Editorial: Why an outside audit?
An announcement by Poway Unified School District Supt. John Collins regarding the controversial capital appreciation bonds issued last year leaves us scratching our heads.
During last week’s school board meeting Collins said the district is retaining the services of an “independent forensic accountant” to examine certain aspects of the issuance bonds, approved by district voters (not living in Mello Roos districts) to pay off the balance of the “Building for Success” school upgrade program involving 24 of the district’s campuses.
The so-called Proposition C “Series B” bonds cannot be refinanced and the district taxpayers will not begin paying on the $105 million until earlier bonds are retired, in 20 years. Since interest will accrue, taxpayers will end up paying nearly $1 billion by the time the bonds are paid off 20 years later.
Collins and school board have been feeling some political heat over the use of CABs. They have repeatedly defended their decision by saying that CABs are commonly used throughout the state (the district itself issued a $3 million CAB as part of the earlier Proposition U program), that recession-related market conditions beyond their control increased the interest rates and that extending bond payments out another 20 years at the current repayment rate of about $55 per $100,000 of assessed valuated was exactly what voters approved in 2008. The district has also insisted that it has been forthright and transparent about every aspect of how the school improvement program was run and financed.
So, all that said, why hire a former FBI agent to look into how the matter was handled?
Collins said the expert will focus on five questions:
• Did the district act responsibly upon the market information it was given at the time of decision?
• Was the district given advice and counsel based on the highest industry standards?
• Are there any issues of integrity with any parties involved in the transaction?
• Were the fees paid to the parties involved at or below industry standards?
• Were the processes that were followed acceptable industry standards?
So this district-hired expert will pore over the records of the transaction and render an opinion on whether everything was on the up and up.
We would be surprised, shocked even, if the final report concluded that anything was amiss. Cynics will say a positive report is expected, since the district is paying for it.
As stated here before, the area where the district fell short was in 2007, and again in 2010, when it failed to clearly communicate that it had run out of construction money, that it needed more money to finish the work and that they faced three choices: stopping the project, raising property taxes or proceeding with a long-term bond. Officials knew in November 2010, when the bonds were authorized, that CABs would be used and that they would include a no-call provision.
We also said that it appears that nothing can be done about the CABs, since they can’t be refinanced.
To protract the second-guessing on all this by bringing in an outside auditor is, from where we sit, a waste of time and district (taxpayer) funds.
- PUSD hires forensic accountant to review bonds
- Editorial: Road to success, or Armageddon?
- School board meeting avoids ugly theatrics
- PUSD releases statement on school bonds
- PUSD not alone in high-interest financing
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