In the Bellevue Union School District, we take very seriously our responsibility to be prudent stewards of public tax dollars. Our district has a solid track record for sound financial management and decision making.
However, a recent editorial in this newspaper ("Time to hit the pause button on costly bonds," Jan. 30) implied that by using capital appreciation bonds to partially finance badly needed construction projects we have not acted in the best long-term interests of our community. That is incorrect.
The newspaper's editorial alleges that our school district's use of a CAB for a $378,000 loan will ultimately cost district taxpayers $4 million in interest — 10.75 times the amount borrowed. That is untrue and misreads the true facts supporting our decisions on the Measure J bond. Unfortunately, the editorial appeared to rely heavily on faulty data from research by the Los Angeles Times.
Here are the facts:
Since 2008, the assessed value (tax base) in Bellevue Union School District has declined by 18 percent. For this reason, we have only issued $12 million of the $19 million in bonds that were authorized by district voters. We anticipate issuing the remaining $7 million only if the tax base increases enough that we can do so with a responsibly structured bond issue. Keep in mind that a sizable majority of the CABs are pre-payable and can actually be refinanced if interest rates permit in the future.
We have issued bonds on just two occasions since the passage of Measure J. In May 2009, we issued $6.5 million at a net interest rate of 4.24 percent. In September 2011, we issued $5.5 million with a net interest rate of 4.05 percent. We have commitments to pay $24.3 million in principal and net interest through the final maturity of the bonds in August 2041. The $378,000 of CABs mentioned in the Jan. 30 editorial is a small part of the $5.5 million bond issue in 2011. The other $4.3 million of that bond sale was at a repayment ratio of just 1.05 to 1. With the CAB included, the overall repayment ratio of 2.1 to 1 is still quite modest. These numbers are publicly available and we'd be happy to share them with anyone who wants to see them.<NO1> California Watch did not ask us to verify its numbers.<NO>
The CABs were necessary in order for the district to take advantage of a federal program known as "qualified school construction bonds." We were thrilled to be selected to issue qualified qualified school construction bonds because the federal government agreed to pay more than 90 percent of interest on the bonds. Because of this program, our local taxpayers are saving millions of dollars through the life of the bond. As the editorial mentioned, "There may be times when CABs and other deferred-payment loans make sense." We strongly believe our transaction fits this bill. We used these bonds in moderation and for a specific, money-saving purpose.
None of these facts suggest a "desperate" borrower willing to repay $10 in interest for every $1 borrowed. None of the facts suggest "loan shark rates." None of the facts support the claim that our district has kicked the financial can down the road and forced future taxpayers to bear the cost of today's construction. We started paying interest within a year of the time that each bond was issued, and in neither case are we paying an interest rate of more than 4.25 percent. The fees paid to our financial advisers for brokering the two bond transactions were reasonable and comparable to those paid by other school districts in our area.