The California Assembly passed a bill today that will limit the use of a controversial facilities improvement bond that allows school districts to delay repayment for decades while hefty interest obligations accumulate.
Capital Appreciation Bonds came to the spotlight in August when Voice of San Diego outlined a deal in the Poway Unified School District that put taxpayers on the book for almost $1 billion on a loan of $105 million.
Several stories followed, including two in which The Bee found the Yuba Community College District will pay $59 million to retire $4.6 million in bonds and Folsom Cordova Unified will pay $9.1 million to retire $514,000 in debt.
"This bill would protect taxpayers from terrible bond deals while maintaining school districts' ability to provide their parents and children needed facilities," state Treasurer Bill Lockyer said in a statement. "Today's vote reflects widespread agreement that AB 182 offers a reasoned, balanced approach to addressing this important issue."
Assembly Bill 182 by Joan Buchanan, D-Alamo, and Ben Hueso, D-San Diego, passed 73-0. The bill would limit the term of the bonds to 25 years, instead of 40 years. The bill also sets a four-to-one limit on the ratio of total debt to principal for each bond.
In the case of Folsom Cordova, the school district will pay $18 for every $1 borrowed.
The bill now heads to the Senate.
PHOTO CREDIT: Isleton Elementary School in 2006. The Sacramento Bee/Brian Baer