Emotions run high at school board meeting
By Emily Sorensen
It was a packed house Monday night as people crammed into the school board meeting to vent their feelings over the current bond issue controversy.
Normally a quiet, sparsely attended event, the Poway Unified School District school board meeting was filled with concerned and sometimes angry district residents. Others were left standing against the walls and spilling into the entryway of the building, where television news cameras were set up for interviews.
Superintendent John Collins and the rest of the board of education began the meeting by defending their actions for an hour and a half to an occasionally restless audience.
“Our job is to educate these children, to make sure they have a future,” said Collins, in regard to the controversial $105 million bond, which is projected to cost Poway taxpayers living in the School Facilities Improvement Districts (SFID) nearly $1 billion over the next 40 years.
Collins presented a detailed time line that explained the board’s thought process and actions in creating both the initial bond series, Proposition U, and the follow-up bond series, Proposition C, which is the cause of contention. Proposition C utilized capital appreciation bonds, or CABs, that are long-term bonds that compound interest over a period of time in which they cannot be paid off.
Collins explained that the need to refurbish and modernize the 24 SFID schools was to bring them up to the standards of the newer Community Facility District (CFD), or Mello-Roos, schools, which are located on the west side of the school district. The “Building for Success” program, as it was called, was also to make sure the SFID schools, many of which were between 35 – 50 years old, would be safe enough to last another 35 years.
According to Collins, skyrocketing construction costs and unforeseen problems in the older schools’ infrastructure contributed to the need to seek Proposition C bonds.
In response to accusations of “back-room deals” and non-transparency, Collins said all dealings with the bonds have been above-the-board and completely transparent.
It was argued by the board that it was mostly a case of unfortunate timing with the selling of Series B of the Proposition C bonds that caused the issue of the massive $1 billion dollar debt. “Nobody knew in 2009 that the stock market would crash,” said Collins.
In December 2010, the municipal bond market seized up, causing a freeze in the selling of bonds, which prevented the board from selling the Series B bonds, with no indicators of recovery and the potential of municipal bankruptcy. “If we would have had to sell bonds then, we would have been in a deep pickle,” said board member Marc Davis.
With a looming bridge financing payment due in December of 2011, board member Todd Gutschow said that the board had to make a hard decision of how to get the money needed to make the payment. When the municipal bond market reopened in May 2011, the board decided they had to issue the Series B bonds while they had the opportunity.
“It was the very best option at the time,” said Gutschow, “to bring certainty in funding, and avoid bridge payment delinquency, or worse. Davis agreed, adding, “It was a wise decision at that moment.”
The impact of selling at that moment was the uncomfortably high payment ratio of 9.35 percent, or 9 times the original $105 million borrowed.
According to Gutschow, by 2033, the first year of the Series B bond payments, $47 million in property tax revenue will need to be collected to cover the payment. That amount will raise to $54.9 million over the next 20 years, reaching its peak by 2051, the final year of payment.
District homeowners living in the SFID will see SFID property taxes raise about 7.6 percent per year, according to Gutschow, and in 2034, increasing about 0.77 percent per year. This means someone living in a home with an assessed value of $300,000, who currently pays about $165 per year in SFID property taxes, will see those rise to $710 per year by 2033, and by 2051 it will be $842. This announcement was met by gasps and grumbling from the gathered audience. “While these are not insignificant amounts, I do not believe they are catastrophic,” said Gutschow, which was met with disbelief and discontent from the audience.
One new fact that emerged from Davis’ address was the fact that the contentious Series B bonds, which are not callable, meaning able to be refinanced, could have been. Davis revealed that the board could have made the CABs callable for an additional $100 million, but chose not to, a decision criticized by some of the residents who spoke to the board.
Over a dozen district residents spoke to the board once they concluded their statements, ranging from supportive to furious.
“You are once again wrapping a pig in the blanket of schools,” said Poway resident Clariece Tally, who spoke first. “It was irresponsible financing.”
Sharon Swildens, another Poway resident, was also upset at the board. “I’m appalled at your 2011 fiscal irresponsibility,” said Swildens, who added that she thought the board members should resign or not run again. “I don’t trust you anymore,” Swildens said. She also wanted a state law to be passed to prevent long-term bonds, and thought that the school board should rent out half of the district building to raise money to pay off their debts.
In addition to asking the board to resign, Poway resident Tom Moore asked for a San Diego County Grand Jury investigation of the board and the bond issue to be conducted.
Other speakers were more supportive of the board. Poway resident Chuck Lord, who drives a school bus for PUSD, asked the community to support the board. “It’s time to stop the negativity and support [the board],” said Lord.
Former board member, and Poway City Council candidate Jeff Magnum, who has also received criticism for his role in the bond issue, also spoke at the meeting. “I’ve been advised … to throw the Poway Unified School District and the board under the bus,” said Magnum. “But I would rather lose in November and retain my integrity.” He then asked the community to keep the tax issue in perspective, since SFID property owners pay significantly less than Mello-Roos parents pay for equitable schools.
Poway resident Dick Lyles agreed. “My concerns are for myself and the community,” said Lyles, who expressed concern that the bond issue could polarize the community, and also said that he thought some people were giving issue for personal and political gain. “Don’t circle the wagons and don’t launch an assault,” said Lyles. “Everybody, let’s problem solve.” (Lyles is a Pomerado Newspaper Group columnist.)
Poway resident Lance Schroeder expressed another concern, that of the underwriters of the bond. “We need to take a look at the underwriters of the bond,” said Schroeder, “as it seems they aren’t in our best interest.” He also stated that he works in selling bonds, including to school districts, and of all the bonds he’s sold this year, all have been callable. “[Having the bond be] not callable does a huge disservice to property owners,” said Schroeder.
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