A reader reviewed the UT San Diego story in today's Brief and says Hart wasn't the only one to go after risky and very expensive bonds:
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Hart's scary $700 million bond
I'm weak on budget and finance issues but I have a feeling these exotic bonds were peddled by the same Wall Street types who built CDOs and credit default swaps and such. At least that's the sense I get from Planet Money's latest episode, which describes similar bonds that have just about sunk the city of Harrisburg, PA. An auditor brought in to fix Harrisburg thinks the local government/chamber types were razzle-dazzled by Wall Street banks. Does the same thing happen in the SCV?Interesting article on those Poway and considered Hart District bonds.The Sulphur Springs School Bond measure which was just passed had some similarly bad features.The Series B bonds were shown as having 40 year terms with the first payment not taking place until 17 years after the debt was issued. Interest of $78.3 million on $14.2 million borrowed.The Series C bonds were shown as having 40 year terms with the first payment 14 years after the debt was issued. Interest of $30.3 million on $4.6 million borrowed.The Series D bonds were shown as having 39 year terms with the first payment 11 years after the debt was issued. Interest of $122.1 million on $18.4 million borrowed.The long terms (10 years longer than normal infrastructure bonds) and significantly delayed repayments add tremendously to the total costs of these measures. They are appealing to the schools in our area because the schools are predicating higher payments in the later years on the assumption of significant increases in property tax revenues due to growth in the tax base.I never could tell what alternatives to this financing were presented to the Sulphur Springs Board members. But as one board member put it “I know this is expensive. We’ll just put it out to the voters to decide”.
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