost $247 million by the time that debt is paid. Again, that’s more than nine times the initial debt.
Making the Same Deal
Apart from their sheer cost, there are other stark similarities between these three deals and Poway Unified’s 2011 bond.
All three districts passed bond measures that paved the way for their capital appreciation bonds in 2008.
And, all three of those bond measures were floated for the same reason: To finish off previous bond programs that had been started in the districts years before but hadn’t yet finished because of cost overruns and delays.
All three districts also promised voters their tax rates wouldn’t increase to pay for the new swath of borrowing. As I explain in detail in yesterday’s story, the same promise of steady tax rates led Poway Unified to seek out this creative form of financing.
There’s one more similarity between two of the three deals and Poway’s deal: The San Diego County Taxpayers Association gave its backing to the bond measures that paved the way for both San Diego Unified and Escondido Union High School District's sales of capital appreciation bonds.
The association didn’t back Oceanside’s bond, saying the ballot language for the bond was too vague.
Where Borrowing $105 Million Will Cost $1 Billion: Poway Schools
[Maura Larkins comment: Why didn't Lutar figure out the implications before she recommended it? The taxpayers association has a habit of giving awards and endorsements without investigating. A few years ago they gave Chula Vista Schools an award without looking at CVESD's budget! One might suspect that the association's decisions are political.]
Where Borrowing $105 Million Will Cost $1 Billion: Poway Schools
August 6, 2012
By WILL CARLESS
Voice of San Diego
“This is way worse than loan sharking.
...What they have done is absolutely insane.”
—Michael Turnipseed, executive director
of the Kern County Taxpayers Association...
“This is a perfect example of how something
that’s done today can adversely affect
the next generation and the generation after that.”
—Dan McAllister, San Diego County
treasurer and tax collector.
Last year the Poway Unified School District made a deal: It borrowed $105 million from investors to fund a final push in its decade-long effort to revamp aging schools.
In many ways, the deal was unspectacular. Some of the money was used to pay off previous debts from delayed and over-budget construction projects. The rest went towards finishing upgrades that Poway taxpayers had been promised as far back as 2002. To a casual observer, it was just another school bond.
But Poway Unified’s deal was far from normal.
In 2008, voters had given the district permission to borrow more money to finish its modernization, and they had received a big promise from the elected school board in return: No tax increases.
Without increasing taxes, the district couldn’t afford to borrow money in the conventional way. So, instead of borrowing from investors over 20 or 30 years and paying the debt down each year, like a mortgage, the district got creative.
With advice from an Orange County financial consultant, the district borrowed the money over 40 years in a controversial loan called a capital appreciation bond. The key point for the district: It won’t make any payments on the debt for 20 years.
And that means the district’s debt will keep getting bigger and bigger as interest on the loan piles up.
The bottom line: For borrowing $105 million in 2011, taxpayers will end up paying investors more than $981 million by 2051, or almost 10 times what the district borrowed. That’s wildly more expensive than a typical school bond, in which a district pays back two or maybe three times what it borrowed.
As well as being expensive, capital appreciation bonds work by tapping future growth in property values to pay today’s debts, a concept considered by many in the school bond business to be both risky and inequitable. In 1994, the state of Michigan banned school districts from issuing bonds like this, deeming them too toxic to taxpayers. Nevertheless, California’s ever-strapped districts have increasingly looked to capital appreciation bonds to raise money for improvements without increasing taxes on current residents. Across the state, districts have borrowed billions this way, using exotic financing to shift the burden for paying for today’s school construction to future generations of Californians.
Poway Unified, a district more accustomed to praise for its fiscal austerity, has found itself at the center of the debate over these bonds. For a year now, it’s come under fire from taxpayer groups and concerned elected officials around the state, for whom Poway’s bond has reached legendary status.
...Officials at the district and two members of the school board who approved it acknowledge that the deal is expensive. But they say Poway’s overall construction program has been a roaring success and a boon to local students and homeowners alike. District taxpayers should have understood that borrowing money over a longer period of time, without raising taxes, would be pricey, the officials said...
"We could have authorized more taxes, it would just have been breaking the promises we made to the community," said school board member Todd Gutschow.
But last year’s bond doesn’t just affect the taxpayers who voted on it. It also saddles their children and grandchildren with hundreds of millions of dollars in debt, and raises the risk that property taxes could spike once the district finally starts making payments on its loan.
In short: In order to keep its promises to current residents, the district entered into a deal that places a billion-dollar burden on future residents...
A Hard Sell
In 2008, Poway Unified’s school modernization plans were way off schedule. Construction costs had spiraled upwards, fueled by the region’s real estate boom. This, combined with other construction delays and cost overruns, meant the district needed more money to complete its ambitious renovation program.
Voters had agreed back in 2002 to allow the district to borrow $198 million to bring state-of-the art facilities to 24 schools. But by 2008, the district was asking for $179 million more to finish the job.
Traditionally, school districts in California fund renovation programs by borrowing money from investors and paying back those loans with small increases in local property taxes.
That’s what Poway Unified’s first bond did in 2002. With California’s economy starting to warm up from the boom-and-bust of the late-1990s, voters approved the district bumping local property taxes up by $55 for every $100,000 of home value. That revenue was then tapped to pay off the district’s construction loans.
By 2008, however, the economy was in trouble. The real estate market had already been tanking for a couple of years. Stocks were sliding downwards and unemployment was on the rise.
It was a tough time to sell a tax increase to voters.
But with some Poway Unified residents still waiting for the renovations they had been promised back in 2002, the district decided to approach voters once more.
"We knew the voters wanted these projects, and we knew they wanted them sooner rather than later," said Poway Superintendent John Collins.
This time, Poway Unified didn’t try to push a tax increase. Instead, it came up with a different way to pay for its new bond program, Proposition C.
Rather than increasing the tax rate, the district asked voters if they’d be willing to extend the life of the existing property taxes for an estimated additional 11 to 14 years.
That passed muster. Despite some vocal opposition, on Feb. 5, 2008, district residents voted 63.9 percent in favor of Poway Unified borrowing another $179 million.
But the bond’s supporters hadn’t made clear to the public just how they planned to borrow money without raising taxes, or how much that would end up costing taxpayers. In 2008, there wasn’t enough money coming in from the district’s $55 property tax levy to pay for all the new borrowing it wanted to do. All the cash being generated by the existing taxes was eaten up paying off old loans that had already been used for upgrading schools.
The district’s plan, then, was to borrow money against the future tax revenues it would receive by extending the life of the taxes. In other words, it would get the money now, but wouldn’t start paying it back for a long time.
Borrowing money in this way is possible for school districts, but it’s much more expensive than paying a loan back year-by-year.
Last year, the district put together its deal to borrow $105 million, without paying anything towards the debt for 20 years.
In two decades’ time, taxpayers will start paying about $50 million a year towards the loan. They’ll make those payments for the next 20 years or so. It’s a bit like a massive version of one of those exotic loans that got homeowners into so much trouble.
With one key difference: For the next 20 years, Poway Unified isn’t even paying the interest.
...But a voter reading the ballot statement for Proposition C in 2008 would have learned nothing about the overall cost of the deal the district was setting itself up for. The full 2,200 word statement makes no mention of capital appreciation bonds, and says little about how the borrowing would be paid back. The ballot arguments against the bond don’t mention the unusually high costs involved in borrowing money that won’t begin to be paid back for 20 years. The bond also had considerable cachet, thanks to a coveted endorsement from the San Diego County Taxpayers Association. Indeed, association President Lani Lutar’s name was first on a list of five local dignitaries named on the ballot as supporting the bond.
Lutar said had she known the full implications of the bond, she would not have recommended the association support it.
...Last month, the association changed its criteria for endorsing school bonds. In the future, it will ask districts how, exactly, they will finance their bonds. ...Glenn Byers, Los Angeles’ assistant treasurer and tax collector, said districts like Poway have been dishonest by issuing bonds without laying out the consequences and costs of the loans for taxpayers.
Find High-Interest School Bonds in Your District: A Five-Step Guide
August 8, 2012
By WILL CARLESS
Since publishing the story on the Poway Unified School District’s billion-dollar bond, we’ve had a bunch of inquiries from all around the state asking one question: Is this going on in my local school district?...
Step One: Find your district in our capital appreciation bond database...
[Maura Larkins comment: Here are some of the districts I found:
2006-0201 Bonsall Union School District 2/23/2006 8,920,243.00 General obligation bond
2007-1030 Bonsall Union School District 7/26/2007 4,698,309.00 General obligation bond
2006-1353 Bonsall Union School District 1/25/2007 3,381,128.00 General obligation bond
2001-0148 Capistrano Unified School District 2/28/2001 29,999,930.00 General obligation bond
2000-1370 Cardiff School District 7/19/2000 10,999,035.00 General obligation bond
2011-0482 Carlsbad Unified School District 6/7/2011 52,998,238.00 General obligation bond
2009-0237 Carlsbad Unified School District 5/12/2009 79,998,017.00 General obligation bond
2011-1278 Escondido Union High School District 10/6/2011 20,000,451.00 General obligation bond
2009-0981 Escondido Union High School District 8/18/2009 34,216,905.00 General obligation bond
2009-1391 Escondido Union High School District 12/1/2009 26,996,392.00 General obligation bond
2002-0430 Escondido Union School District 7/18/2002 46,299,622.00 General obligation bond
2008-0504 Grossmont Union High School District 7/22/2008 88,159,578.00 General obligation bond
2006-0779 Grossmont Union High School District 5/31/2006 124,999,225.00 General obligation bond
2004-0710 Grossmont Union High School District 6/3/2004 60,841,197.00 General obligation bond
2010-0902 Lakeside Union School District 9/22/2010 12,982,209.00 General obligation bond
2009-0034 Lakeside Union School District 4/23/2009 21,833,149.00 General obligation bond
2010-1239 Lemon Grove School District 9/23/2010 7,999,480.00 General obligation bond
2002-1813 Lemon Grove School District 10/18/2002 2,191,178.00 General obligation bond
2000-1769 Lemon Grove School District 11/30/2000 2,560,587.00 General obligation bond
2012-0447 Oceanside Unified School District 4/11/2012 14,999,282.00 General obligation bond
2010-0235 Oceanside Unified School District 5/5/2010 29,999,991.00 General obligation bond
2008-1062 Oceanside Unified School District 2/19/2009 49,995,054.00 General obligation bond
2010-0094 Poway Unified School District 3/10/2010 24,998,007.00 Bond anticipation note
2010-1369 Poway Unified School District 8/3/2011 105,000,150.00 General obligation bond
2008-1217 Poway Unified School District 1/9/2009 3,698,554.00 General obligation bond
2008-1216 Poway Unified School District 1/9/2009 73,998,936.00 General obligation bond
2006-1091 Poway Unified School District 10/19/2006 119,300,766.00 General obligation bond
2007-0692 Ramona Unified School District 6/13/2007 24,333,360.00 Certificates of participation/leases
2008-0412 Rancho Santa Fe School District 7/22/2008 1,959,042.00 General obligation bond
2008-0413 Rancho Santa Fe School District 7/22/2008 33,997,571.00 General obligation bond
2004-1209 Rancho Santa Fe School District 7/30/2004 2,836,419.00 General obligation bond
2012-0397 San Diego Unified School District 3/1/2012 65,434,442.00 General obligation bond
2012-0485 San Diego Unified School District 5/10/2012 149,998,824.00 General obligation bond
2010-0997 San Diego Unified School District 8/5/2010 163,869,783.00 General obligation bond
2009-0232 San Diego Unified School District 4/23/2009 131,157,581.00 General obligation bond
2004-1372 San Diego Unified School District 8/19/2004 199,996,373.00 General obligation bond
2005-1469 San Diego Unified School District 8/18/2005 195,024,802.00 General obligation bond
2002-1426 San Diego Unified School District 8/22/2002 274,995,346.00 General obligation bond
2003-1434 San Diego Unified School District 8/7/2003 349,993,599.00 General obligation bond
2001-1770 San Diego Unified School District 11/8/2001 199,995,712.00 General obligation bond
2000-1584 San Diego Unified School District 12/6/2000 149,999,084.00 General obligation bond
2012-0109 San Ysidro School District 1/31/2012 10,409,715.00 Certificates of participation/leases
2011-0496 San Ysidro School District 6/15/2011 17,599,623.00 General obligation bond
2007-1350 San Ysidro School District 11/15/2007 33,952,741.00 General obligation bond
2004-1729 San Ysidro School District 1/14/2005 24,619,363.00 General obligation bond
2004-1742 Sweetwater Union High School District 11/4/2004 96,999,415.00 General obligation bond]
Kudos to Michigan Journalist on the Poway Bond Story
August 8, 2012
By ANDREW DONOHUE
Voice of San Diego
We've gotten more national attention on our Monday story about bonds at Poway Unified School District than we imagined. While it's been great, today a retired reporter and blogger in Michigan is upset with us for taking credit for breaking the story...
Joel Thurtell is a retired Detroit Free Press reporter who has a long history of great reporting on this type of borrowing. He now keeps his own blog called Joel on the Road and did important work on Poway’s expensive borrowing back in May, long before we wrote about it...
First, there’s no doubt Thurtell’s work deserves highlighting. Here are three tremendous stories he did on the Poway financing in May: CABs = Compound Trouble in California, Disaster Shadows Poway and CAB Scam in Poway...
Friday, May 04, 2012
South Bay bond manager's home raided; California Watch finds campaign donors get bond work in 110 out of 111 cases
District Attorney Bonnie Dumanis seems to be obsessively focused on Chula Vista politics when it comes to public integrity. It's a big county, but Bonnie seems to be limiting herself to implementing the agendas of Greg and Cheryl Cox and their friends. There are serious problems in other parts of the county. In fact, California Watch discovered that "For donors [to bond campaigns], failure is rare. In only five cases out of 111 did an underwriter make a donation and fail to receive a contract to sell the bonds. In four of those, however, more than one underwriter made donations and the contract went to the firm that had contributed a larger amount to the campaign." (See second story below.)
South Bay bond manager's home raided
Wendy Fry
UTSD
May 3, 2012
District Attorney’s investigators executed search warrants Wednesday morning at the home and former office of bond manager Gary Cabello, a financier who has done work at both Sweetwater schools and Southwestern College.
Cabello’s defense attorney, Heather Boxeth, said the investigators were searching for documents and information as part of their ongoing investigation of corruption in the South Bay. Cabello has not been implicated in any crime.
“That law enforcement showed up with a search warrant was a surprise to Mr. Cabello, as he had been previously contacted by the District Attorney’s Office and has been willing to cooperate in any fashion,” Boxeth wrote in an email statement. “Furthermore, my various phone messages, as Mr. Cabello’s attorney, left with the District Attorney’s Office remain unreturned. Mr. Cabello has over 20 years of public finance experience across the state, which is a highly regulated industry. Mr. Cabello has nothing to hide, he’s been involved in no illegal activity. The execution of the search warrant ... while inconvenient and embarrassing certainly won’t turn up any evidence of any wrongdoing on his part.”
Also searched were the Carlsbad offices of Alta Vista Financial, Inc. A spokesman for the company said of that raid, “It had nothing to do with our company. They were here looking for information on a former employee who hasn’t worked here for about three years. We cooperated with them and they left.”
Cabello, 53, worked at Alta Vista serving the Sweetwater school district prior to Proposition O, a $644 million voter-approved bond measure passed in 2006. He calculated the size of the bond measure and the tax rate needed to finance the long list of school building projects. Alta Vista contributed $25,000 to the campaign to get the bond measure approved by voters. The company then won a contract underwriting the bond.
Cabello’s current company, Chicago-based Cabrera Capital Markets, LLC., has a contract with Southwestern College to manage Proposition R bond funds. Officials with Cabrera Capital did not respond to questions Thursday.
The District Attorney’s Office is building a case that Sweetwater and Southwestern officials accepted thousands of dollars of expensive meals, entertainment and other gifts in exchange for awarding multi-million dollar contracts under a systemic “pay to play” culture. Five current and former officials face felony charges, while three contractors have pleaded out on misdemeanor charges and are cooperating with prosecutors.
With campaign donations, bond underwriters also secure contracts
May 3, 2012
Will Evans
California Watch
Leading financial firms over the past five years donated $1.8 million to successful school bond measures in California, and in almost every instance, school district officials hired those same underwriters to sell the bonds for a profit, a California Watch review has found.
The practice is especially pronounced in California, where underwriters gave 155 political contributions since 2007 to successful bond campaigns for school construction and repairs. One major underwriter, Piper Jaffray, has said it gets more requests for campaign contributions in California than in any other state where they do business.
The success rate of these underwriters is extremely high. In only five cases since 2007 has a campaign donor failed to receive a bond-selling contract from the school district.
School districts say they choose bond underwriters for their expertise and competitive rates and because they’ve served them well in the past. And underwriting firms say they contribute only after they’ve been hired to sell the bonds, avoiding any undue influence.
But critics say that no matter when the agreement is made, the campaign donations influence school districts’ business decisions. They argue that pre-arranged underwriting contracts bypass a truly competitive sale, leaving in doubt whether districts got the best possible deal.
“If this isn’t clear proof of pay to play, then pay to play doesn’t exist,” said Glenn Byers, Los Angeles County’s assistant treasurer, who oversees some school bond sales but doesn’t control the hiring of underwriters. “The timing of the payment is irrelevant. You paid and you got the job. That’s pay to play.”
Some states have banned the practice. Missouri, for one, outlaws donations to bond campaigns from companies with a financial interest in the bond sale.
In the past five years in California, five major underwriters donated $1.8 million to help pass 111 ballot measures, authorizing $15.5 billion in debt. A couple dozen other measures received underwriter contributions but failed at the ballot box.
Overwhelmingly, bond underwriters who donated to these campaigns were granted contracts by school districts.
In nearly all cases, the only underwriters that donated to a successful school bond campaign ended up working on the bond sale. Bond Buyer, a trade publication, found the same pattern in an earlier review of 2010 campaign contributions.
At times, multiple underwriting firms will donate to a single bond campaign. But even there, the success rate is high. In almost all cases in which multiple bond underwriters donated to the same campaign, they all were given contracts by the school district to market those bonds...
For donors, failure is rare. In only five cases out of 111 did an underwriter make a donation and fail to receive a contract to sell the bonds. In four of those, however, more than one underwriter made donations and the contract went to the firm that had contributed a larger amount to the campaign...
(Click on link at top to see the rest of this very detailed article.)
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