Boardroom bondage: School districts wrestle with new regulations

Marsha Sutton
Marsha Sutton

By Marsha Sutton

New rules and restrictions make school district finance options for bonds seem more like bondage.

Not the Shades of Grey bondage (naughty readers) but bond reform that tightens the ropes in four, not 50, ways.

Assembly Bill 182, sponsored by state legislators Ben Hueso and Joan Buchanan, has garnered bipartisan support in Sacramento and would impose limitations on how school districts can structure their bonds.

Operating within defined boundaries of appropriate conduct can be as foreign to school districts as Christian Grey’s concept of normal interpersonal relations. But many districts see the writing on the wall and are prepared to submit, so to speak, to the greater will of the people.

At a “Debt Financing 101” seminar held March 12 hosted by San Diego County Treasurer-Tax Collector Dan McAllister, San Diego County school district trustees and officials learned about the proposed regulations aimed at controlling “outrageous bond financing schemes that put unwarranted tax burdens on taxpayers,” as McAllister put it in a press release.

The keynote speaker at the symposium was California state treasurer Bill Lockyer who delineated the four main provisions of AB-182, although he said some details are still under discussion:

  1. A debt ratio of no more than 4 to 1, ensuring that the total cost cannot be more than four times the amount of the principal
  2. A maximum maturity of 25 years
  3. Bonds with maturities over 10 years must be callable, to refinance
  4. Transparency

Lockyer anticipates that AB-182 will be “the new rules enacted” and said the legislation was precipitated by the sense that the debt load is often too large for the amount borrowed. The question, he said, is how to define “too large.”

In a private interview, Lockyer said the “construction folks” are trying to figure out “how to put the brakes on the legislation.”

When I asked why proposed legislation limiting bonds to a 25-year maximum is only targeting school districts and not other public agencies, Lockyer said, “Abuses are almost always uniquely [by] school districts.”

First elected as California’s 32nd state treasurer in 2006 and again in 2010, Lockyer is a credentialed teacher and served for years on a school board before becoming the state’s banker.

The county treasurer’s office paid for the symposium, which included dinner for about 100 school board members and district officials who stayed for three hours to listen to speeches and panel discussions on the proposed legislation and how it will affect them.

[No, I didn’t eat dinner on the county’s nickel. I didn’t even drink their water, although I do confess to finding a chair to sit on after my feet began to ache from standing in the back leaning against the wall for an hour. Talk about the red room of pain …]

In attendance from the San Dieguito Union High School District, which just received voter approval in November for a $449 million bond measure, were Eric Dill, SDUHSD’s associate superintendent of business services, and school board member John Salazar.

In his keynote address, Lockyer said there is momentum in Sacramento lately to tighten bond financing rules despite vendors “worried about adverse impacts on their business.”

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