(San Diego) PUSD disputes findings in grand jury’s bond report

By Steve Dreyer, Pomerado News -

The Poway Unified School District is taking issue with portions of a San Diego County Grand Jury report that was highly critical of the use of capital appreciation bonds by several districts in the region.

The Poway district’s required response to the May report disagrees with three of the jury’s findings of fact. The report also declined to comment specifically on any of the jury’s four recommendations, saying that “further analysis” by the district would be required.

See full PUSD respond here.

The grand jury’s report called for “countywide school bond reform.” Those reforms should include “greater citizen oversight of bond requirements and increased transparency of total bond costs and future outlays,” the report said.

Many of the jury’s recommendations are incorporated into Assembly Bill 182, which is on the governor’s desk for signature.

State law required all 47 school districts in the county to respond to the report. All responses were due by Aug. 20. Poway, one of two districts that did not meet the deadline, received an extension to this past Tuesday, when its response was filed.

The Poway district has come under extensive public criticism for proceeding with a $105 million CAB that will eventually cost nearly $1 billion over the next 40 years. The voter-approved bonds were used to complete renovations at several PUSD campuses. However, district taxpayers will not begin paying on the bonds for 20 years, until after previously approved construction bonds are retired. As the grand jury report notes, the payoff ratio of the CABs is over 9 to 1 and there was no provision allowing for the early repayment of the bonds.

Comprised of four pages, the PUSD response said the district complied with the state Election Code in the wording of the bond measure presented to district voters. It also took issue with the jury’s finding that “The practice of artfully inflating the interest rate to generate premium for unauthorized uses allows additional bond proceeds over and above what the voters authorized.”

“We disagree with the statement …” the PUSD response says. “A premium is an amount paid by an individual bond purchaser over and above the principal amount. That bond premium is not debt and does not constitute part of the amount of the issued bond; it is not part that needs to be repaid.”

The grand jury report found that “Bond initiatives and propositions typically do not provide information as to the cost of principal and interest payments. The amount can be exponentially larger than the original principal in bond measures that employ a CAB structure.”

The district disagreed, saying “Bond initiatives always contain an estimated tax rate necessary to pay the cost of principal and interest payments. The District disagrees with this finding because information is publicly available and shared by the District in full with the voters.”

The jury report endorsed the provisions of AB 182, which the report said will require school districts to provide greater transparency to voters regarding the terms and conditions of CABs and require mandatory early redemption (call) guarantees.

The Poway district response: “The Poway Unified School District has always complied with all applicable laws when issuing any bonds. The District will continue to follow any laws passed by the State Legislature.”