Summerville High School’s Board of Education authorized the sale Wednesday of $4.5 million in Measure H bonds, leaving open the possibility that some could be a controversial type known as “capital appreciation bonds.”
Measure H is the $8 million general obligation bond measure passed by an extremely narrow margin of two votes after a ballot recount in December. The sale of $4.5 million is expected to close this April.
Capital appreciation bonds, which have garnered negative publicity in recent months, defer repayment further into the future than traditional school bonds. They were included in the resolution passed by Summerville High’s board Wednesday.
Facing an urgent need to finance school construction, hundreds of California school districts and community colleges have used capital appreciation bonds.
Some, like Summerville High, pledged to keep property taxes at current rates and turned to the longer-term bonds as a way to fulfill the promise.
However in January, State Superintendent of Public Instruction Tom Torlakson and Treasurer Bill Lockyer urged school districts not to issue capital appreciation bonds until the state government has considered reforms.
Of concern is the amount future taxpayers end up shelling out, which for some districts will be more than 10 times what was originally borrowed over the course of 40 years.
A bill going through the California State Assembly, Assembly Bill 182, would cap total debt at four times the amount borrowed and shorten the maturity period to less than 25 years.
Summerville High Superintendent John Keiter said not all capital appreciation bonds are “bad” and that any issued by the district will be the “low-risk” variety, limiting repayment to just over three times what was originally borrowed.
That amount is consistent with the cost of conventional school bonds.
Summerville High’s capital appreciation bonds could also be refinanced, which would lower interest rates. Keiter couldn’t yet comment on the amount of time it’ll take to repay them, though he said it will be much shorter than 40 years.
“Schools, unfortunately, are expensive,” said Bill Kadi, a Sacramento-based attorney who is acting as Summerville High’s bond counsel. His firm’s fees for the spring Measure H bond sale will be $46,000, with more fees for future sales.
During Wednesday’s meeting, district Chief Business Official Tonya Midget reiterated the district’s commitment to controlling taxpayer costs.
“Our little community here has a long memory of these things,” she said.
Like Sonora Union High School District, which passed its own $23 million bond measure in November, Summerville High is holding off on bond-funded construction to allow more planning time.
Neither district intends to start construction this summer.
“You don’t want to shortchange yourself on the planning part of it in order to start getting some shovels in the ground,” Keiter said. “You want to make sure everything’s thought out.”
The first meeting of the Measure H steering committee was held Wednesday to discuss project phases and costs, Keiter said. The next step will involve the district obtaining a credit rating, a process that will begin next week.
The Board of Education has identified revamped athletic facilities as the highest priority for the bond money, followed closely by technology upgrades.
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