Hartnell and its bonds, cont'd

On its face, it looks a bit scary. To have to repay $460 million after getting only $48 million in bond money to build two buildings. So the alarm bells were sounded, and about two dozen community members -- including three Hartnell trustees -- attended a special meeting of the district's Citizens' Bond Oversight Committee on Thursday.

It is not exactly the job of the committee to be vigilant about how much interest the college's paying -- that's supposedly a job for the trustees. The committee's responsibility is to make sure the money's spent for its intended uses. But Bob Perkins, chairman of the committee is also vice chair of the Salinas Tax Payer Association, so he convened a special meeting to request some answers.

"We asked for the meeting as citizens, not as the citizen's oversight committee," Perkins announced. (The notice for the meeting, by the way, was advertised as a special meeting of the Citizen's Bond Oversight Committee)

The answers had already been given back in 2009 when the bonds were issued, but the only person who was around back then and is still around to remember is apparently President Phoebe Helm.

At the special meeting Thursday, Helm explained that trustees authorized to issue the type of bonds that accrue interest back then despite their cost because no investor seemed interested in the regular kind of bonds.  Not having authorized the sell of those bonds would have risked losing matching funds from the state, would have stopped construction already begun and exposed the college to lawsuits from builders with contracts already signed. At the time, the economy had begun its painful decline, and the bonds that Hartnell had been able to sell at enviable rates back in 2003, 2006, and even in June 2009 were no longer available by September of the same year. So the board voted to get capital appreciation bonds, with the knowledge that they would have to be refinanced in 2019 -- before repayment is scheduled to begin in 2022.

Homeowners in the Hartnell district began paying $17.37 per $100,000 of assessed value in 2003 to begin repaying the bonds, but their payments by law can't be higher than $25. The average they've paid is just under $20.

As comparison, payment for Cabrillo College's two bonds is almost $40. Gavilan's bond is $21.70. Monterey Peninsula's bond is $23.57.

Because college officials had been able to secure such good interest rates in the early bonds, even if the last bond remains at this much higher interest rate, it would all balance out to a repayment of five times -- compared to two times for the first second series of the bond, and three times for the third one.

So the bonds were sold in 2009, and the audit report was issued in 2010,  why is all this happening now, asked Faculty President Ann Wright.

It's the political climate, said Helm. 

"The issues should be to educate and not to alarm," Helm said. "Specially when you're dealing with what's already been determined."

Julie Tucker, another member of the oversight committee, felt her fears had been assuaged by the special meeting.

"I'm really glad we did this," she said. "I'm very confident things are being monitored."