California Assembly passes bill limiting schools' use of risky bonds

Published: Tuesday, Apr. 9, 2013 - 12:00 am | Page 3A
Last Modified: Tuesday, Apr. 9, 2013 - 7:54 am

The Assembly voted Monday to limit the use of facilities-improvement bonds that allow school districts to delay repayment for decades while interest obligations accumulate.

Capital-appreciation bonds came into the spotlight in August when Voice of San Diego outlined a deal in the Poway Unified School District that put taxpayers on the hook for nearly $1 billion on a loan of $105 million.

The Bee has found that the Yuba Community College District will pay $59 million to retire $4.6 million in bonds, and Folsom Cordova Unified will pay $9.1 million to retire $514,000 in debt.

Assembly Bill 182 by Joan Buchanan, D-Alamo, and Ben Hueso, D-San Diego, passed 73-0. It would limit the term of the bonds to 25 years instead of 40 years.

The bill also sets a 4-to-1 limit on the ratio of total debt to principal for each bond. In the case of Folsom Cordova, the school district will pay $18 for every $1 borrowed.

"This bill would protect taxpayers from terrible bond deals while maintaining school districts' ability to provide their parents and children needed facilities," state Treasurer Bill Lockyer said in a statement.

The measure would also require school boards to receive an analysis of the proposed bond issues, including the total cost and a comparison with the cost of more traditional bonds. Some board members have said they weren't sure what they voted on or were confused.

Under the bill, districts that have issued bonds could seek a one-time waiver from the bill's provisions until the end of the year.

Some school officials, including the association representing administrators, still oppose the measure. They say the bonds can be a benefit to schools if used wisely. School officials argue that delaying payment on bonds allows districts to gamble that property values will rise by the time they have to start making payments.

They are asking that the bill be amended to allow a 30-year term and up to a 6-to-1 debt-to-principal ratio.

The bill now heads to the Senate.

Call Melody Gutierrez, Bee Capitol Bureau, (916) 326-5521. Follow her on Twitter @melodygutierrez.

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