This year our community’s assessed valuation is set at a little over $8B, making our “bond sweet spot” $72M. The bond consultants knew this. So did School Board members.
Instead of keeping Measure CC within our own means, Board members decided to add another $34M beyond our sweet spot. This made it necessary to resort to using interest-only payments over the first half of the repayment schedule.
Fitting Community to Bond
The use of these 20 strategically placed interest-only payments is an obvious sign that the consultants had to use them to make our community’s limited resources fit the School Board’s larger $106M bond price tag.
Common Sense Needed
Why didn't the Board stay with the smaller, more simply-financed bond measure, one that fits our community’s resources? Why didn't members ask for a smaller bond first, one we could support wholeheartedly? Start the critical work projects. Ten years later, ask for a bigger bond after our assessed valuation has grown large enough ($12.5B projected)?
Instead, they decided to propose a larger $106M bond first. They proposed a bond that resorts to payback tweaks—again, needing to fit our community to their bond rather than the other way.
Lunches Are Not Free
You should be aware that interest-only payments are not cheap. The price for using them has to be paid sometime down the line.
Before Measure CC is paid off, we will end up paying investors about $75M over the last seven years, 70 percent of Measure CC’s face value.
Zoom, Zoom, Zoom
Instead of being able to use the less-costly level repayment plan, their additional $34M necessitated resorting to a more expensive ($13M), accelerated payment schedule.
There is a reason shrewd homebuyers don't want to pay a speeded-up repayment schedule. It is cheaper over the life of the home loan.
By using their proposed payment structure, our community not only will be paying what the current interest rates, but will have to pay investors $13M more than Measure CC’s face value beyond the normal cost.
Ask and Receive?
What are local voters really being asked to vote on June 3? To approve the issuing of $106M worth of bonds and intentionally fuzzy spending categories. You also are being asked how to pay for it.
Tax Rate Missing
You are not being asked to approve Measure CC’s tax rate. Remember the $48M that was polled? It is not on the ballot.
The tax rate will be set later by the School Board, after the election. If Measure CC passes, the Board could later choose to raise the tax to its legal maximum of $60. This innocent sounding $12 increase would add almost a million dollars a year to our payments, nearly $30M more to the cost of Measure CC. That would make our small community’s debt balloon to over $300M.
Something to Ponder
Would you ever enter into a long-term contract without knowing how much you will be paying or how much more you will be paying every succeeding payment? Would you ever sign up for a long-term mortgage without knowing what your next payment was going to be? That is what the School Board is asking you to approve.
What Would Board Members Do?
Do you think Board members would choose such ill-conceived financing for themselves if they were ones borrowing?
Tell Us Why
You would think that when Board members make this kind of multi-million dollar bond decision that they would be ready to defend the spending.
Limited Information
Yet the only mantra supporters have given for floating the Board's mega-bond is that our schools need fixing. After four months of telling us over and over that our schools need upgrading, which they do, they have yet to explain why spending 12 percent more on fixing our schools is good for our community.
Ill-advised Decision
Even though some Board members may think of themselves as being infallible, they are not. They can be persuaded by outside consultants to make ill-advised, financial decisions. When that happens, it is up to the community to say:
Thanks, but no thanks. Let’s see what else you have in November.
They will come back with something that stays within our means.
Just say no to Measure CC.
Mr. Laase may be contacted at GMLaase@aol.com
