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 â€” 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.”