School owes $1 billion on $100 million loan. And these fucking dickless asshole morons teach economics (among other things) to our kids.
http://www.npr.org/2012/12/07/166745290/school-district-owes-1-billion-on-100-million-loan
More than 200 school districts across California are taking a second look at the high price of the debt they’ve taken on using risky financial arrangements. Collectively, the districts have borrowed billions in loans that defer payments for years — leaving many districts owing far more than they borrowed.
In 2010, officials at the West Contra Costa School District, just east of San Francisco, were in a bind. The district needed $2.5 million to help secure a federally subsidized $25 million loan to build a badly needed elementary school.
Charles Ramsey, president of the school board, says he needed that $2.5 million upfront, but the district didn’t have it.
Why would you leave $25 million on the table? You would never leave $25 million on the table.
“We’d be foolish not to take advantage of getting $25 million” when the district had to spend just $2.5 million to get it, Ramsey says. “The only way we could do it was with a [capital appreciation bond].”
Those bonds, known as CABs, are unlike typical bonds, where a school district is required to make immediate and regular payments. Instead, CABs allow districts to defer payments well into the future — by which time lots of interest has accrued.
In the West Contra Costa Schools’ case, that $2.5 million bond will cost the district a whopping $34 million to repay.
‘The School District Equivalent Of A Payday Loan‘
Ramsey says it was a good deal, because his district is getting a brand-new $25 million school. “You’d take that any day,” he says. “Why would you leave $25 million on the table? You would never leave $25 million on the table.”
But that doesn’t make the arrangement a good deal, says California State Treasurer Bill Lockyer. “It’s the school district equivalent of a payday loan or a balloon payment that you might obligate yourself for,” Lockyer says. “So you don’t pay for, maybe, 20 years — and suddenly you have a spike in interest rates that’s extraordinary.”
It’s so irresponsible, that if I were on a school board — which I was, 40 years ago — I would get rid of that superintendent.
Lockyer is poring through a database collected by theLos Angeles Times of school districts that have recently used capital appreciation bonds. In total, districts have borrowed about $3 billion to finance new school construction, maintenance and educational materials. But the actual payback on those loans will exceed $16 billion.
Some of the bonds can be refinanced, but most cannot, Lockyer says.
Perhaps the best example of the CAB issue is suburban San Diego’s Poway Unified School District, which borrowed a little more than $100 million. But “debt service will be almost $1 billion,” Lockyer says. “So, over nine times amount of the borrowing. There are worse ones, but that’s pretty bad.”
A Statewide Problem
The superintendent of the Poway School District, John Collins, wasn’t available for comment. But he recently defended his district’s use of capital appreciation bonds in an interview with San Diego’s KPBS Investigative Newsource.
“Poway has done nothing different than every other district in the state of California,” Collins told the program.
And he’s right. In some cases, districts are on the hook to pay back anywhere between 10 and even 20 times the amount they borrowed.
But Lockyer says it distresses him to hear school officials defend these bonds.
“It’s so irresponsible, that if I were on a school board — which I was, 40 years ago — I would get rid of that superintendent,” Lockyer says.
Back in the ’90s, the state of Michigan banned capital appreciation bonds altogether. But Lockyer says California needn’t go that far. He supports a series of reforms such as capping the payback of debt to four times the amount borrowed. Otherwise, says Lockyer, these bonds will be paid well into the future, by the children of today’s students.
backwardsevolution says:
Unbelievably stupid. Sugar Daddy comes in with the carrot, but will they bite? Yes, indeedee do da. Of course these products should be banned. Even four times the amount borrowed is too much to ask. You tell your citizens that you need a new school and that everyone will have to pay an extra $whatever per year. But this way everyone’s a winner because they don’t have to pay for it; someone else down the line does. It’s just a deferral of pain!
Again, the federal government is involved. How many would have jumped if not for their involvement? And who really got rich out of this?
Insanity!
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9th December 2012 at 3:37 pm
Thunderbird says:
Money is the root of all evil. We are seeing it all around us. It is a fact of life.
Hot debate. What do you think?
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9th December 2012 at 3:45 pm
IndenturedServant says:
For over a decade, I have voted against each and every school bond or other tax continuance/increase I have had the chance to oppose. I will never vote for another until some sort of sanity is restored. Many millions of American were educated in little more than wooden shacks with a coal or woodstove in the corner. They received far better educations under those conditions than the kids do today in multi-million dollar schools with every available amenity. The Lost Boys of Sudan received better educations in refugee camps in Kenya than American kids receive in these modern monuments to excess.
Even if you have kids in public school, I would suggest that you vote against all school bond/tax measures. It is incredible to me that even with an obvious loss on all of our so called investments in education, people continue to fund that shit. It would be like paying for two BJ’s but never getting the happy ending on the first one. People have the attention spans of gnats!
Where I live, parents are REQUIRED to purchase, tp, paper towels, disinfecting wipes and other supplies for every child they have and GIVE them to the school so that they are SHARED. All I can say is, it’s a damn good thing that I have no children.
I_S
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9th December 2012 at 4:16 pm
Hope@ZeroKelvin says:
Gee, I guess the people that read through this contract and, assumably, understood the math, MUST BE A PRODUCT OF THE PUBLIC EDUCATION SYSTEM!!!!
What a great advertisement for their own “educational product!!!” Not.
We put a freaking men on the moon and brought them back with SLIDE RULES AND TRANSISTOR TECH, with people educated PRIOR to the Dept of Stupification, as well prior to the invasion of the illiterate hordes from South of the border, heh, all of whom have to be “educidamated” at the public’s expense in 15 languages.
Don’t forget the costs for in-school day care for all the Baby Mommas, the legal costs school districts have to pay to defend themselves from “student’s rights” lawsuits, and paying for all the affirmative action crapola.
It will go on until it won’t, then the FSA of today will be the Zombie Horde of tomorrow. In fact, sometimes I wonder if that, in fact, is the entire point of education in Amerika today.
Note to self: Become banker to the school district. Probably no where EVER in business can you get an almost 10X return like this, unless you get a green “loan” from Obama’s Dept of Energy, of course.
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9th December 2012 at 6:54 pm
SAH says:
Public Schools are not for-profit businesses. Where the fuck do they think they are going to get the money to pay back these loans? Public schools don’t create any revenue. Besides the sheer ridiculousness and idiocy of the terms of these bonds, I don’t believe public schools should ever take out loans, even ones with reasonable terms and rates, as schools have no income upon which to base the loan. This is just a microcosm of our Federal Government – school districts taking out loans promising repayment by the taxpayers. I wish I could take out a big fat loan and promise that Llpoh will pay it back (without his consent, of course) – if the government from the smallest school district all the way up to the leviathan Federal monstrosity can all do this, why can’t I? Anyone want to loan me $100K at 10,000%APR? I swear Llpoh will pay it off.
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9th December 2012 at 7:18 pm
Davos says:
“Money is the root of all evil. We are seeing it all around us. It is a fact of life.”~Thunderbird
“So you think that money is the root of all evil?” said Francisco d’Anconia. Have you ever asked what is the root of money?”~Ayn Rand
Answer: These fucking dickless assholes
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9th December 2012 at 8:52 pm
OF says:
Money is a brilliant idea directly from the heavens. It´s called the ability to handle abstractions. Money only works for the honest and trustworthy. Those who chase money instead of pursuing spiritual happiness and meaning are apes and may, if we can believe Hinduism, be reborn as apes or the like (which most will be glad about).
Anyone who has trouble with money, either this way or that, can be sure that there is still trouble in the inside and meditation and prayer are called for.
Money is not for apes.
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9th December 2012 at 1:44 am