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Wednesday, February 13, 2013

School Bond Refuted: Real Costs Revealed

Op/Ed Contributor

Who Wants to Be A Millionaire?

by Brian W. Carver

The Emery Unified School District's letter to explain its issuance of a 
soon-to-be-illegal Capital Appreciation Bond (CAB) skirts around several important points.

First, while the District claims to be committed to keeping its promise that tax rates will not exceed $60 per $100,000 of assessed valuation, they were only able to issue this CAB by placing their faith in an absolute fiction: the notion that property values in Emeryville will increase nearly 4% per year, every year, forever.

According to, the average listing price for a home in Emeryville for the week ending February 6, 2013 was $397,626. If we, like the School Board, assume that average Emeryville home will increase in value by 4% per year, it takes only 24 years before that home will be valued at over $1 million dollars. If the School Board is to be believed, the average Emeryville homeowner is already a millionaire! Just sit back and watch it unfold over the next 24 years.

The reality is much different. In March 2003, put the average Emeryville home value at $280,000 (median sales price was $297,000) and as of January 2013, puts it at $271,300 (median sales price is $229,300). That is, over the last ten years, while there have been some ups, the downs have left things back where we started, so that values are basically flat or down over the last ten years. The School District's rosy assumptions don't account for this. Rather than look at the last ten years as a guide, they simply put blind faith in a
never-ending 4% annual increase.

The consequences of this false assumption will unfold on your tax bill. Now that the District has bonded us to the limit, it will take only one year with less than 4% annual growth in assessed valuation to see their $60/$100k promise broken. Your tax bill is going to exceed $60/$100k. Get ready for it. Indeed, if the next 10 years are basically flat, as the last 10 years have been, you will be paying nearly $90 per $100k of assessed valuation in 2023.

Second, the legislation that is being considered in Sacramento will limit these CABs to payback periods of 25 years, while our District issued one with a term of over 32 years. This component of the legislation was well-known before our District took action, and it is pure speculation on their part that this aspect will change prior to the legislation's enactment.

The 25-year payback period limitation is important because, contrary to the Board's false comparisons: bonds for school facilities are not comparable to home mortgages.

With regular maintenance one can reasonably expect one's home to appreciate or maintain its value over at least a 30 year period. However, District officials frequently inform us that school facilities,even properly maintained, only have useful lives between 10 and 40 years, and that's ignoring the fact that our District has already used bond proceeds for items such as iPads with useful lives of about 3 years (even though Emeryville residents will continue to pay for them for decades).

The better comparison here is to financing a car whose value depreciates immediately and, even with regular maintenance, continues to decline in value until it requires complete replacement. That is our experience with school facilities and should inform the payback periods on the bonds the District issues: the shorter the better.

Instead, the District routinely disguises what a bad deal this most recent CAB was by blending its payback ratio in with the lower payback ratios the District achieved in prior bonds sales. By participating in federally-subsidized bond programs with payback periods under 20 years, the District got a good deal on these earlier bonds. But just because you got a good deal then, doesn't justify accepting this lousy deal now.

How bad are these latest Series D CABs? Unbelievably bad. The three prior bond sales were going to cost Emeryville taxpayers just over $80 million to pay back. That was expensive, but probably within our means. However, the Series D CABs, by themselves, are going to cost Emeryville taxpayers another $66,185,000 to pay back, increasing the cost of the project by over 82% to a new total payback amount of over $146 million. At current enrollment levels, it would be cheaper to present a $50,000 check to every graduate of Emery High for the next 40 years. Too bad that's not an option.

Prior to the issuance of these costly CABs, District Staff explained that without this latest bond, we could build a new high school, but we simply would not be able to also cram the elementary and middle school students onto the same site. Our School Board's insistence upon shutting down Anna Yates Elementary School is what has nearly doubled the cost of this project and forced Emeryville taxpayers to live far beyond our means.

There were alternatives that this Board refused to adequately consider. Over 70 stakeholders signed a letter asking them to keep Anna Yates open as our elementary school and simply build a less expensive high school on the San Pablo Avenue site. Our School Board refused to consider this alternative and remains doggedly committed to a project design that this City does not need and cannot afford.

Our only option now is a new School Board.


Brian Carver is a parent of a child in the Emery Unified School
District, was the Chair of the Measure J Citizens' Oversight Committee from March 2011-2012, and has been critical of the School Board's insistence on moving the elementary students from Anna Yates to the Center of Community Life site on San Pablo Avenue.  Mr Carver is an occasional contributor to the Tattler.


  1. Thanks for that Brian. Sadly it's clear we have a serious problem in this District and with this project. The CAB is a mess for us homeowners, but then families and homeowners are not highly valued in this community. Now if you owned a business on the other hand you probably would have more say and influence on this decision.
    I do think the Board failed us here. Remember when we had so much money we had to accelerate the project? Well they did and then the money evaporated and left them needing to tie us to this mess of a CAB to maintain the momentum. Yes they failed us BIG TIME but honestly there aren't enough people who give a crap about the schools in this City to seat a completely different Board.'s a dishonest mess. Where is the COC in all of this? Where do they stand? The Community wants to know. I want to know, even if the community doesn't give a crap. I actually care about how much my taxes are going to increase as I age. To be honest I'm 2 seconds away from throwing in the towel on this school district. With 3 kids that means the community goes with it. I'm bummed.

  2. if anyone in the city should know how capital appreciation bonds work, mr. carver is that person. i thank him for his letter without the fluff provided by the dice/lindo letter and how much taxpayers should expect to pay. i also think this goes higher than the emery unified school district. what about alameda county superintendent sheila jordan and even state superintendent tom torlakson? emeryville certainly is not the only city in california approving capital appreciation bonds. we just happen to have the lowest population.

  3. Thank you Shirley, Ronald, and Brian(s). I think you see through all of this nonsense, and through slightly different perspectives, each one being correct. As a Taxpayer, I feel frustrated, and helpless. I would back an immediate RECALL of the entire Board,ASAP.

  4. Brian Carver has written a very compelling piece. The last sentance is a new concept but one we should start considering. This school board can't seem to listen to anyone that disagrees with them. It seems like this isn't going to turn out well, for them or us. Either way, this is not how it's supposed to work. We need to start thinking about turning this board out and trying a new board.

  5. another thought: how does this indebtedness affect very small business, doctors, accountants, gas station owners, restauranteurs,dry cleaners, car repair and body shops who may not live in emeryville but rent space here and pay business taxes? we rarely hear comments from them unless they sign anonymously.

  6. I agree, it's time to get rid of this school board (and the superintendent).

  7. re: eusd letter and anonymous dated feb. 12 6:12 a.m.

    the next citizens oversight committee meeting will be held feb. 20 6 p.m. in the multi purpose room of the ralph hawley middle school, 1275 61st st. on the agenda will be a report from caldwell flores winters (financial advisors) and eusd staff regarding the sale of measure j series D bonds.

    interesting to note that this report will take 30 minutes, a finance report will take 10 minutes and community engagement 15 minutes.

  8. If Brian is right then the School Board is lying when they say this CAB is close to what the state says should be allowable. We need to get the Board to answer for this lie.

    1. Good point! Look for a future Tattler story on this.

    2. I'll be the judge on future Tattler stories thank you very much.
      Look for a future Tattler story on this.

  9. Project J authorized the issuance and selling of bonds "at interest rates below the legal limit."

    The Project J Community Engagement Process Resolution identifies as a first priority, "Build trust from community stakeholders."

    Trust has been eviscerated through the rushed approval of this CAB sale a few days before the state moratorium. Worse, Brian provides cause to question the credibility of appreciation assumptions supporting the 4:1 payback ceiling. Unfortunately, our community is willing to burden a future generation with our unnecessary expenses. When property taxes will not support the repayment of this debt, what will be sacrificed? Public health services? Park maintenance? Shoreline conservation? Security?

    I also find it extremely lame that the CC subsequently rejected a LEED design for this building.