Published: Feb. 15, 2013 Updated: Feb. 21, 2013 1:43 p.m.
Melody Petersen / ORANGE COUNTY REGISTER
The fliers touted new ballfields, science labs and modern classrooms. They didn’t mention the crushing debt or the investment bank that stood to make millions.
In early 2008, residents of Placentia and Yorba Linda approved a $200 million school construction bond after reading those fliers and being assured repeatedly that “their money will be spent wisely.”
Borrowing through capital-appreciation bonds is helping to pay for a 600-seat performing arts center at El Dorado High School in Placentia. The expensive bonds, which delay payments for decades, were sold by Placentia-Yorba Linda Unified officials after voters approved Measure A in 2008.
What happened instead was that Measure A led to a debt so large and long lasting that it has mortgaged the future of their children’s children.
With no public discussion, the school board had hired George K. Baum & Co. and its staff of political strategists to help push the measure through so the district could continue an ambitious building spree.
After the election, the board allowed the bank to sell some of the costliest bonds ever issued by a California public agency. Just one $22 million borrowing from 2011 will cost taxpayers nearly 13 times that amount – $280 million – to repay.
Those bonds, known to Wall Street traders as capital appreciation bonds, are like a loan for which no principal or interest payments are made for 35 years. Interest is charged on a growing pile of unpaid interest, causing the balance to balloon.
“It’s another method of pushing debt to future generations,” said state Treasurer Bill Lockyer, who compares the bonds to “payday loans.” “I just don’t understand how these board members got away with this,” said Alexandria Coronado, a former member of the Orange County Board of Education. “These people need to be recalled.”
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This scam has been played out all over.
Greed isn’t only in Orange County….although there is a lot of it there..