Dick Lyles: Are Poway Unified bond critics helping community or themselves?
By Dick Lyles
Unfortunately it has become a necessity during political season to challenge the motives of those stirring up controversy. Are they working for the good of our community or selfishly for themselves?
Dick Lyles
The most recent hysteria about bonds and the Poway Unified School District calls for such a challenge. What is really going on here?
The story starts with Proposition U, a $198 million bond initiative passed by a super-majority (two-thirds) of Poway voters in 2002 to fix Garden Road, Midland, Meadowbrook, Valley, Pomerado, Twin Peaks and Poway High schools. All needed major renovations. Inflationary increases in materials costs in the 3- to 4-percent range were included in Proposition U’s cost projections.
In 2003, contrary to everyone’s predictions, costs of construction materials sky-rocketed at unprecedented rates. Between 2003 and 2008, structural steel prices increased 161 percent and structural concrete increased 55 percent. These increases were four to five times the projected annual inflation rate and were virtually uncontrollable by the district. In 2006 and 2007 it became obvious prices were not going to decline and that the district faced three choices. They could either: stop renovating and abandon the remaining improvements, raise taxes to cover the higher costs, or take out a new bond that would be repaid after the existing Proposition U bonds were retired.
During 2007, PUSD surveyed the community to determine their preference for dealing with this unfortunate, unpredictable, and uncontrollable circumstance. The overwhelming response was to take out a new bond. PUSD then drafted Proposition C and presented it to the Board of Trustees who voted unanimously to take it back to the voters for their approval. In early 2008 Proposition C was approved by voters, after having been endorsed by all local and regional press, the San Diego Taxpayers Association and just about every interested group or individual.
Proposition C allowed for interest rates up to 12 percent on a bond of $179 million to finish work started on Proposition U. The actual amounts of the Proposition C-triggered bonds were unknown at the time and were unknowable. PUSD was commended by the San Diego County Grand Jury for exercising bold leadership and moving decisively to get the severely needed improvements without being exposed to even greater future cost increases which subsequently became reality. More than 70 districts throughout the state have successfully used similar bond strategies. The first bond of $74 million was funded almost immediately so work could continue.
In 2011, the year after Jeff Mangum resigned from the school board, the time came to fund the final $105 million approved under Proposition C. PUSD negotiated a deal well inside voter-approved Proposition C parameters. Payments won’t start until Proposition U bonds are paid off and it will accrue interest until then. By the time it is paid off, unless early payoffs are implemented, the total payback will be just under $1 billion. Broken down further, this means the average homeowner will pay under $20 per month in bond payments. Homeowners with above average assessed valuations will pay more. Other portions of PUSD pay substantially more for their schools – some in the hundreds of dollars each month – because of Mello-Roos or other levied assessments.
The 2011 bond for $105 million will neither “impoverish future generations” nor “drive Poway home prices to the bottom.” It’s time for those who are stirring the pot to re-assess the impact of their actions. Creating hysteria for personal political gain at Poway’s expense is unconscionable. Inappropriately maligning our community and PUSD will have a greater negative affect on home prices than this bond assessment.
Lyles, a Poway resident, is an author and film producer. Reach him at dick@dicklyles.com.
Related posts:
- PUSD releases statement on school bonds
- Editorial: Road to success, or Armageddon?
- Viewpoint: Early concerns about school bond ignored by PUSD leaders
- School bond legislation proposed
- PUSD not alone in high-interest financing
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"The average homeowner will pay under $20 per month in bond payments." What? Show some statistics for this There seems to be a discrepancy between what Gutschow said ($842 per month in 2051) and $20. I'll gladly pay $20/month for my share of the bond payment. SIGN ME UP!
Oops, $842/year (not month), that's $70/month. Don't also know why everyone quotes a $300K house, aren't they "counting" on house prices skyrocketing? Average Poway house price is $300K?
Joe, I understood that $842 to be per year, not month.
As per usual, Dick is looking through different glasses than the rest of us. If he would be a little less interested in promoting Jeff Mangum, perhaps he could see the real truth of the matter. PUSD never revealed the truth of the borrowing for these bonds. Even the San Diego Taxpayers Association admits if they knew the truth they would not have recommended it. So to say we overwhelmingly approved it is shockingly untrue and is a continuation of the Lyles' type misinterpretation of the facts.
It amazes me that Mr. Lyles and a few others continue to think this is all about personal politics. I'm not running for anything. The guy who created the "Thanks a Billion" Facebook page isn't running for anything. The 150 people who showed up at the school board meeting aren't running for anything. The initial article that triggered Carless' article came from a financial investigator in Michigan. He's not running for anything. How do you make a billion dollars politically motivated?
The first CAB bond under Prop U. Series B was a CAB bond for $3,080,766 issued in 2006. It too is not redeemable prior to maturity in 2031. The final accredited value is going to be $19,050,000. That's 6-to-1. That's not politically motivated – it's a breach of fiduciary duty. And they did it over and over again.
So I'm not sure there is any point to the endless commentary. Nothing is going to change Poway's situation but maybe we can prevent it from ever happening again. There's the political motivation.
Dick, a large number of those who voted for it will not have to pay for it. A large number of those who were too young, some not born yet, to vote on it will have to pay for it. Could that be considered taxation without representation?
BTW, with an average of approximately $54M per year to service the debt and a reported estimated assessed valuation for home and business of $20B in the improvement district, the taxpayer will have to pay 0.00027 dollars per dollar of their assessed valuation. A $200K home would pay $540 per year.
Why is our math so different? Is the $20B more like $43B?
Joe, you must mean $842 per year.
In the voiceofsandiego.com article, "Poway Residents Ask: What Can We Do Now," Dick is quoted as saying, "Dick Lyles, a 30-year Poway resident, called on Poway to put aside its differences and work together to come up with a solution.
“I don’t remember an issue that has animated passion throughout our community in the past 25 years as much as this one has,” Lyles said. “Spreading hate and dissention and polarization is not problem-solving. Let’s problem-solve.”
Come up with a solution? "Problem solve."(?)
Apparently, Dick at least at that time, tacitly admitted there was a "problem" to be "solved."
In his column, Dick says his solution is to relax and enjoy it! No problem here, folks, just keep on moving along…
Dick is partially right. There is nothing that can be done because the Board painted itself and the PUSD taxpayers into a straight jacket! There is no solution.
Question: if legislation is presented to ban such future CAB bond issues, will Dick support such legislation or oppose it?
Question: If such a Capital Appreciation Bond were submitted by the PUSD Board today, would Dick support it or oppose it?
That will at least tell us if he really supports the results of the Prop. C CAB.
Dick is a big blowhard who cares more about being “civil” to corrupt politicians than leaving a legacy of debt for our children.
You have to wonder if Dick hadn't kept his mouth shut if this whole mess wouldn't have just flown over his annointed one – Mangum – would have just faded away. But instead we've got people digging so deep, we'll see China's finances. And for better or worse Mangum and the rest of them need to put his political aspirations on hold until we know exactly who knew what, when. You can be the nicest person but if you can't do basic math, stay out of government.
No one is "maligning" Poway, Dick. but we are maligning the irresponsible board… with good reason.
70 other districts have successfully use the same approach? Really? How do you know how successful they've been when the bond will take 40 years to pay off?
PUSD homeowners are taking it in the shorts because of the board members' collective fiduciary irresponsibility and it is not hysteria to hold them accountable.
To give them a pass because they were between a rock and a hard place and made a bad decision is absurd. They have an obligation to present to their constituents fiscally sound policy. They did not. They should all be removed and replaced. At best they displayed incompetence and now they are sanctimoniously and arrogantly defending their incompetence. And Dick Lyles has the temerity to scold us for being outraged? His glib, patronizing dismissal of the additional cost to homeowners demonstrates the same sanctimonious arrogance which characterizes the board.
A billion dollar pay-off in 40 years… keep in mind those improvements will need to be done at least twice BEFORE that bond is payed off. The money will come from… where?
"In 2006 and 2007 it became obvious prices were not going to decline…" so contractors locked in high prices before the economy collapsed. Poway would have gotten a better deal by waiting.
Lot's of disinformation from Dick Lyles…
Prop U was not passed by two-thirds of the voters, and Prop U was intended to renovate all 26 schools in the SFID.
There was some inflation, but the money came up short because of poor project management.
Raising the Prop U tax rate was not a permissible option. The Board knew a relatively expensive CAB with deferred payments was sought, but this was not disclosed to the San Diego Taxpayers Association nor to the voters on the Prop C ballot. Nevertheless, Prop C had strong opposition and barely garnered the 55% needed to pass.
In 2011, the Board blatantly ignored the most important parameter of Prop C, namely the requirement to hold the tax rate at a maximum $55 per $100,000 of assessed value. The Board entered into the bond deal knowing that this tax rate would not be sufficient. Even worse, the Board decided not to opt for a call feature.
Many home buyers, myself included, purchased where they did, rather than the new areas, expressly to avoid paying Mello Roos. We do not appreciate being subjected to ever increasing fees. The jump from $150 per year to $850 per year will be a significant impact to seniors living on a fixed income. Prop C alone will eat up almost 10% of my projected private pension income.
This bond deal is already discouraging potential buyers; the deal must be disclosed by sellers in real estate transactions. It will indeed have a negative impact on property values.
The increase in the tax rate for Prop C is projected to shoot up way beyond $60 per $100,000 of assessed value. This violates the state law brought by Prop 39. Prop 39 lowered the voting majority requirement for school bond measures to 55%, but it also limited the associated tax rate to $60 per $100,000. To exceed that rate would require at least a two-thirds majority.
I just read the grand jury report http://www.sdcounty.ca.gov/grandjury/reports/2011...
It does not say anything at all about prop u or prop c or any building improvements. The recommendation is for getting kids ready for college.
BTW, the grand jury is tasked with investigating citizen complaints, not giving warm fuzzies. This grand jury visited an elementary school, chatted with teachers and district officials and then used statistics supplied by the district for their report. I would love to see the "complaint" that was filed that initiated this "investigation."
Prop U passed w. 57.4% yes. (21958 Y/ 16294 N) That's a 2/3 super majority? Must be the new math. Prop C passed w. 63.91% (28323 Y/ 15995 N). These numbers obtained from SD Reg of Voters. WHERE'S the facts checker for these claims in this opinion piece? The chieftain is allowing some blogger to ramble off INCORRECT statistics as fact? Geesh, Louise. And if Mr. Lyles wants to call someone out, call them out by name, not by inference. Just because someone might benefit from "dirt" being piled onto a candidate doesn't make the school boards actions any less heinous.
Mr. Lyle, I am a resident of Rancho Bernardo. I have no political interest what so ever. This whole fiasco of PUSD bond makes me sick to my stomach. How could each member of PUSD board and all people who are supporting this be so stupid to take a loan that when you annualize it over 40 years, costs 25% a year!, without ability to refinance it?. They said it would cost extra 0.35% in interest cost if you want to have the option to call. It is negligible to the 25% annual interest. I myself refinanced my house multiple times, that is the very first thing that always I asked: no pre-payment penalty.
The board said it would cost more to stop and re-start the project?, how much more it would cost compared to the 25% annual interest. It is a no brainer.
Mr. Lyles is absolutely right. Up until 2 weeks ago PUSD and its Board were consider top notch. Then a political opponent of Jeff Mangum chose to stir up controversy by focusing on an isolated portion of the PUSD’s overall funding plan which was the result of a “Perfect Storm” of an economic forces (Bond Markets freezing, State Budget Crises, Property Tax revenues decreased, Initial interest payments on the PUSD bridge financing came due).
Since 2003:
TOTAL SCHOOL PROJECT FUNDS GENERATED $543,078,721,
TOTAL BOND REPAYMENT AMOUNT $1,606,413,115
PAYMENT TERM 48-YEARS
SFID TAXPAYER REPAYMENT RATIO 2.9579%
I didn't realize that the Voice of San Diego article was written by a Mangum foe.
You might want to re-read what seekinfo said. I didn't see anywhere where it said Mangum's opponent WROTE the article. Seekinfo refers to an opponent taking advantage of the article to find any way possible to connect Mangum to a 2011 vote that was made almost 6 months after Mangum left the school board. And I agree that many of critics are certainly quick to forget how much these board members have done for the district. I would call all the rabid critics fair weather friends, but I'm beginning to think they never were friends of the school district. All these critics seem to be gloating over the district's misfortune and intent on dragging PUSD, its board members (current and past) and the community down just as Mr. Lyles said in his article.
No one is gloating over any of this. 2011 was the worst of it. There are multiple bonds involved and go back several years. The Board may have done good things but it is completely overshadowed by their poor financial planning – which covers the period Mangum was also on the board. And which opponent is taking advantage? It seems there are so many justifiably upset by this with only the Mangum group accusing this of being political.
Um Seekinfo -no one locally stirred this up. Will Carliss picked up on another expert's research. This information was discovered by a real financial investigator out of Michigan who was studying bond financing across the U.S. And if you actually believed the numbers posted on that ridiculous Powerpoint, you deserve a bankrupt school district. Every single REAL financial analyst and professional has called our bonds ridiculous. That isn't a political issue that's getting caught at bad financial management. Whether it's revealed today or 6 months after the election has no relevance. The numbers you list above are so mangled and massaged no person with half a brain sees them as real. Sorry. And which candidate would be doing this – the school board challenger or one of the THREE running for election onto the city council. Cunningham? Vineyard? or wait. That's right. You're talking about Steve Vaus. I forgot he has all power to create a bond fund nightmare, find a guy in the midwest, get the guy to study all school bonds in the country, gets Will Carless' to write another article, gets the Wall Street Journal and the tax assessors for half the counties in the state to agree it's a mess. If you believe that you deserve this mess and you can pay the legal fees to get us out of it as well. Don't be a dolt.
Seekinfo: do you think it is such a good deal that PUSD should try a CAB again?
Do you think the PUSD Taxpayers would vote again to approve a future Capital Appreciation Bond?
Seekinfo,are you a Mangum supporter or just plain stupid?
Mr Mangum has a lot of very good qualities and I would bet he would not seek your support. He has served this community very well over the years but, along with his colleagues, made a horrendous mistake. Don't try to make this political. Yes, his opponents will use this against him, as is the democratic way.
The word "Bond" should be replaced with the term "Credit Card Debt" and also be required to disclose the daily, monthly, annual % of interest.
I have a daughter in the 6th grade, she will be 50yrs old by the time this bond is paid off.
There should NEVER be a BOND, or VOTER approved DEBT, or ANY other financial boondoggle which has a payoff date beyond a 12 year period! This is how many years the PUSD serves each child. The solution is to disband the Unions, sell off the School busses which are 90% idle in the parking lot, sell some real estate, allow teachers to be fired and institute a taxpayer/school system oversight committee without conflicts of interest and with full power to make changes when the PUSD trys to screw us.
MadAsHeck,
I don't see what the bond terms have to do with teachers and unions.
Who made out on this deal were the bond sellers, the underwriter, the many varied consultants, the contractor who was chosen without a public bid (in order to keep costs low) and the politicians who get campaign donations from the above list. I don't that anyone on that list is in a union.
You know what else? The people who bought those bonds probably don't even have to pay tax on the interest they "earn".
I do agree with you that the terms of the bond are too long. The bonds won't be paid off until 2051. That is 49 yrs from when Prop U was first passed. Will the portables and buildings last until the bond is paid off?
Dick,
Do you think it is OK for kids to lie to their parents about their test scores if itwouldd make their parents feel proud of them? What if they just made up some story about winning an award for something that seemed important at the time, but they really got an award for something else?
Dick, do you think it is important to be honest?
CABs can be a useful tool to spread the cost among multiple generations of residents by match¬ing bond repayment to the life of the assets. When one steps-back and looks at the entire debt structure its evident that today’s residents are paying a share of the cost. Moreover, the use of the CAB allows the cost to be spread across multiple generations so that everyone that benefits from the facilities bears a share of the cost. This CAB will be paid in 2031 – 2051 dollars and property values in 20 years will be much greater – which has to be considered in any conversation about the use of this CAB. If you only look at the CAB it looks very bad. If you look at the overall funding plan from 2003 to present and consider the “Perfect Storm” of economic conditions the Board faced it is a reasonable measure that they took.
I got swampland for sale. CABs are NEVER recommended to exceed 20 years by any financial expert. Shoving debt down the road or as you put it "multigenerational sharing" is irresponsible financing. CABs are part of blended financing but are not to exceed 10 years. These CABs are bad. They are counting on an inflation to be at 10% (what it was in the 80's) may not happen. You need to read what the REAL experts are saying about the bonds financed by the school board over the last 10 years. NO ONE thinks we did anything smart. We're poster kids for stupid. But you keep right on believing that baloney fed to you by the board. The rest of us got smart real quick and we will make sure that wherever possible to NEVER elect any of these people to a position of public trust ever again.
But what keeps getting pushed out of the spotlight Chris – and which you've posted on your blog – is the $105M is only one of the many bonds issued that were poorly financed. The one for $13m in 2006 is a 6 to 1 payout. For the last 10 years the school board just used the bonds as a giant taxpayer ATM. Mangum and the rest were financial irresponsible. I see Mangum's signs going up and they are wrong. He's not tested and trusted. I can't trust him with the city budget.
Where are you getting the $13M in 2006 information.
The following link is to the Power Point used at last PUSD Board meeting which contains information related to the bonds: http://www.powayusd.com/news/PDF_Files/2012-13/Bo...
Well that's my point. The Powerpoint left out all the details. It showed lots of neat pictures of new schools but nothing of the real details on the funding of the bonds. You need to understand there were multiple bonds issued since Prop C. Not one of them is callable. The $13m was issued in 2006.
Seekinfo, you should immediately inform County Tax Collector McAllister of your knowledge that property values will be much greater in 20 years. He is spreading the false assertion that you can't predict prices in 2 years much less in 20 to 40 years. You should try to stop him from trying to get legislation that would outlaw deals like this PUSD sponsored CAB.
He, obviously, does not understand.
Of course over a 2 year span no one can predict of property values, but over 20 years I think most will agree they will increase substantially.
From Neighborhood Scout.com:
“Real estate appreciation rates in Poway's have tracked to near the national average since 1990, with the annual appreciation rate averaging 3.60% during the period.”
I would not be in favor of adding regulation here. CABs allow for an equitable way to finance long lived assets by spreading the cost over multiple generations. Nuveen Asset Management, who to my knowledge is not a party to this CAB, has provided the following related analysis:
http://www.nuveen.com/Home/Documents/Viewer.aspx?...
I think all concerned will be more informed after reading this report by Nuveen.
I think all concerned understand that you absolutely have no idea what you're talking about. CABs stretched out over multigenerational time are a bad idea (but then again we'd all be dead so maybe there is an upside in that we don't have to pay for it) and rely on market conditions that may never happen.
Do you actually read the other positions that have been studied in regard to CABs or is your head buried so deep in the sand that you absolutely do not recognize failed financing when you see it?
Seekinfo go back to my post earlier today in response to your post this morning. The answer is the same.
From Nuveen Asset Management: http://www.nuveen.com/Home/Documents/Viewer.aspx?...
"When studying the debt structure of a bond, one should always take into consideration that particular issuer’s overall debt structure and other key credit characteristics. In the case of Poway USD, the media attention paid to this bond misses the fundamental nature of the bond by ignoring the premium generated at sale, doesn’t take into consideration the district’s overall debt structure, gives little weight to the public policy dilemma of intergenerational fairness and fails to properly an¬alyze the affordability of the improvement district’s debt. We believe a more complete analysis of the situation – as we’ve outlined here – better “appreciates” the nature of this capital appreciation bond."
Nuveen is alone in their assessment. Please let me know how I can better "appreciate" an intergenerational debt of over a billion dollars. It's fiscally irresponsible. Stop trying to justify it. No one agrees them except you and the irresponsible Trustees over the past 10 years who have saddled us with this intergenerational debt.
From "Above the Market" publication which completely dismantles the Nuveen analysis:
"Just to add a little “kicker,” note that the Nuveen argument is made using an illustration involving “a home that is worth $300,000 in 2017,” even though the median value of a home in the district today is nearly $500,000. So the actual numbers are (of course) far worse than advertised. But even then, the “monthly contributions to the annual levy” according to that analysis go from $5.04 to $74.49 over the life of the bond, and that’s a fifteen-fold increase. If you think that’s a reasonable increase, you must work for the underwriter or want to buy more of these bonds."
I fail to see how the “Above the Market” piece “completely dismantles” the Nuveen analysis. In fact the Above the Market (AM) piece opens with conveniently leaving out the $21.36 million premium generated at issuance – why not tell the whole story? The AM piece is told through the lens of hindsight. The AM piece essentially states that PUSD should have known projects will go over budget which is an extreme oversimplification of what lead PUSD to utilizing the CAB.
No one is pleased with this financing outcome, but giving the circumstances in my view it was necessary. As a result, the 22,000 PUSD students who attend the 24 oldest schools in the SFID now have equitable and appropriate learning facilities that have been improved to provide another 30-plus years of service to our students and community.
Well I'm thrilled that in your view the worst bond financing in the country is ok with you. And don't use the "equitable and appropriate" that's a load of horse manure. This wasn't for the kids. No where was it stated it was necessary to do all 24 schools at once. The district could have started off with the worst and worked down the list. Also the argument that starting and stopping a project would have been expensive. It may have cost something but it was a whole lot less than a billion. This was irresponsible fiscal management by the Board for the last 10 years. What's the term I read in the UT – "naive or irretrieveably stupid" to believe this was anything less than a full breach of fiduciary duty by the Trustees.
Seekinfo, please tell the millions of people who are underwater with their loans that real estate prices will always go up. Did Nuveen predict prices would fall 30-40%? I'll just bet they would love to come in, for a price, and guide PUSD in the future.
How can I invest in these bonds? I want to earn 12% interest on my money payable in 20 years! That'll really help my retirement.