Posted on 08/07/2012 7:20:56 PM PDT by DogByte6RER
Poway Unified to Pay Nearly 10 Times What it Borrowed: Report
District will begin financing the 40-year loan beginning in 2050
New school, new library, new technology – just a few examples of the renovations and repairs made to Poway Unified School District’s 24 aging schools starting in 2001 under Proposition U.
To finish the job, Poway taxpayers passed Proposition C in 2008. Last year, as part of that bond, the district borrowed $105 million.
It won’t begin paying it back until 20 years from now.
With interest, that $105 million loan will end up costing taxpayers almost $1 billion over 40 years, according to our media partner, Voice of San Diego, who broke the story.
So how did this happen? To convince taxpayers to pass the other bond measure, the district promised voters their property tax rate would not go up again.
With no new tax rate increase, the district had to do some creative financing. Instead of paying down debt every year for 20 or 30 years, as one would with a home mortgage, last year, the district cut a deal for a loan to be paid in the future.
The district won’t make any payments – not even interest-only payments – for 20 years, at which time the district will start making payments for the next twenty years. But, during the life of the 40 year loan, interest compounds, and the debt continues to increase.
The school superintendent John Collins and Board member Todd Gutschow say taxpayers need to look at the big picture. The two bonds together allowed the district to complete $543 million worth of projects for a little more than $1 billion in interest.
“That one offering in isolation doesn’t look good,” Gutschow said. “But in the context of the whole program and the total value the taxpayers, we think it’s a good deal.”
He says the taxpayer will pay about three times the total value of the projects.
Voice of San Diego reporter Will Carless, however, points out that some of the $543 million value came through state grants; the district actually financed $377 million of that $543 million. The cost of borrowing that amount is still very high, he says.
Superintendent John Collins says without the bonds, there would have been no state funding; in addition, he says financing just the principal was not a bad deal.
He says the district avoided the inflation by building sooner rather than later, not to mention the fact that children are already benefiting from the construction and other additions to the district’s schools.
“If we made [our kids] wait twenty years until the tax rate would have supported that, where would they be now?” he asked.
On the other hand, County Treasurer and tax collector Dan McAllister wonders where those kids will be later when payment is due.
“It’s not just this generation, or the next generation, but probably two generations down the road,” McAllister said of the economic impact of the bond.
“We’re not saying this is going to end up an Armageddon situation, but potentially the risks are much greater with this kind of financing than what would be a more traditional way,” he added.
“If you had raised taxes in the beginning in order to have money coming in to be able to borrow in a normal way,” Carless said, “it could have ended up being much cheaper at the end of the day because you wouldn’t have had to have this crazy exotic financing.”
More coverage here ...
Where Borrowing $105 Million Will Cost $1 Billion: Poway Schools
http://www.voiceofsandiego.org/education/article_c83343e8-ddd5-11e1-bfca-001a4bcf887a.html
Poway is a pretty high dollar place to live.
Looks like they are over leveraged on the dream.
What People Are Saying About the Bond
“If they ever told the truth, they would never get these approved by the voters.” — Glenn Byers, Los Angeles County assistant treasurer and tax collector.
“This is way worse than loan sharking. And Poway is the poster child. What they have done is absolutely insane.” — Michael Turnipseed, executive director of the Kern County Taxpayers Association in central California.
“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.
What District Officials Say
“We could have authorized more taxes, it would just have been breaking the promises we made to the community.” — Todd Gutschow, Poway Unified board member.
“We knew the voters wanted these projects, and we knew they wanted them sooner rather than later.” — John Collins, Poway Unified superintendent.
In 20 years the students will all be Mexican citizens. Good luck getting that money out of their parents.
Uhhhmmmm...a billion dollars richer..??
It’s for the Chirens!
BTW I have family that work for Poway schools.
Nothing but the best.
. . .
It won’t begin paying it back until 20 years from now.
None of this is very clear to me. The district will begin paying off the loan "20 tears from now" (2032), but it won't begin financing the loan until 2050?
Assuming in 40 years the staggering sum of $1,000,000,000 will probably buy you a ham sandwich or two - it seems like a pretty good deal.
.....Again suppose Louis XV. and his cotemporary generation had said to the money-lenders of Genoa, give us money that we may eat, drink, and be merry in our day; and on condition you will demand no interest till the end of 19. years you shall then for ever after receive an annual interest of 125/8 per cent. The money is lent on these conditions, is divided among the living, eaten, drank, and squandered. Would the present generation be obliged to apply the produce of the earth and of their labour to replace their dissipations? Not at all.......
And which part of the Constitution allows the State to Enslave Future Generations in Perpetual Debt in which they had absolutely no say in ??? I thought we outlawed Slavery?. When you consider this contract requires payment from “Future Investors” it is ILLEGAL on it’s face as a Pyramid Scheme. And should be invalidated by ANY Judge that bothered to read the Constitution. Involuntary Servitude should not be allowed, and yes that is exactly what it is.
20, 30, 40 years from now those buildings will need to be (a) upgraded, (b) added to, (c) replaced and (d) and/or all the above;
it’s not as if capital spending for schools for the next 40 years is going to end with this one bond issue,
so by the time the local taxpayers have to start paying on this bond issue - 40 years from now, they will have already determined it was necessary to fund new bonds for new capital projects
so, in the next 20, 30, 40 years, the local schools taxes will become comitted to paying off new bonds, before payments on this bond issue even start.
These people are thieves and getting away with it. Someone needs to look at whose taking the bond debt and whose getting the construction work and where do any of their bank accounts intersect, even offshore, with any bank accounts of any members or relatives of members of the Poway school board.
What they - the Poway school board - are saying is - “long after we are dead, forty years from now, someone else is going to get the bill for our children’s education, and they are going to have to cut back on spending on education for their children to pay for it.”
The entire board should be locked up. They’re criminals.
Our federal constitution places very few restrictions on states. We call that principle “states rights” and “federalism.”. The only people who will have to repay these bonds are the people who choose to own property in that district in twenty years when repayment begins.
You probably can, but it will be a secured loan.
In fact, those “reverse mortgages” are like that. ;-)
Excellent find.
I fully understand the principle, however please explain how an elected body can ENSLAVE FUTURE GENERATIONS to pay for their wants?? We used to call this SLAVERY.
Mafia?
The Feds are no better if you compare the Fed debt history. It all goes to show people in government at any level can be crooked as hell along with ignorance and selfishness. I’ve seen government of the people at all levels.
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