How refinancing schemes work
By Steve Geissinger
SACRAMENTO BUREAU
SACRAMENTO -- The state's controversial new state bond-debt restructuring strategy works something like the refinancing of a home mortgage, pushing bond payoffs years -- or even decades -- into the future.Critics fear that with the state pushing bond payments ahead for the first time, taxpayers will now be paying off the bonds well past the useful life of some of the projects that were financed with the bond monies.
Bay Area school districts were among those which received initial allocations from the bond measure in 1999, according to documents obtained from the state Office of Public School Construction in the Department of General Services.
In Alameda County, money from the school bond went in 1999 to the Albany Unified School District for a middle school and New Haven Unified for a middle school and an elementary school.
In Contra Costa County, school bond money that year went to Antioch Unified for an elementary school.
Records obtained from the state treasurer's office under the California Public Records Act show that more
than $1 billion in bond payments that would have come due this year and next will now be paid from 2003 to 2030.
The recent refinancing postpones payments on various multimillion-dollar bond issuances under the authority of 25 ballot measures that voters approved:
In 1988, for construction of schools, universities, libraries, local jails and state prisons, as well as for clean-water projects and water conservation efforts.
In 1990, for construction of state prisons, schools and universities, as well as for seismic-safety retrofitting, mass transit, transportation improvements and affordable housing.
In 1992, for school and university construction.
In 1996, for earthquake safety, school and university construction and clean-water projects.
In 1998, for school construction and repairs aimed at reducing class sizes.
Under the refinancing, state officials say for example, $3.5 million in bonds issued under the 1998 voter-authorized school construction measure that would have been paid off in April of this year and another $3.5 million that would have been retired in April 2003 will both instead be paid off in February 2029.
Therefore, critics say that bonds monies used in 1999 or 2000 for construction or repairs -- that are supposed to have a useful life of at least 10 years under the original $9.2 billion bond measure -- will be paid off decades later.
But the concerns are dismissed by top officials in a deficit-ridden state government, who view the refinancings as a widely accepted fiscal tool to free up cash in the short term and take advantage of the current low interest rates.
I believe they are going to tap into the giant pile of money in the State Pension Funds!