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School Bonds Under the Microscope

Auditor-Controller Releases Survey Findings


Recent reports about school districts issuing controversial capital appreciation bonds (CABs) that do not mature for decades but collect interest all the while have caught the attention of officials who recently performed a survey of all bonds issued by districts in Santa Barbara County. Property-tax manager Ed Price led the effort since it will be his office ​— ​the Auditor-Controller’s ​— ​that will inform taxpayers of the heftiness of the bag they’ll be left holding when CAB payments are due.

What he found is that eight districts and one community college district, Alan Hancock, have issued these bonds. Those school districts include Buellton, College, Hope, Solvang, Santa Barbara, Santa Maria Joint High School, and Lompoc. The poster child for CABs is the Poway district in San Diego County, which will have to pay nearly $1 billion on $105 million in principal. The assemblymember for that district, Ben Hueso, has proposed legislation that will limit the debt-service ratio to 4:1 among other precautions.

The highest ratio in Santa Barbara County is 11.56 for a $205,377.90 loan for the College Elementary district. The interest on that bond, the last payment of which will be due in 2029, adds up to $2,169,622.10. As a result of bond measures Q and R passed in 2010, the Santa Barbara Unified School District will pay roughly $122 million in interest on a less than $31-million principal. The latest maturity date is 2045.

The district issued a statement in which it explained that, to keep the promise of completing basic repairs and updates at schools ​— ​replacing old air-conditioning and heating units, fixing roofs, installing wireless networks ​— ​without raising taxes, CABs were necessary. They allow districts to avoid limitations on property taxes that can be levied for bond measures, while betting that assessed values will increase over time.

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