Eleven school districts — from Bonsall to the South Bay — are asking voters to approve bonds this election. How do you know if the bond on your ballot is a good one? Let’s start at the ground level.
What is a bond?
“Essentially, it’s an increase in property tax to back a bond, to get money up front to build facilities today,” said Haney Hong, president and CEO of the San Diego County Taxpayers Association.
Put another way, school districts are asking voters for permission to take out a loan using future property taxes as collateral. Take the San Diego Unified bond proposal. The district wants to sell $3.5 billion worth of bonds and pay investors back over 39 years using a $60 tax on every $100,000 of a property’s assessed value.
As in every bond on the ballot, San Diego Unified says it’s going to do this “within the legal limits.” That might sound like we can dust off our hands and move on, but our work isn’t done.
“My personal opinion: I think it’s a little silly when folks say ‘within the legal limits of the law,’ because I certainly hope you wouldn’t be putting something outside the legal limits on the ballot,” Hong said. “The challenge is always in implementation.”
The numbers you’ll see on your ballot are mostly estimates. What actually happens — what gets built, what revenue is earned, what interest rate the district gets — all depend on how the market and district perform. But there are indicators you can look at now to get a feel for whether the bond will pencil out as proposed.
Are all bonds like that Poway bond?
Let’s start with the financing.
You might remember that Poway bond. That was a capital appreciation bond that delayed payments and let interest pile up. The state has outlawed the worst of those bonds and most school boards have adopted policies to be more transparent if they’re entering into such an agreement, so don’t let that bad press sour you on bonds.
But Hong said you should still pay attention to finances. He suggested looking at how the district predicts property values will change.
“We tend to like districts to be conservative in the assumptions of the growth of assessed value. Four percent is generally conservative. If they want to go lower, even better,” Hong said. “But if they’re starting to do something beyond 4 percent, that can create problems on the finance side.”
It can create problems like the district not having enough tax revenue to pay back investors and needing to dip into already constrained general funds to make good on its debt.
All of the bonds this year meet that 4 percent threshold.
My district had to make big budget cuts. Should I approve its bond?
One might argue the need for a bond to repair schools means a district didn’t budget properly to cover annual maintenance on its buildings.
“It’s a structural problem,” Hong said. “If you buy a house and you can’t maintain the pool, should you have the pool?”
RELATED: Follow The Money: The Campaign For San Diego Unified’s $3.5 Billion Bond
But both Hong and Andy Berg, the chairman of the committee in favor of San Diego Unified’s bond, said bonds are a reasonable way to pay for capital improvements. Just about all of a district’s state and federal dollars go toward operations and personnel, and many districts have had to make budget cuts in recent years, as pension payments and special education spending have increased.
“The bond is a completely separate animal. None of that money can be used to help with their budgets,” Berg said. “What would make the budget problems worse, though, is if we didn’t have the bonds, and we had to take money that was supposed to go to operations and used it to fix facilities. That would cause more cuts for teachers."
But didn’t they just get a bond?
One of the arguments against the San Diego Unified bond — and one of the main reasons why the Taxpayers Association didn’t endorse it — is that San Diego Unified still has active bonds from 2008 and 2012.
The district, however, has said all of those funds are earmarked for projects and that there’s still a need in the district. In 2008, it identified $7.5 billion in facilities needs. Berg said the previous bonds and this year’s Measure YY were envisioned as a package deal.
Berg also said the 2008 bond measure asked to extend, not add to, a tax rate voters approved in 1998. Similarly, Santee School District’s bond this year is a reauthorization.
Other things to consider
Hong likes bond projects that have strong oversight, are well-planned and efficient. How can you tell?
The nonpartisan education arm of the Taxpayers Association puts out an annual scorecard to show whether districts with active bonds have strong and transparent oversight.
In terms of efficiency, the Taxpayers Association doesn’t like project labor agreements that commit districts to using union labor for construction on bond projects. That can undercut competitive bidding, Hong said.
But Berg argued that’s a subjective measure.
“That criteria is completely political,” he said. “That criteria has nothing to do with can the school district deliver on the project?”
Berg said project labor agreements can mean more jobs for parents in the district.
His other advice to voters:
“I think it’s up to the individual voter. I’ll just talk about me. I look to see if there’s a need in the school district. Go to your own schools and see if there’s still work to be done to make these better,” he said. “And then ask yourself if you believe like I believe that public education is the most important thing we do. It’s the great equalizer.”
