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School Bonds: San Leandro District Used Long-Term, High-Interest Loan

San Leandro's school district is among hundreds of districts throughout the state using capital appreciation bonds to finance major projects.

The San Leandro School District is among many California school systems that are borrowing against the future to build facilities and improve infrastructure, according to a report in the Bay Citizen.

The publication says 1,350 school districts and government agencies throughout the state are using capital appreciation bonds to finance major projects.

Throughout the state, these capital appreciation bonds have allowed the agencies to borrow billions of dollars while delaying payments, in some cases for decades.

In San Leandro, in 2010 the district borrowed a total of $19 million but will pay $52 million in interest, essentially spending $3.61 per dollar borrowed, according to a Bay Citizen chart.

Bill Clark, the associate superintendent for the Contra Costa County Office of Education, said some school districts don't have much choice.

He explained the state imposes a debt issuance ceiling for school districts based on property values. Districts from higher income areas have little problem issuing bonds for their construction needs. However, districts from lower income areas have to resort to more creative bond issuance plans.

"The schools cost about the same money, but the low wealth district can't build using more acceptable funding methods," said Clark. "Don't the low wealth kids deserve to have effective classroom environments that contribute to their academic success?"

Typically, school districts begin paying off bonds within six months and end up paying two to three times what they borrowed, The Bay Citizen said.

With capital appreciation bonds, some school districts will end up paying more than 10 times what they borrowed. In some cases, the payments don't start for 20 years. In some cases, the facilities that were built with the bonds will have been replaced by the time the money is paid off.

District officials usually decide what type of bonds to use after voters have approved the money through ballot measures, The Bay Citizen reported.

Earlier this month, state Superintendent Tom Torlakson and state treasurer Bill Lockyer urged school districts to stop issuing capital appreciation bonds until the state does a thorough investigation of the practices.

Pastor Derek Jung February 04, 2013 at 05:14 PM
David, I would vote for you.
Tyler February 04, 2013 at 05:27 PM
All through the 'recession', voters have voted for school bonds, in order to improve SL Schools without raising taxes. Our leaders knew they would, people seem to think bonds are free money. They built a new 9th grade campus, a performance venue, a swimming pool (while our public pools remain closed due to lack of funds!). They built a beautiful track and field for the middle school. The irony is, they had to lay off teachers, and don't have money for supplies. It seemed like the height of insanity at the time, and this news only makes it more special.
jeffrey olsen February 05, 2013 at 06:00 AM
I believe San Leandro Cassidy mafia ready to steal the last penny from taxpayers for their voters and placards suppliers from public workers unions.
Barry Kane February 05, 2013 at 07:11 PM
Yes, you should run and you could win.
David February 05, 2013 at 08:13 PM
thanks for flattery. I'll put it under consideration. I do have a few other ideas beside vouchers, but not sure if they'd really end up working or not. but then again, the current board just keeps on doing stuff they know doesn't work and never has.

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