More Local Govt. Corruption in California
An investigative report from the Orange County Register deserves to be read in its entirety, but here’s my executive summary.
Hundreds of schools in California enlisted the services of a bank to underwrite school construction bonds, known on Wall Street as “capital appreciation” bonds. The key attraction: no payments on principal or interest for 35 years.
Of course, that kind of delay isn’t free. One school district in Orange County is estimated to owe $13 for every $1 borrowed when the bills come due. This means that for one $22 million bond issue in 2011, the Placentia-Yorba Linda school district will eventually owe $280 million – 13 times the original amount.
It gets worse. In 2008, thanks to arguably illegal politicking by the bank underwriter, district voters approved up to $200 million in bond issuances. But while not all of the total are capital appreciation bonds, those that are could very well bankrupt the district for a generation or more.
The failures on display here are all too familiar. Public officials opting to mortgage the future to look like a hero in the present saddle taxpayers with huge financial burdens. Financial whizzes with no ethical scruples abuse the system for big profits. And money wasted on concrete eye-candy – a football stadium and 600 seat performing arts center – while funding for classroom instruction gets reduced.
While there is no silver lining to the Register piece, it’s worth reading as a reminder of how much American government at all levels needs a deep renewal of ethics, thrift, and a commitment to the common good.