Opposition to Bond Sales Prompts Lawsuit

Hope School District Board Member Challenges Legality of Bond Sale

Saturday, April 20, 2013
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The Hope School District faces a dilemma repeating itself in communities across the state. Either raise tax rates to sell more bonds and update school facilities, or honor a commitment to not raise taxes while sacrificing infrastructure.

In fact, the district has made its decision and is ready to sell $5 million worth of bonds, authorized by voters when they approved Measure L in 2010. (Three million of the authorized $8 million-worth have already been sold.) They would like to put the money toward classroom technology, renovating the multi-purpose room at Vieja Valley School, and replacing portable units at Monte Vista School with a permanent library.

Not so fast, says one board member. Retired IRS attorney Patricia Hiles is arguing that the measure does not authorize the district to issue a second series of bonds because of language that says “bonds are only issued with NO estimated increase in tax rate.” While Hiles is a lone voice on the board — she’s been outvoted 4-1 on two recent bond resolutions — she has threatened to sue the district should they go forward with a sale.

Hope School District board member Patricia Hiles
Click to enlarge photo

Paul Wellman

Hope School District board member Patricia Hiles

“I want people to only pay the taxes they are obliged by the law to pay,” she told The Santa Barbara Independent. And, according to her, the law says that any bond sales resulting in a property tax increase will be illegal. The financing structure that the Hope district has worked out will increase the tax rate from about $9 per $100,000 of assessed value to about $18, which, Hiles points out, is a doubling.

Because home values within the Hope boundaries have risen less than predicted when Measure L passed, it is difficult for the district to sell bonds without changing tax rates. For years, districts have gotten away with borrowing while keeping taxes steady by issuing capital appreciation bonds (CABs). This species of municipal bond does not have to be paid off for decades, but all the while it accrues interest. So the amount eventually paid off becomes exponentially greater than the principal. CABs are also often not callable, meaning they cannot be paid off early. They have come under intense public scrutiny since The Voice of San Diego broke the story that the Poway Unified School District will have to pay almost $1 billion on a $105 million loan that was financed through CABs. Several other districts throughout the state have overleveraged themselves with these financial instruments. Hope sold $3 million worth of CABs for its first series of Measure L bond sales in 2010.

The State Assembly recently approved a bill that would regulate the financing of CABs. AB 132, on which the Senate has not yet voted, limits the debt-to-principal ratio on CABs to 4-1, caps maturity dates at 25 years, and allows those that extend 10 years to be paid off early. State treasurer Bill Lockyer, an outspoken opponent of CABs, supports the bill.

Hope School District Superintendent Dan Cooperman in the Vieja Valley Multi Purpose Room that is slated for renovations
Click to enlarge photo

Paul Wellman

Hope School District Superintendent Dan Cooperman in the Vieja Valley Multi Purpose Room that is slated for renovations

The debt-to-principal ratio of Hope’s CABs is 4.14-1 and the latest maturity date is 2040. This time around, the district would like to sell traditional current interest bonds which are much less risky because they don’t bank on increasing property values over a long period of time, and less costly because the borrower begins to pay them back immediately. “We’ve become informed consumers,” said district Superintendent Dan Cooperman.

Traditional bonds, however, force school officials — and their communities — to engage in that time-honored democratic process of prioritizing what they value and where they want to spend their resources. The Hope district is doing just that by filing what is called an active validation lawsuit. This creature of the California legal code opens up contract disputes to the public. The school district must print a summons via newspaper about its plan to sell bonds, opening it up to challenge by those who live in the affected area before a judge rules. Hiles said she will file suit.

Chris Gallo, Hope’s board president, believes that Hiles’s argument is totally undone by the word “estimated” in the bond measure and that the district cannot be held to a specific tax rate. He also said that voters authorized the bond sale when they passed Measure L. Every single sale under the same measure is not up for a new vote, he maintained.

The current sale proposal would cost Hope School District 1.7 percent interest on each dollar borrowed over a 26-year term. “I’m not sure how we can get better financing than that or be more up front,” said Gallo. To the contrary, Hiles wrote in a synopsis of her position, such financing would be “a violation of the CA Constitution, of Measure L2010, and of the voters’ mandate.”

A similar debate is brewing on the Santa Barbara district board. At the last meeting, Trustee Ed Heron noted that the district promised not to raise taxes in its campaign for bond measures Q and R. Trustee Kate Parker countered that the district also promised new libraries at Adams and Washington elementary schools.

With historically low interest rates, such conversations are likely taking place among innumerable school boards that have promises to keep, and millions of bonds to sell before they sleep.


Independent Discussion Guidelines

Santa Barbara School District needs a trustee like Ms. Hiles. Less than a year since they got $110,000,000 in bonds they are thinking about coming back for more $$$?! Thank you, trustee Ed Heron, for reminding your colleagues and the School District of their so-easily forgotten promises.

at_large (anonymous profile)
April 20, 2013 at 1:27 p.m. (Suggest removal)

But the measures authorizing the bonds also were passed. Thank you Kate Parker for remembering that without the education that school libraries are part of, there will be less educated workers to pay much of anything in taxes in future.

Canaveral (anonymous profile)
April 22, 2013 at 4:06 p.m. (Suggest removal)

To even put libraries on the chopping block you must be dragging your knuckles.

Ken_Volok (anonymous profile)
April 22, 2013 at 4:38 p.m. (Suggest removal)

Can someone on the Hope School District Board explain why, since 1955, the increase in the number of students has been 92% but the increase in non-teaching staff has been 690%?

Oh, wait: I know... Unions want more dues and without any downside for low performance, they just grow and grow and grow their departments, collect more dues and create more lib-dem voters that vote to increase the size of their district staff.


willy88 (anonymous profile)
April 22, 2013 at 9:34 p.m. (Suggest removal)

Libraries are NOT on the chopping block, it's a question of choices. There's a lack of education, selling the idea to the voting, paying public why "new" libraries are needed at Washington and Adams, for instance, when a lot of effort and public fund expenditures have been made to make and correctly make the SB Central Library student-welcome.

I am guessing that most classrooms at Washington and maybe Adams are internet-connected. I am also guessing that part of the new libraries wishes would be to upgrade the computer aspects. Isn't that duplicative? If not, please explain Trustee Parker.

at_large (anonymous profile)
April 23, 2013 at 2:28 p.m. (Suggest removal)

how about a webref to PROVE your assertion Willy?
And your union-hating voice always repeats the same diatribe.
at-large, it's a good question to ask about how much of this "Library" stuff is about books and children, and how much is about internet/computers in library/toys for teachers...

DrDan (anonymous profile)
April 23, 2013 at 2:50 p.m. (Suggest removal)

With most kids now on line and the digital gap virtually closed, the need for free standing libraries in K-12 today is negligible. This sounds far more window-dressing, than actual need in today's digital world.

Go to the public libraries we have around town, if one wants a free-standing library. Conduct a class there on how to use them. But you don't need them in elementary schools. Really.

The future our students face is the world of digital virtual libraries. Repairing infrastructure, getting rid of portables and even improved landscaping is a far better promise to keep and will pay off in far more pride and purpose in our schools than a separate occasional use library.

Voters are tired of these chronic tax measures demanded by SBUSD that never die. Prop 30 sent SBUSD more money. The weak state recovery is sending SBUSD more money under the Prop 98 guarantees.

Please can you take your hands out our back pockets, SBUSD and learn to budget both your short-term and your long-term needs more prudently. Is there a better lesson to teach our students than fiscal restraint and learning to prioritize needs to meet ones available resources?

foofighter (anonymous profile)
April 23, 2013 at 6:21 p.m. (Suggest removal)

that's ridiculous foo. Printed books will never be replaced, don't need electricity, software updates, you can write in margins etc. its also cheaper than the actual reading devices and their maintenance to stick with books.
wishful thinking about being futuristic I'm afraid.

Ken_Volok (anonymous profile)
April 23, 2013 at 6:58 p.m. (Suggest removal)

Elementary schools? Their own libraries? Get a grip. I love print books too. These are ages 6-11. Most kids are not even at an abstract reading level by this point, let alone free agent primary source researchers.

I hear what you are saying, but c'mon, how much did you use a school library when you were in elementary school?

I used my public library and it was a childhood treat during my summer and weekends. But during the school day, class time was engaged in learning time, not time spent in a library.

Maybe if we were talking Junior HIgh and especially if we were talking High School, but even at a college level actual brick and mortar free standing libraries are not what they used to be.

foofighter (anonymous profile)
April 23, 2013 at 8:25 p.m. (Suggest removal)

Ages 6-11, print? YES.
I used the libraries, public and school quite often from elementary onward and many students still do today.
You have a really romanticized notion of technology if not childhood itself, and I'm sorry but I question your concept of education itself. Do you see education as strictly the memorization of facts? Do you understand that a tree only dies once to make a book but many trees die from the pollution caused by the energy required produce and transport the power to run ebook readers?
In addition the tactile experience of a book teaches a child to value literature and learning instead of it being an abstract vague thing.

Ken_Volok (anonymous profile)
April 23, 2013 at 9:14 p.m. (Suggest removal)

my elementary school's library is filled with students reading and thinking and discussing...occasionally utilizing some of the computers... youngsters NEED libraries (not media centers!), and KV hits it, foo, your romanticized notion of technology infects your definition of 'education'...
foo writes, "The future our students face is the world of digital virtual libraries" ...this isn't true, or at least I hope so. Onward with BOOKS!

DrDan (anonymous profile)
April 24, 2013 at 4:32 a.m. (Suggest removal)

Why aren't students at your K-6 school "reading, thinking and discussing" in the classroom, instead of in the "library".

Libraries are wonderful and great day care centers for vagrants, but do we need them in every K-6 school to be open for only a few hours a day during the week to a very limited number of people? Nope.

Nothing romanticized about today's digital realities. If anything I think you have a romanticized version of printed text. Perhaps you are writers yearning to see your own names in print?

foofighter (anonymous profile)
April 24, 2013 at 10:05 a.m. (Suggest removal)

K-6 education is the introduction to facts, done in the class room and hopefully all together to build a common knowledge base at least for the basics of the K-6 curriculum.

Yes, rote learning plays a large role at this K-6 stage. Memorize numbers, colors, days of the week, math tables, introduction into simple reading and writing, intro to the solar system, grammar, vocabulary, spelling, the state's history, important dates etc, etc, etc.

This is the time, the best and only time for the 3 "R's" - reading, writing and arithmetic. The sooner we get back to ensuring at least those basics are mastered by age 10, the better chance children have later in their lives.

K-6 is the time for shared foundational facts that can be woven much later in a child's educational career into "critical thinking" and creative exploration.

Dumping kids out of the classroom and into a library for some teacher time off must be just one more teacher union perk. Libraries come with all their additional union job protection demands and regulations administrators have to administer, adding to the over all budgetary burden of each K-6 school.

No, we do not need stand alone and full service libraries in our K-6 schools.

foofighter (anonymous profile)
April 24, 2013 at 10:15 a.m. (Suggest removal)

comments like "Dumping kids out of the classroom and into a library for some teacher time off" and "additional union job protection demands and regulations" reveal your bias, foo. And how irrelevant to state, "Libraries are wonderful and great day care centers for vagrants" ... it's a foo writing, who knows little about kids and learning and libraries.

DrDan (anonymous profile)
April 24, 2013 at 10:38 a.m. (Suggest removal)

Ah-HAH! It all comes down to "those damned unions, damn them." What's the link between "willy88" and "foofighter," except for incognito references to WWII villains real and imagined?

But seriously...willy88's castigation of unions, in the context of an unverified disproportionate increase in NON-teaching staff between 1955 and [now?], is just plain non sequitur. And foofighter's attacks on access to humanity's accumulated knowledge is just plain unbelievable. Yeah, let's burn the books, that's what we'll do! Gets rid of lice too!

GregMohr (anonymous profile)
April 24, 2013 at 12:26 p.m. (Suggest removal)

Distracting attention from the real argument with side line fake issues and intentional misrepresentations only shows someone did not learn much in their own K-6 days, when they were fooling around in the library instead. Case closed.

K-6 needs more supervised class room time learning basics than money spent on mandated union librarians and limited-use stand-alone buildings, adding to the overall school maintenance and infrastructure costs.

What were they thinking when they came up with this "promise"? As a voter, I don't even remember this being put on the table. Promise me instead you will start balancing your budgets and not invest in any more vanity projects for the school board's own aggrandizement and getting to see their own names on the portal doors.

Enough of this. No on K-6 libraries.

foofighter (anonymous profile)
April 24, 2013 at 2:18 p.m. (Suggest removal)

You have to be pretty dim and shallow to see libraries as only places to babysit and store information. They are places where new ideas are born, creative and scientific. New understandings of history are born in libraries by young and old.
Only a complete Neanderthal or narcissists would ever state: "No on K-6 libraries". It's always baffling when people adopt the ames of bands and other artists that are completely diametrically opposed to the blather they post.

Ken_Volok (anonymous profile)
April 24, 2013 at 3:22 p.m. (Suggest removal)

It's you, foo, who has been "Distracting attention from the real argument" -- readers of these posts just skim them again and decide for yourself. Foo has 5 (of the 17), & the longest ones, too.
And sure, it's valid to write "K-6 needs more supervised class room time learning" -- so hoping you will vote, foo, for a hypothetical Prop 31 adding money to our Calif public schools' budgets, and stop railing vs. libraries.
'Case closed', as you foolishly wrote.

DrDan (anonymous profile)
April 24, 2013 at 3:37 p.m. (Suggest removal)

That's it? That is all you got?

Why would we need to add more money to our California schools. Didn't you read just today Brown is handing 90% of the unexpected $4billion in new revenues to schools, the slowly strengthening state economy is handing over more Prop 98 revenues and most of Prop 30 is also going to schools. They are doing fine.

You misread and intentionally distorted what I said about students needing more classroom time. Go back and get it right. Oy, what have their been teaching in public schools these past few decades? Has the only book in the library been Saul Alinksy's Rules for Radicals?

foofighter (anonymous profile)
April 24, 2013 at 6:08 p.m. (Suggest removal)

go back and get it right, foo. Oy, you're still stuck in Ayn Rand.

DrDan (anonymous profile)
April 25, 2013 at 6:08 a.m. (Suggest removal)

Cliff Notes:

Ayn Rand believes in being productive.
Saul Alinsky believes in being destructive.

foofighter (anonymous profile)
April 25, 2013 at 8:18 p.m. (Suggest removal)

Do you have any quotes by either to support your supposition?

Ken_Volok (anonymous profile)
April 25, 2013 at 8:26 p.m. (Suggest removal)

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