California Schools Will Fall For Anything - Take CAB's

Discussion in 'Politics' started by pspr, Dec 9, 2012.

  1. pspr


    Infrickingcredible! You've got to love those stupid California liberals.

    More than 200 school districts across California are taking a second look at the high price of the debt they've taken on using risky financial arrangements. Collectively, the districts have borrowed billions in loans that defer payments for years — leaving many districts owing far more than they borrowed.

    In 2010, officials at the West Contra Costa School District, just east of San Francisco, were in a bind. The district needed $2.5 million to help secure a federally subsidized $25 million loan to build a badly needed elementary school.

    Charles Ramsey, president of the school board, says he needed that $2.5 million upfront, but the district didn't have it.

    "We'd be foolish not to take advantage of getting $25 million" when the district had to spend just $2.5 million to get it, Ramsey says. "The only way we could do it was with a [capital appreciation bond]."

    Those bonds, known as CABs, are unlike typical bonds, where a school district is required to make immediate and regular payments. Instead, CABs allow districts to defer payments well into the future — by which time lots of interest has accrued.

    In the West Contra Costa Schools' case, that $2.5 million bond will cost the district a whopping $34 million to repay.

    'The School District Equivalent Of A Payday Loan'

    Ramsey says it was a good deal, because his district is getting a brand-new $25 million school. "You'd take that any day," he says. "Why would you leave $25 million on the table? You would never leave $25 million on the table."

    But that doesn't make the arrangement a good deal, says California State Treasurer Bill Lockyer. "It's the school district equivalent of a payday loan or a balloon payment that you might obligate yourself for," Lockyer says. "So you don't pay for, maybe, 20 years — and suddenly you have a spike in interest rates that's extraordinary."

    Lockyer is poring through a database collected by the Los Angeles Times of school districts that have recently used capital appreciation bonds. In total, districts have borrowed about $3 billion to finance new school construction, maintenance and educational materials. But the actual payback on those loans will exceed $16 billion.

    Some of the bonds can be refinanced, but most cannot, Lockyer says.

    Perhaps the best example of the CAB issue is suburban San Diego's Poway Unified School District, which borrowed a little more than $100 million. But "debt service will be almost $1 billion," Lockyer says. "So, over nine times amount of the borrowing. There are worse ones, but that's pretty bad."
  2. Now everybody knows the buyer and seller of those bonds were in collusion to rip off the taxpayer.
  3. Obviously the only fair thing to do is for the federal government to step up and pay them off. The only reason they borrowed the money was to get a federal grant, so aren't we all really at fault here?
  4. pspr


    Surely the school districts knew the terms of these bonds and the consequences they were facing. How did they think the balloon would be paid? With profits from the school lunch room? I think PT must be right that there were kickbacks, favors or something to induce accepting such crazy terms.
  5. Yes we are.
  6. Most of the politicians in California see the taxpayers as their personal ATM machines. They don't care what anything costs as long at it will buy them votes in the next election.
  7. This is nuts, CAB's are nuts, even worse than Annuties that some people buy, crazy.
  8. That's a mere drop in the ocean compared to the type of debt obama is running up.

    Take a good look at the future.