EXCERPT: Herb Calderon stood on the campus of Hillcrest High School, staring at a wall that cost $10 million to build. ...
... The school, including the wall, cost $110 million to build, but by 2046, when it is finally paid for, it will have cost taxpayers at least $485 million.
Alvord is one of at least 1,350 school districts and government agencies across the nation that have turned to a controversial form of borrowing called capital appreciation bonds to finance major projects, a California Watch analysis of bond financing data in the U.S. shows. Relying on these bonds has allowed districts to borrow billions of dollars while postponing payments in some cases for decades.
This form of borrowing has created billions of dollars in debt for taxpayers and hundreds of millions of dollars in revenue for financial advisers and underwriters. Voters are usually unaware of the bonds' high interest. At least one state, Michigan, has banned their use.
In California, where rules governing the loans are among the loosest, more than 400 school districts and other agencies have racked up greater capital appreciation bond debt in the past six years than in any other state. ...
... The decision to issue these bonds instead of traditional bonds typically is made by district officials after voters have approved bond measures, and the public usually has no knowledge of how much they will cost to repay.
... According to state records, Piper Jaffray was the busiest underwriter since 2008, brokering 165 capital appreciation bonds for a price of $31.4 million. Goldman Sachs made $1.6 million on a single deal with the San Diego Unified School District. Both firms declined to comment for this story. ...
...California removed its flat debt service requirement on long-term bonds in 2009 with the passage of AB 1388. The bill was sponsored by the California Public Securities Association, which lobbies state lawmakers on behalf of financial consultants and underwriters. An association official declined to comment. ...
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