How the DMUSD bond would differ from the Poway bonds
As I talk with members of our community about Proposition CC, the bond measure for the Del Mar Union School District, I hear one concern raised repeatedly: how do we know that Prop CC will not be the same taxpayer travesty that the Poway school bonds have become? There are several reasons why the DMUSD bond differs from Poway, and these reasons can go a long way towards reassuring our community.
Poway’s primary objective with their bonds was to build and renovate facilities at their older school sites. Some of the campuses, like Poway High School, received dramatic renovations. This means they had to take out large construction contracts at the outset of building. They needed very large sums of money in a short time frame to accomplish this. In four of five bond draws they made between 2003 and 2011, the draw amount exceeded $73 million.
DMUSD’s bond is not intended to finance the building of schools. It is primarily intended to enhance the implementation of the strategic plan and to offset declines in school funding by paying for things like modernization of schools, and maintenance and site upgrade projects. There are no large-scale, up-front construction contracts to sign. Rather than taking out the entire $76.8 million in a lump sum, the district plans to make smaller draws of approximately $15 million every few years.
The impact of this major difference between the two bonds is that the DMUSD has much more flexibility to look at other bond vehicles besides the much-discussed capital appreciation bond (CAB) that has Poway in hot water. The CAB typically defers payment against the bond principal to some future date, during which time large sums of interest are accrued. The DMUSD will most likely use current interest bonds (CIBs) that would enable them to make payments against the principal immediately. Interest rates for CIBs are far more favorable than for CABs because the bond buyer is assuming less risk. It also means that taxpayers will not get stuck with highly unfavorable terms as we have seen in Poway.
There is a silver lining to the debacle in Poway. We have all learned a lot from it. Community members I have spoken with are aware of what happened there, and are rightly concerned about fiscal responsibility with respect to these bond measures. Dan McAllister, our County tax assessor, has responded to the Poway situation by issuing guidelines that would protect taxpayers against bad CAB deals.
The DMUSD takes its responsibility to the public seriously, and in a board meeting earlier this month the trustees adopted a resolution that embraces McAllister’s recommendations. This, along with an independent oversight committee that will review bond draws, will help to ensure our district makes choices that will protect taxpayers from fiscal fiasco.
Torrey Hills Parent
Co-Chair, Quality Schools for Del Mar