Updates
December 9, 2012: School District Owes $1 Billion On $100 Million Loan
More than 200 school districts across California are taking a second
look at the high price of the debt they've taken on using risky
financial arrangements. Collectively, the districts have borrowed
billions in loans that defer payments for years — leaving many districts
owing far more than they borrowed.
In 2010,
officials at the West Contra Costa School District, just east of San
Francisco, were in a bind. The district needed $2.5 million to help
secure a federally subsidized $25 million loan to build a badly needed
elementary school.
Those bonds, known as CABs, are unlike typical bonds, where a school
district is required to make immediate and regular payments. Instead,
CABs allow districts to defer payments well into the future — by which
time lots of interest has accrued.
In the West Contra Costa Schools' case, that $2.5 million bond will cost the district a whopping $34 million to repay.
November 29, 2012: it turns out that Wisconsin schools don't have the only recipe for disasters when it comes to borrowing.
From today's LA Times:
Two hundred school districts across California have borrowed billions
of dollars using a costly and risky form of financing that has saddled
them with staggering debt, according to a Times analysis.
Schools and community colleges have turned increasingly to so-called capital appreciation bonds
in the economic downturn, which depressed property values and made it
harder for districts to raise money for new classrooms, auditoriums and
sports facilities.
Unlike conventional shorter-term bonds that require payments to begin
immediately, this type of borrowing lets districts postpone the start
of payments for decades. Some districts are gambling the economic
picture will improve in the decades ahead, with local tax collections
increasingly enough to repay the notes.
CABs, as the bonds are known, allow schools to
borrow large sums without violating state or locally imposed caps on
property taxes, at least in the short term. But the lengthy delays in
repayment increase interest expenses, in some cases to as much as 10 or
20 times the amount borrowed.
Put another log on the fire.
Original Post
Oh, I'm sure there are limits, but they can be raised. When it is other people's money, there really doesn't need to be a limit, does there?
A reader was nice enough to send me this little gem,
link to wtaz.com:
Wisconsin schools are taking advantage of a three-year-old state law
to catch up on maintenance and become more energy-efficient. According
to Gannett newspapers, school districts throughout the state have
borrowed $134-and-a-half million on energy projects since 2009, without
having to get voters’ approval. The law lets school districts exceed
their state revenue limits without referendums, in order to borrow for
energy projects.
Last year the law was expanded to let schools spread their payments
over a number of years instead of just one. And that spurred a big
increase in borrowing – from about $9-million in fiscal 2011 to
$93-million this year, with around 30 projects throughout the state each
year.
The Racine School District has borrowed the most since the revenue
cap exemption was adopted – around $42-million, covering almost half its
deferred maintenance. Oshkosh officials said they handled about
one-fifth of their maintenance needs with a $21-million project.
RSD may have borrowed the most, so far, but the others will catch up now that they see how easy it is.
Memo to self: file under "Recipes."
"For Disaster."
We'll tag this to follow up in 2030 to see how this worked out.
**********************
This story was carried alongside another Wisconsin story which was a bit more upbeat, link to
In Eau Claire, Menards’ is looking for 50 good employees to help
cover a severe shortage of workers at its store in Minot North Dakota.
And those people are needed so badly, the Eau Claire Leader-Telegram
says Menards plans to fly them to Minot on a private jet to and from
their jobs on a weekly basis – and give them lodging and food while
they’re there.
Data points
- booming oil patch --> thousands of retail jobs
- retail workers --> to the oil patch; stores "scrambling" to find workers
- offer: private jet from Eau Claire to Minot; 4 - 5 days/week in Minot; room and board paid; $13/hour pay + overtime, weekend pay.
I particularly like the "private jet" part.
Speaking of which: any update on the Menard's in Williston?
