A San Diego assemblyman today announced plans to introduce legislation to place restrictions on the terms of school district construction bonds.
The bill by Assemblyman Ben Hueso, D-San Diego, stems from a furor over a capital appreciation bond issued by the Poway Unified School District that leaves taxpayers in that area on the hook for paying back $981 million over 40 years, in exchange for borrowing $105 million to construct school facilities.
San Diego County Treasurer-Tax Collector Dan McAllister subsequently proposed a series of reforms for construction bonds, which he sent to state and school district officials.
McAllister's suggestions are incorporated into Hueso's proposed legislation, which would:
-- reduce the maximum maturity of a bond from 40 years to 25 years;
-- drop the top interest rate from 12 percent to 8 percent;
-- allow the bond to be paid off early, allowing a district to refinance;
-- limit the highest debt ratio to 4-to-1; and
-- require the bond to be approved by the county Board of Supervisors, county superintendent of schools or governing board of a community college district.
McAllister said the restrictions would prevent politicians from gambling on property values with bonds like Poway’s.
“Two to five years is about all we can predict out and maybe not even that. So how on earth could anyone reasonably expect to be able to project accurately 25,35, 40 years out into the advance to be able to pay down the debt that’s incurred now,” he said.
The bond in the Poway district, which drew heated opposition at school board meetings after the terms were revealed, has a debt ratio of over 9-to-1.
The district is also not allowed to pay off the bond early, according to McAllister.
"I will work diligently with my colleagues to pass this important piece of legislation,'' Hueso said. "This measure has already received an overwhelming amount of bipartisan support and I plan to push it through with the help of my colleagues in Sacramento.''
The assemblyman is expected to introduce the bill in the first week of December.
