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A closer look at proposal to increase bond tax rates in MDUSD

By Theresa Harrington
Friday, April 6th, 2012 at 2:02 pm in Education, Mt. Diablo school district.

Whether you call it “accelerating bond sales” or “increasing the tax rate,” the Mt. Diablo school board’s decision to consider issuing $227 million in construction bonds as soon as June could mean property owners will see their taxes for district construction bonds rise this year, while also seeing faster progress on construction projects.

The board is reviewing options for raising the tax rate on the district’s combined $348 Measure C bond passed in 2010 and its $250 million Measure C bond approved by voters in 2002. Trustees told property owners they would extend the rate of $60 per $100,000 for both measures, meaning tax rates wouldn’t increase.

Now, they are considering breaking that promise and raising the combined tax rate as high as $110 per $100,000. This means taxes on property valued at $300,000 could jump from $180 to $330 per year.

One parent told Superintendent Steven Lawrence on Wednesday that people in the community are starting to chatter about this, with bits and pieces of information filtering out. Lawrence told the Parent Advisory Council the increased rate — a direct consequence of the district selling its remaining bonds sooner — would speed up construction so that projects could be completed in four or five years instead of eight to ten. Previously, the district had estimated projects would be completed in seven years.

The new proposal was first raised March 26 by a coalition of 18 parents who submitted the following information to Lawrence and the board:

“Who are we?

We the undersigned have come together as an unlikely coalition. We are from all areas of the district, having various district experiences, and from both sides of the Measure C issue. What we do have in common is our interest in doing what is best for our students, schools and community.

Why are we here?

We are urging the district to reconsider the proposed financing structure of the 2010 Measure C bond.

We understand that MDUSD has issued low interest CREBs (Clean Renewable Energy Bonds), QSCBs (Qualified School Construction Bonds), current interest bonds, and capital appreciation bonds as part of the Measure C 2010 issuance. Our concerns lie with the issuance of any additional capital appreciation bonds (CABs). Capital appreciation bonds have been banned in other states because of the exorbitant cost and undue financial burden they place on the next generation of families and property owners.

The funds from Measure C 2010 can provide our children with facilities that will enhance their educational experience. However, right now, due to the $60 cap, you are faced with waiting several years for Measure C 2002 bonds to mature before issuing additional 2010 bonds or issue expensive capital appreciation bonds, both of which will not best serve our children.

What is our proposal?

Rather than being faced with the decision to delay projects or issue costly bonds, we propose a third option that would take advantage of the current low interest rates, allow our school sites immediate access to upgraded facilities, and save our community hundreds of millions of dollars in compounded interest.

We request that you include on the next board agenda (April 23) an action item providing issuance of the remaining $228 million (actually $227 million) of bonds, as needed, with conventional bond financing, without deferment of principal and interest and with terms no greater than 25 years. In addition, the action item would call for, and be conditioned upon, the development of school site lists that reflect a current and comprehensive project list that is school site driven and Proposition 39 compliant.

How much money will the community save?

We estimate that selling the bonds today with conventional financing and a 25-year term will cost the community approximately $400 million over the life of the bond and will cause the tax rate to increase in the range of $20-$30 per $100,000 in assessed value. However, if the bonds are sold with a 25-year term and 25 years of deferred interest, similar to the CABS sold last year, we estimate it will cost the community over $800 million.

By exceeding the $60 cap and issuing the bonds with fiscally responsible conventional financing our community saves approximately $400 million.

We believe our proposed action will be met with community support and will ensure that our children’s educational experience is improved by meeting their most pressing facility needs today. We realize this will require courage on the part of the board. It is the right thing to do for our kids, our schools, and our community. This is a unique opportunity to come together with a common goal as evidenced by those who have signed below.

Linda Loza, Northgate parent, former CUES committee, Measure D site captain
John Ferrante, Concord resident, 2002/2010 Bond Oversight Committee, Measure A Advisory Committee, CUES committee
Alicia Minyen, Pleasant Hill parent, 2010 Bond Oversight Committee
Tammy Nelson, Ygnacio Valley parent, MDMEF board member
John Parker, Mt. Diablo parent, 2002/2010 Bond Oversight Committee, CUES committee
AJ Fardella, Bay Point parent, 2002 Bond Oversight Committee
Ralph Austin, Northgate parent, Northgate Pride President, 2010 Bond Oversight Committee
Jack Weir, Pleasant Hill Taxpayers Association, former 2010 Bond Oversight Committee
Monica Fitzgerald, Northgate parent, Northgate PFC President
Shel Perham, Walnut Creek parent, former CUES committee treasurer
Diana Corkran, Concord High parent, Concord High School PFC President
Carla Ludwig, Walnut Creek parent, former CUES committee, PACE Foundation co-founder, Measure D site captain
Kevin Hennessy, College Park parent, UMDAF vice president
Jim McClelland, Walnut Creek resident, Northgate Pride board member
Paul Kitchell, Ygnacio Valley parent, UMDAF board member
Don Wildes, College Park parent
Kent Caldwell, Northgate parent, UMDAF board member
Karen Barta, Pleasant Hill parent, former CUES committee.”

Do you support the proposed tax increase and accelerated bond sales?

[You can leave a response, or trackback from your own site.]

  • http://www.k12reboot.com Jim

    This is the right thing to do. Paying hundreds of millions in interest over 40 years on assets that will not last even 20 years was an insane concept from the very beginning. It would tie the hands of future district financial decision-makers(assuming the district lasts that long) and make it harder for families who are stuck in this district to approve future facilities that their own children may need.

    Yes, increasing the limit from $60 may further undermine MDUSD’s credibility, but their reputation is pretty hopeless in any case. It’s time to be sensible and just do the right thing for a change.

  • g

    First, I would like to see that there is actually $227,000,000.00 left in the 2010 bucket to sell.

  • James and Freda Kohl

    As very senior citizens we are appalled that the Board would consider raising our taxes at this time. Tax increases are an after thought to the original proposal and the entire electorate has no opportunity to vote.
    The increase proposed could almost double the present rate.
    We do NOT support the proposed tax increase and accelerated bond sales.

  • Doctor J

    @ the Kohls: You were lied to by the Meas C campaign which included Board members and the Supt. They now claim their “promise” to cap the taxes at $60 can be broken. There will not be a new vote by the public on raising the cap. SOME, a very few, of those who propose to raise the tax cap, put forth a very honorable reason — it will cost less in the long run. But to seniors, it really makes no sense since you will be long gone from your properties by the time it makes any difference. The message to you is: Shame on you for believing school board members Linda Mayo, Gary Eberhart, Sherry Whitmarsh, and School Supt. Steven Lawrence. How does it feel to be lied to by these so called “public servants” ?

  • anon

    @ the Kohls … I’m curious, did you vote yes on 2010 Measure C? I would like to hear from yes voters who actually believed your taxes would not increase by approving the district to incur $348 million in additional debt.

  • Theresa Harrington

    Superintendent Steven Lawrence has promised to hold three community forums. However, so far I don’t believe he has released the dates, times and locations for these meetings, which I believe are supposed to take place next week.
    At those forums, people who believed their tax rates wouldn’t increase may be able to voice their concerns. Those who support the accelerated sales could also comment.

  • Anon

    LOL. I think Steven Lawrence reads the blog! I just got an update in my e-mail “Where Kids Come First” LOL

  • Theresa Harrington

    Although Lawrence’s message said the News Update was also on the district’s website, I don’t see it posted yet.
    Also, he said the forums were to discuss a community request not to sell capital appreciation bonds. He didn’t mention, however, that the proposal would also increase Measure C property tax rates.

  • Doctor J

    Lawrence, show us the “Specific Project List” with bond amounts allocated for each project on how the $227 million [and prior amounts] will be spent. No surprises, no secrets — just the truth for once. MDUSD parents/taxpayers might learn a lesson from the story about how the attention of the Chevron CEO was “brought home”. http://www.contracostatimes.com/news/ci_20366904/protesters-take-lafayette-neighborhood-decry-1-percent

  • g

    Sorry, repeating myself. I originally posted on the wrong thread:

    In typical Lawrence fashion, he puts out a letter nearly a week later than promised, and then SHUFFLES the Options, CHANGES some Option results, and expects people to answer a poll of 1? 2? or 3?

    Some will answer based on the Power Point. Some will answer based on his letter. How will we know if we have a consensus? In the end, we’ll get what he and master-mind Isom want us to get.

  • Doctor J

    Lawrence has become the MDUSD’s Monte Hall of “Let’s make a Deal” — Door #1, # or #3 ? G, nice pickup on the “sleight of hand” of shuffling the options, and changes in the data !! The problem with liars is that you never know when they are telling the truth. Who has “verified” these numbers ? Richards ? Pedersen ? Eberhart ? And Sherry Whitmarsh is no Carol Merrill ! :-)

  • g

    When were they planning to tell us that under the current plan the bulk of this Measure, $155Million, would not be activated until 2026? Pants on fire Lawrence? Doesn’t the current “Schedule” complete projects by 2017?

  • Doctor J

    I am wondering if Linda L and Alicia are still supportive of the “coalition” now that Lawrence has changed the data and shuffled the options ? Why won’t $155 million be “activated” until 2026 when projects are completed by 2017 ?

  • g

    and Nero played….

  • g

    Read up on Prop 218. It may be our only friend. At first glance it does not seem to apply. On closer look, it says in part:

    No local government may impose, extend, or increase any special tax unless and until that tax is submitted to the electorate and approved by a two-thirds vote. A special tax shall not be deemed to have been increased if it is imposed at a rate not higher than the maximum rate so approved.

    (Current law states that the tax rate for GO Bonds for Unified School Districts may not exceed $60.00/$100K)

    Then carefully read about “Initiative Power”

    Initiative Power for Local Taxes, Assessments, Fees and Charges. Notwithstanding any other provision of this Constitution, including, but not limited to, Sections 8 and 9 of Article II, the initiative power shall not be prohibited or otherwise limited in matters of reducing or repealing any local tax, assessment, fee or charge. The power of initiative to affect local taxes, assessments, fees and charges shall be applicable to all local governments and neither the Legislature nor any local government charter shall impose a signature requirement higher than that applicable to statewide statutory initiatives.

    (Mr. Weir could advise us on how many signatures are required to bring about an Initiative to change the playing field, and rethink our Options.)

  • Theresa Harrington

    I have posted the superintendent’s newsletter, so readers may post comments regarding the proposal: http://bit.ly/I6MQV7