Posted on 07/01/2002 9:10:43 AM PDT by John Jorsett
How refinancing schemes work
By Steve Geissinger
SACRAMENTO BUREAU
SACRAMENTO -- The state's controversial new state bond-debt restructuring strategy works something like the refinancing of a home mortgage, pushing bond payoffs years -- or even decades -- into the future.Critics fear that with the state pushing bond payments ahead for the first time, taxpayers will now be paying off the bonds well past the useful life of some of the projects that were financed with the bond monies.
Bay Area school districts were among those which received initial allocations from the bond measure in 1999, according to documents obtained from the state Office of Public School Construction in the Department of General Services.
In Alameda County, money from the school bond went in 1999 to the Albany Unified School District for a middle school and New Haven Unified for a middle school and an elementary school.
In Contra Costa County, school bond money that year went to Antioch Unified for an elementary school.
Records obtained from the state treasurer's office under the California Public Records Act show that more
than $1 billion in bond payments that would have come due this year and next will now be paid from 2003 to 2030.
The recent refinancing postpones payments on various multimillion-dollar bond issuances under the authority of 25 ballot measures that voters approved:
In 1988, for construction of schools, universities, libraries, local jails and state prisons, as well as for clean-water projects and water conservation efforts.
In 1990, for construction of state prisons, schools and universities, as well as for seismic-safety retrofitting, mass transit, transportation improvements and affordable housing.
In 1992, for school and university construction.
In 1996, for earthquake safety, school and university construction and clean-water projects.
In 1998, for school construction and repairs aimed at reducing class sizes.
Under the refinancing, state officials say for example, $3.5 million in bonds issued under the 1998 voter-authorized school construction measure that would have been paid off in April of this year and another $3.5 million that would have been retired in April 2003 will both instead be paid off in February 2029.
Therefore, critics say that bonds monies used in 1999 or 2000 for construction or repairs -- that are supposed to have a useful life of at least 10 years under the original $9.2 billion bond measure -- will be paid off decades later.
But the concerns are dismissed by top officials in a deficit-ridden state government, who view the refinancings as a widely accepted fiscal tool to free up cash in the short term and take advantage of the current low interest rates.
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Using long-term debt to pay current expenses is lunacy.
I believe they are going to tap into the giant pile of money in the State Pension Funds!
Yep. I actually thought that it was prohibited by state law, but I must be mistaken. Either that or it's been gutted by the courts.
The temptation must be enormous. If it happens, that will be an interesting battle. The public employees are generally quite protective of that money. It's our money they want to fling around.
Lunacy for sure but when you consider how the average (stupid) citizen handles their personal finances they will probably all pass in November.
Personally, I have never borrowed a cent for personal consumption and haven't had a mortgage in years and object to having to pay taxes to finance the desires of the "have to have it now and cost doesn't matter" idiots that are allowed to vote.
Welcome to socialism's mature stage, the end game. The socialists will max out the state's $80 billion credit card and then self-destruct. The best thing we can do is try to direct the socialist spending into capital improvements, durable goods or things we would have to buy anyway, such as electricity, rather than any Democrat voter breeding programs.
We are paying $30 billion a year now for education, $10 billion of which never leaves Sacramento and can't be fully accounted for. And these lizards want more?
It's time to smash the military-priesthood educational model. You could buy every child in California a notebook computer and a set of DVDs with the entire K-12 curriculum for far less than we are spending annually to keep these teachers union jokers in power (where they can generously fund Democrat campaigns.) "Schools" are nothing but breeding grounds for antisocial and criminal behavior and we could improve the futures of millions of California children if we bulldozed every one of them starting tomorrow.
Good Term, I could see a bumper sticker come out of that!
Stamp out all Democrat voter breeding programs
What I thought was signficant was that the concept of pushing repayment past the useful life of capital projects was raised, that paying current expenses out of borrowed funds was labled as wrong, and that loading up local government agencies with debt may create future problems.
If this keeps up, common sense may return to the discussion of government financing. Sorry, I got carried away, the politicians are still looking at the easy money, so common sense hasn't yet returned.
This should be an interesting season for the Bond Rating Agencies. I saw where Moody's downrated Dynergy and Illinova. I expect they will soon get around to DWR and the State of California. It is interesting how nothing is being said any more about "power bonds." Must mean that wall street has told the Gov. that there it is not going to happen.
This will be the largest bond issue ever to go on California's ballot," says Davis. "And believe me, we need it. This will improve schools, modernize schools, build new schools and put California's hard-working men and women back to work."
Over 50% of the state budget already goes to education. Now they want more.
I stopped supporting any bond issue years ago. If this bond issue passes, the money will be wasted just as all the other money given to the education mafia.
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