School District Trots Out New (Unchanged) Bond Financing Scheme

Meet The New Bond, Same As The Old Bond:

Both New & Old Bond Requires Taxpayers Pay $107 Million For $20 Million Borrowed

The new school bond has been
proposed to replace the
discredited CAB.
But if it looks like a duck and
walks like a duck
and quacks like a duck....

In response to angry parents recently chastising the School Board, the Emery School District distanced itself last week from its previous consideration to float a Capital Appreciation Bond (CAB) to fund the last $20 million to help build a new school on San Pablo Avenue and instead embraced a new General Obligation bond that the District admitted would end up costing taxpayers the same as the CAB.
The criticisms caused the District to change the 'Series D' bond, the final proposed bond for the new school from a CAB, considered a risky financing scheme that defers payments for many years to a General Obligation Bond, generally considered safe.  The new Series D bond would begin repayment in 2014 and finish in 2053 as opposed to the former proposed CAB that would have deferred payments until 2032 and finally be paid off in 2049.  Both bond schemes would cost taxpayers $107 million for the same $20 million borrowed.  Both bonds assume a 4% Emeryville Assessed Valuation growth every year for the duration of the bonds and both bonds assume no greater than the promised $60 per $100,000 of property valuation.  The General Obligation bond requires payment every year starting in 2014 but each payment is less than $100,000 until 2032 when the large balloon payments begin.

Capital Appreciation Bonds have been much in the news of late since cash strapped school districts from cities with low property value appreciation across the State have turned to them and reporters have shown the fiscal impropriety of this type of high interest borrowing.  The media has depicted CAB financing as a sort of bellwether for irresponsible financial chicanery in school districts up and down California.
Emery, too has been revealed to be entertaining the idea of CAB financing to fund the move of the existing Anna Yates Elementary School to co-locate with the proposed new high school.  The District has claimed it needs an extra $20 million to close down the elementary school on top of the already raised $48 million to rebuild the high school.

It's a duck.

School Board members last week called for an explanation for the CAB previously presented by District staff in the wake of a Tattler story and the Board heard that a CAB would not be necessary to finance the final $20 million after all.  The staff then introduced the new General Obligation Bond.  Staff members did not volunteer that the new bond would cost taxpayers the same as the discredited CAB bond nor that it would actually take four years longer to pay off than the CAB.

One parent at the meeting commented that the new bond is a CAB in all but name and that the replacement General Obligation Bond is a cynical ploy meant to deceive Emeryville residents.  The parent expressed frustration at the lack of transparency by the staff. "Show us your work" the parent challenged the staff, noting how math teachers require students to reveal how they arrived at an equation.