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Friday, April 12, 2013

Sacramento Outlaws Emery Type School Bonds

After months of wrangling, California lawmakers have outlawed the worst of a particularly expensive and usurious kind of school construction bond financing called Capital Appreciation Bonds (CAB), the same bond issued by Emery School District last fall.  CAB critics and citizen detractors in Emeryville were quashed by the School Board as they moved quickly to get their CAB sold before Sacramento lawmakers could outlaw the notorious financing scheme.  With Emery's nimble moves, mindful of and keeping one step ahead of lawmakers, Emeryville taxpayers will now be on the hook for more than 30 years of high interest pay back.

Emery's CAB was issued in order to abandon the existing elementary school on 41st Street and rebuild at the Center of Community Life site on San Pablo Avenue.  The new high school there is being financed with cheaper traditional 'general obligation' bonds.

Our neighbors to the north, Berkeley Unified School District has so far avoided any ruinous CAB financing and any possible CAB issued in the future there will be made after the new Sacramento mandated taxpayer-protecting regulations are the law of the land.   Berkeley school board president Karen Hemphill, also coincidentally Emeryville's City Clerk, proudly proclaimed at Berkeley Unified, fiscal responsibility is a "hallmark".

Berkeley is portrayed as the fiscally prudent counterweight to Emery's reckless profligacy in this week's Daily Californian:

State Assembly passes bill aimed to curtail school district debt burden

Tuesday, April 9, 2013

The California State Assembly unanimously passed a bill Monday restricting the use of high-debt-accumulating bonds in school districts and community colleges.

Introduced by Assemblymember Joan Buchanan, D-Alamo, Assembly Bill 182 attempts to reduce the future debt burden by limiting the length of capital appreciation bonds to 25 years and restricting money owed to a maximum of four times the borrowed amount. The bill would also let districts refinance these bonds at a lower interest rate and require increased disclosure to the school districts’ governing boards.
“They shove debt on the next generation of taxpayers who won’t benefit directly from the facilities the bonds finance, which means (the next generation will) have less ability to finance what their kids need,” said Tom Dresslar, spokesperson for California State Treasurer Bill Lockyer, who has been a strong advocate for the bill.
Emeryville City Clerk & Berkeley School Board
President Karen Hemphill
Unlike Emery, Berkeley School District hasn't 
issued a CAB because of a culture of 
"Fiscal responsibility" &"Accountability"

Capital appreciation bonds have been used by public schools throughout the nation to fund large-scale projects like school construction. Unlike traditional bonds, however, for which the funds are repaid in gradual, short-term increments, capital appreciation bonds are paid back in one total amount at a set date, often decades after the bond is issued.
However, during the period between the bond’s issue date and its maturity date, interest is continuously compounded, which often results in high levels of accumulated interest. In some cases, debt payments have accrued to even 10 times the original amount borrowed, according to Dresslar.
Several groups, such as the California Association of School Business Officials and the Association of California School Administrators, believe that capital appreciation bonds should be limited but that AB 182 should be revised.
“If passed in its current form,” said Molly McGee Hewitt, executive director of CASBO, “we are concerned that many school districts will have to delay their facilities’ construction programs, resulting in substandard facilities for students, teachers and staff that are in the greatest need of them — particularly in districts that serve a high percentage of economically disadvantaged families.”
The Berkeley Unified School District is not using any capital-appreciation bonds at the moment, though the use of such bonds is “likely to happen in the future,” according to Mark Coplan, BUSD public information officer.

Karen Hemphill, president of the BUSD Board of Education, mentioned that the board has weighed the pros and cons of capital-appreciation bonds and would consider them only in the context of saving taxpayers money.
“Fiscal responsibility has been the hallmark (of the district),” Hemphill said. “We have a lot of checks and balances and accountability.”
The state Senate will vote on AB 182 in the following months. If passed and signed by the governor, the bill will be implemented beginning Jan. 1 of next year.
Contact Alison Fu at


  1. This now merits a Full Court Press on the Senate, to move quickly, and get this measure to Law. We taxpayers should have a campaign to Lobby that.
    Screw the financial "parasites" who are profiting.

  2. Among Mayor Brinkman's new priorities from his State of the City address, published April 23, 2013, is supporting the Emery School District.

    This is to call on our mayor to support our school district by leading an effort to replace the current school board and the current school superintendent.

    1. I wouldn't count on it Will. Mr Brinkman has shown he is here to do Nora Davis' bidding on the council, and Councilwoman Davis is a strong supporter of this Board and this Superintendent. The only way to get the kind of change you're calling for is at the ballot box I'm afraid.