Concerned About Local Government Debt, the California Policy Center Seeks to Increase Public Awareness of How Municipal Bonds Work
The California Policy Center has just released some preliminary findings from an ongoing study of school bond financing. The complete study will be released later this year.
In the November election, a record number of K-12 school and community college districts in California want voters to approve bond measures for construction — a total of 113 individual bond measures for 108 local educational districts. Voters are being asked to authorize these districts to borrow a total of $11.8 billion.
Click here for the list of all 113 bond measures.
“Bonds do not mean free and easy money,” says Kevin Dayton, who is working with the California Policy Center to research debt accumulated by California school and community college districts through construction bond measures.
Dayton wants voters to understand what they are doing.
“When voters approve bond measures, it means their school district will borrow money from investors — paying financial transaction fees in the process — and then pay that borrowed money back to investors, with interest,” he says.
Dayton asserts that voting on a bond measure requires more than a quick response based on emotional appeals. “Voters need to look at the debt already accumulated by the school or college district and consider whether it is wise for the district to take on additional debt.”
Dayton cites as an example the San Mateo Community College District, which is asking voters to authorize borrowing $388 million for construction to add to the $1.2 billion it now owes to investors as debt service from three earlier bond measures. He also cites the Pittsburg Unified School District, which is asking voters to authorize borrowing $85 million for construction to add to the $478 million it now owes to investors as debt service from three earlier bond measures.
Dayton urges the local news media to make voters aware of the definition of a bond, the amount of existing bond debt for school districts, and the true cost over time of a bond measure when interest is included.
“Look beyond the anecdote about the leaky roof in 2014 and focus on how the money will be obtained and paid back over 30 years or more.”
The California Policy Center is a non-partisan public policy think tank. One of its projects is the website TransparentCalifornia.com which provides pay and pension information for the state’s governmental agencies.