December 10, 2012
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 ‚ÄĒ leaving many districts owing far more than they borrowed.
[…] [California State Treasurer Bill] 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.”