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Sunday, August 4, 2013

Emery's Series D Bonds Slammed by Grand Jury Reports

Grand Jury Calls School Financing 
"Reckless" & "Ticking Time Bomb"

The Voice of San Diego, who broke the story the of California school districts issuing Capital Appreciation Bonds (CAB) for their school construction projects, is now reporting that numerous civil grand juries are issuing reports highly critical of this abusive method of buying now and paying much much later.   Our own Emery Unified School District recently issued such a bond as its "Series D" in which Emeryville tax payers will have to pay back nearly $70 million over 32 years in order to receive $17 million to put towards the construction of a new grammar school building at the Emeryville Center of Community Life (ECCL).
Emery is using its Series D CAB to finance the closing of popular Anna Yates Elementary School on 41st Street in order to move the children over to the Center of 'Community' Life site on San Pablo Avenue.  A Kindergarten through 6th grade building will be built on the site at a cost of approximately $17 million ($70 million including financing) School District officials have said.
The whole schools portion of the ECCL project is slated to cost in excess of $150 million, not including the City's $21 million portion and interest on that.
Emeryville's Anna Yates Elementary School
Photo shows an addition completed as part of a

 $9 million remodel a few years ago.  This will be 
replaced with a new $70 million building at the 
Center of 'Community' Life site.

As the Voice of San Diego reports, the San Diego County Grand Jury, the Santa Clara County Civil Grand Jury, and now the San Mateo Grand Jury have all issued reports that slam these balloon-payment bonds. San Mateo's report called Capital Appreciation Bonds, "reckless" and a "ticking time bomb." A spokesman for Bill Lockyer reiterated his position that using Capital Appreciation Bonds (CABs) "has been a big mistake that has hurt taxpayers." The recent San Mateo Grand Jury report was particularly harsh, calling CABs, "Too-Good-to-be-True Bonds" noting that the "taxpayers who approve these loans are presenting the tab to their children and grandchildren." Legislation to curtail CAB borrowing is currently under consideration in Sacramento.

The Voice of San Diego highlighted the story of Southern California's reckless Poway Unified School District bonds, in which that district borrowed $105 million and will have to pay back $1 billion because of the use of a Capital Appreciation Bond (CAB) that delays payments for years while interest accrues, making it the poster child for reckless school district financing.

Tattler readers will recall a recent debate via letters on the pages of the Tattler in which parent and former Bond Oversight Committee Chairman, Brian Carver, called Emery's dive into CAB financing through its Series D bonds "unbelievably bad" and CABs in general "absolutely terrible deals" while School Board Trustee, John Affeldt, defended the Series D bond as "prudent and measured."

It appears that counties across California are weighing in on the practice as well, and their conclusions are highly critical of Emery's choice.

They're both lawyers:  They can't both be right.
Who's telling us the truth?
Consider the source;
the insider or the oversight director.
Former Bond Oversight Chairman 
Brian Carver
 "This 'Series D' Capital Appreciation Bond
is a terrible deal for Emeryville taxpayers".
School Board Member 
John Affeldt
"This 'Series D' Capital Appreciation Bond
is a good deal for Emeryville Taxpayers."

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