Thursday, November 29, 2012

Of school bonds and other demons

The widespread practice among school districts of selling "Capital Appreciation Bonds" is coming into sharp focus this week after the L.A. Times published an investigation on the topic. Here's the link.

School districts statewide have been resorting to selling Capital Appreciation Bonds since the economic bubble burst and pushed down property values. Administrators began to use these bonds banking with the belief that property values will go up, so taxpayers would not be adversely affected.  I've also heard from district administrators they plan to refinance the bonds before they become due so the payments are not as high as they're being made to sound on stories like this.

Nine districts in Monterey County have resorted to this type of bonds since 2007: Alisal Union, Bradley Union, Carmel Unified, Gonzales Unified, Greenfield Union, Hartnell College, Monterey Peninsula College, Monterey Peninsula Unified, King City Elementary, and Santa Rita Elementary. Together they've issued about at least $104 million in bonds to finance school construction and renovation.

To my untrained eye, it looks like the only bonds that should raise eyebrows are in Bradley, Carmel, Hartnell and Santa Rita because of their high repayment ratio. But I'll have a chance to look at them more closely in the days to come.

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