Del Mar Union School District establishes new CAB policy

By Karen Billing

The Del Mar Union School District adopted a new resolution and policy on Oct. 3 regarding the use of capital appreciation bonds (CABs) with the issuance of general obligation bonds.

With time closing in toward the Nov. 6 vote on Prop CC, the board wanted to ensure accountability to the public and avoid a situation like Poway Unified’s, where that district’s long-term, 40-year CAB will end up costing taxpayers almost 10 times what the district borrowed.

Baked into the policy and resolution is language recommended by San Diego County Treasurer-Tax Collector Dan McAllister, who is pushing for legislation to change school districts’ use of CABs.

“I think we now have a resolution for the bond and a policy that really sets a direction for what we want to do, keeping an eye on responsibility in the district,” said Del Mar school board trustee Doug Rafner.

Under DMUSD’s new resolution and policy, CABs will only be pursued if the repayment ratio does not exceed 4:1 and they are structured to be fully repaid in 25 years.

The board made it clear they do not want bonds that last beyond 25 years.

“Poway needed a lot of money fast,” said trustee Kristin Gibson. “We don’t need a lot of money fast, we need a sustained amount of revenue to implement our strategic plan over a long period of time.”

Rafner said he also likes the checks and balances that are worked into the resolution—the sale of any form of CAB would have to be reviewed by the district’s citizen’s bond oversight committee.

The policy states that prior to the sale of bonds it must be put on an agenda at a public meeting to disclose the method of sale and the costs associated with the bond issuance. Also, after the sale the board must present the costs of the bond sale.

Trustee Doug Perkins said he had hoped to see a little more “teeth” to the policy, making more restrictions.

President Scott Wooden said it is intentionally flexible because they don’t want to tie the hands of future boards should something unforeseen happen.

While the resolution and policy states the circumstances in which CABs could be used, DMUSD primarily plans to use Current Interest Bonds (CIBs), paying on a debt rather than deferred debt with interest.

“(Should the bond pass) the first issuance will be very conservative at an approximate debt ratio of 2 to 1, which is highly favorable and acting well within the parameters of the this resolution, ” said district superintendent Holly McClurg.