California schools push construction costs to future tax payers with controversial bonds
- Hundreds of the California school districts and community colleges funded $7 billion in construction projects since 2007 using controversial capital appreciation bonds, which push the cost of construction to future taxpayers.
- Those future taxpayers will also be responsible for huge interest payments on the bonds, which may balloon to 10 times the amount originally borrowed over as much as 40 years.
- Since news broke that the Poway School District's $105 million construction project will cost nearly $1 billion by the time it is paid off, outrage among residents and elected officials has been on the rise, and a bill working its way through the State Assembly seeks to cap the maturity of the bonds at 25 years and require the total debt be no more than four times the amount borrowed.
From the article:
LOS ANGELES — School officials in Santa Ana were in a bind several years ago: they wanted to build hundreds of new classrooms, but feared that voters would rebel against tax increases to pay for the construction. So in 2009, the Santa Ana Unified School District borrowed $35 million using an inventive if increasingly controversial method known as capital appreciation bonds, which pushed the cost of the construction on to future taxpayers. Not a cent is owed until 2026. But taxpayers will eventually have to pay $340 million to retire that $35 million debt. ...
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