Palo Alto Daily News/Bonnie Eslinger, 7/12/13. "Grand Jury: Bonds issued by 13 San Mateo County school districts are 'ticking time bombs'"
| You paid for it, or flipped it, nothing is forever, now it needs repair you need a new bond |
"Capital
appreciation bonds used by 13 San Mateo County school districts are
expensive "ticking time bombs" that will drain future taxpayers,
according to a civil grand jury report released Thursday.
Those bonds enable districts to pay for capital improvement projects now, and don't have to be repaid for decades. As a result, they'll accrue substantial interest that eventually will cost the districts several times more tax dollars than the original sums, the grand jury warned.
.... Of the 20 capital appreciation bonds issued, the report highlights three as particularly imprudent because the debt service is four times the amount borrowed: a $22.7 million bond issued by the Hillsborough School District in 2011 that will multiply to more than $172.2 million by 2045; a $6.5 million bond issued by the Laguna Salada Union Elementary School District -- now the Pacifica School District -- that will multiply to more than $37.4 million by 2030; and the $35 million bond issued by the San Mateo Unified High School District in 2011." Read article.
Those bonds enable districts to pay for capital improvement projects now, and don't have to be repaid for decades. As a result, they'll accrue substantial interest that eventually will cost the districts several times more tax dollars than the original sums, the grand jury warned.
.... Of the 20 capital appreciation bonds issued, the report highlights three as particularly imprudent because the debt service is four times the amount borrowed: a $22.7 million bond issued by the Hillsborough School District in 2011 that will multiply to more than $172.2 million by 2045; a $6.5 million bond issued by the Laguna Salada Union Elementary School District -- now the Pacifica School District -- that will multiply to more than $37.4 million by 2030; and the $35 million bond issued by the San Mateo Unified High School District in 2011." Read article.
Note: graphic is from Time Timer.com, article the Atlantic, "Is the wristwatch becoming obsolete?"
Posted by Kathy Meeh
28 comments:
Refresh my memory. That library bond we keep hearing about, was it $35 million? How's that work? No developer wants to build us a library so we go with a bond? Or is it the developer builds it in exchange for free land? Naw, the land isn't worth that much. Bond, right? So $35 million in 30 years becomes, what, $300 million? Hey kids, don't say I never left you anything.
PSD board member Matt Levie is active in the current city utility tax secret campaign. Maybe he ought to concentrate on PSD since they will have to answer the grand jury and the public why a bond appreciated by 600%.
And people have the balls to bring up another 30 million dollars for a library.
I knew that these bonds were a bad deal for the taxpayer but I had no idea how bad. Is this the same type of bond that they are planning to fund the new library with?
Think of them as Kick the Can bonds. Gotta have something you can't afford? Float a bond so your kids and grandkids can pay for it.
Let's not even discuss where to draw the line between needs and wants because fancy new libraries might fall in that "want" category.
uh .. this is how bonds work. If you didn't know that, you shouldn't have voted for it. It's like the mortgage on your house. Almost all the money you pay over 30 years is interest on the loan, not the amount of money you borrowed. If you look at the amount of money you borrowed and the total amount of money you will pay over the life of the loan, you'll see that what you pay is many times more than what you borrowed. Get used to it.
Keep this article handy for the library bond measure campaign. Many of the library bond measure team is warming up on this UUT campaign. No doubt picking up valuable tips on that old council favorite, consensus building, from a consultant paid for by tax-payer dollars.
I want the library. Build it!
It is like the ultimate Neg Am loan! A ticking time bomb.
Big banker always votes no on Bonds!
Debt is another instrument of the devil.
Good for me when I issue it, but horrible when I take it out.
Big banker never pays interest he just charges it.
4:11 they need to switch up your meds
30+ million in debt. The city is already out to the gills with debt and oh they need another 50 million in debt to fix the "state of the art" sewer plant. Probably another 20 million to fix the aging and crumbling roads and sewer system.
And the price tag for the library only pays for the building not the books not the staff and not the lost property tax and sales tax that a mix uses building would bring in.
@5 Do you think that might have been a council member's post?
Tom Clifford, you are so right! The waste of that space for a library is obscene. Prime real estate in city control should be used to create maximum revenue and not wasted on a public building. I doubt any developer will even nibble. It'll sit vacant for years and then end up as condos and apts which is just fine. More housing for more people brings more tax revenue and demand for local goods and services.
People who work for the government and or eat from the taxpayer trough do not have a clue how outside private sector works.
When I told city council many years ago you have to run the city like a business, so it can pay for services, they gave me the deer in the headlights look, two even told me, but its not a business. NO CLUE.
Pacifica, has the same problem it had 30 years ago. No place to buy a cd(even though cds, are out now) no place to buy a pair of jeans(ROSS) and if you need home repair items you either have to go over the hill to Home Depot, Lowe's, or OSH(or get gouged at ACE)
But 30 years ago the city had 3 car dealerships(the biggest tax source for a city) a movie theatre(Seaview) and a record store(Manor)
30 years ago we had the wasters and stoners who hung out at the Adobe or Linda Mar beach. Now we have the tweakers who wander around all night looking for things to steal.
So how can anyone say the city has improved over the last 30 years.
Yes, we have a vast trail system, but do people have anyplace to drop some money in town while visiting. Not really.
Those of you lucky to sort of own a home, ever look at the little box that shows how much you will have paid back over the 30 years?
It'll make the bonds look cheap. If you're going to bitch about something maybe it should be that.
Did someone actually complain about our lack of a record store? Here's a news flash, gramps: there are no buggy whip dealers either.
9:05 ass clown I was saying if you wanted to buy a record, cd, or for most anything you want you have to go over the hill.
Unless you want to get gouged buying it here.
I use Amazon.com so ask me if I really care. Yes, I go over the hill to Lowe's OSH Home Depot and Costco. Sue me if you don't like it
Another angry member of the gang of no splitting hairs, and not taking ownership of bankruptcing the city.
9:03
That is why Banks and Insurance companies have the biggest newest and nicest buildings downtown.
From interest paid, fees and making their money work for them.
"When I told city council many years ago you have to run the city like a business, so it can pay for services, they gave me the deer in the headlights look, two even told me, but its not a business. NO CLUE."
People who think government should be run like a business have NO CLUE. Governments and businesses are completely different types of organizations and have fundamentally different purposes and operations. If you don't understand this, you have no business telling governments how to run.
When you are borrowing 25 to 30 million you should be getting a better deal then someone borrowing $500,000.00 that is unless you don't care because your not the one paying the bill.
Tom
Yes and no. It depended on the lending climate. When banks are playing fast and loose with money it is pretty easy to get money for a project like the OWWTP.
When the Government regulators are looking over the banks shoulders like now, it's tougher. Every bank has been beat up with commercial loans. Still alot of bad paper out there, Real Estate Owned and Non performing mortgages.
Even the private lending guys and pension funds have been really tight to get money out of.
The commercial loans have gone through the extend and pray they pay phase.
I expect one more phase of commercial foreclosures before the lending climate can improve.
The developers who built projects like this have been beaten to a pulp in the last 5-8 years.
Banks are requiring more skin in the game then before( hard money from the developer or investors) to even talk about new construction.
This project is too big for the local guys but too small for the big national home builders.
It is going take someone like, Chop or Swenson to come in and take a hard look. Minus the library at this location.
The city burned Sweson once on this parcel when they wanted Skyfield USA to develop the parcel and we all know how that turned out.
Always interesting to get financial analysis from a guy who calls himself big banker, moved to Texas because he couldn't keep a job here, and lost his Pacifica home to foreclosure.
Sinai
Are you willing to put down some money. If you are so sure Big banker is someone who moved put up some money?
put up or shut up?
$1,000 or $10,000 or $100,000
It's obvious who it is, but I'm afraid I'm not the betting type.
Does that also mean, you have no money to lose, or you are scared to lose your money?
There's only one person who's obsessed with Vreeland, tar balls, Skyfield, bankruptcy, and other things that were issues when he left four years ago, but aren't issues now.
He's doing the same thing on this blog as he did on his short-lived blog. He comments on something anonymously or with a pseudonym, then a few minutes later responds to his first comment pretending to be someone else. He then does the same thing and responds to his second comment - and on and on it goes. He takes over a thread with his tiresome conversations with himself.
I don't go around calling people liars very often, but the person in question could easily be the most pathologically dishonest person I've ever met.
"Does that also mean, you have no money to lose, or you are scared to lose your money?"
If you're so upset by what I'm saying, why do you require money to show that I'm wrong?
As usual, Tom Clifford wins the common sense prize.
People who think government should be run like a business have NO CLUE. Governments and businesses are completely different types of organizations and have fundamentally different purposes and operations. If you don't understand this, you have no business telling governments how to run.
This had to be a government or municipal employee that does not understand finance 101. If a city can not pay its bills, they file chapter 9 bankruptcy.
When a business can no longer pay bills it files a Chapter 7 or Chapter 13. Or the seldom used Chapter 11.
You have to have enough revenue coming in to pay for basic needs and services if not you are bankrupt. You can rob Peter to pay Paul but sooner or later the house of cards falls apart. Just like Pacifica.
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