The Board wished to close the popular Anna Yates Elementary School and move the children over to the new school site on San Pablo Avenue but because Emeryville's Assessed Valuation had sunk during the recession, it was only possible for the School District to borrow $48 million (not including interest) by normal bond financing. That amount was enough to build a new high school but not a new elementary school as well. Emery turned to Capital Appreciation financing to build a new elementary school for an extra $70 million paid over 32 years.
The School Board's CAB financing, if attempted today, would be illegal. Since the School Board got its CAB sold just under the wire, two generations of Emeryville taxpayers will be paying back this debt at onerous interest. Emeryville as it turns out, has the dubious distinction of being among the last taxpayers statewide saddled with CAB financing.
From the Oakland Tribune:
Brown signs law prevents schools from incurring huge bond debt
A law signed Wednesday by Gov. Jerry Brown will prevent school districts from issuing ultra-long-term bonds that saddle taxpayers with huge repayment debt.
AB 182 restricts schools and community college districts in issuing capital appreciation bonds, which can delay repayment for decades and can require huge balloon payments 30 or 40 years later.
The new law, authored by Assemblywoman Joan Buchanan, D-Alamo, limits total debt service to four times the principal, limits the duration to 25 years and requires that deals permit early repayment on bonds that mature after 10 years.
The law also requires schools to disclose terms and costs of capital appreciation bonds, known as CABs; how costs compare to the cost of regular bonds and the repayment ratio.
The Santa Clara County Civil Grand Jury has criticized districts for burdening taxpayers with those bonds. The Luther Burbank School District in San Jose, for example, raised $7.5 million through four capital appreciation bonds that will cost more than $40 million to pay off.
Attorney General Bill Lockyer said the new law "ensures school districts no longer can heap outrageous debt burdens on the backs of future generations of taxpayers."
-- Sharon Noguchi, staff