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Poway Unified Officials Defend Billion-Dollar Bond as Public Fires Back

Poway Unified School District officials on Monday defended a controversial $105 million bond that could end up costing nearly $1 billion to repay.

Updated 11:19 a.m. Tuesday with PDF of Superintendent John Collins' presentation from Monday's board meeting.

Poway Unified officials on Monday fiercely defended their choice to trade $105 million in bonds now for a nearly $1 billion taxpayer tab later, even as a grumbling crowd called for their resignations and a grand jury investigation.

"I think this board should resign. ...I do not trust you anymore," said Sharon Swildens, a Poway resident who was one of a dozen public speakers at Monday's board meeting.

The monthly meeting—typically a lightly attended affair—brought out more than 150 attendees, with many standing, lining the walls and spilling into the hallway of the Poway Unified School District's main office on Avenue of Science.

The district has been under fire for the past two weeks since a Voice of San Diego report spotlighted a $105 million bond series for school repairs issued in 2011 that could end up costing $981 million to repay over a 40-year term. It was one of five bond series issued for a 24-school modernization and repair project.

For more than an hour to start the meeting, Superintendent John Collins and board members defended the decision, focusing on the benefits of modernizing and repairing 24 older schools to equalize the quality of campuses across the district, shifting responsibility to voters who, they said, should have known that costs could escalate at some point.

"Remember, it wasn't the board that passed the bond," former board member Jeff Mangum, who held the seat now filled by Marc Davis until 2011 and is now running for the Poway City Council, said during public comment. 

Collins took a magnifying glass to the ballot language of Proposition C, a $179 million bond measure in 2008 which alerted voters that tax rates could vary depending on market conditions. The first bond series issued under Proposition C—$73.9 million in 2009—came with a 24-year term and payment total of $260.7 million for a payment ratio of 3.5 (meaning the district would repay three-and-a-half times as much as it borrowed), according to a PowerPoint presentation by Collins. But by the time the second Proposition C bond series was issued in 2011—the controversial $105 million—officials opted for a 40-year term that would mean repaying more than nine times as much as was borrowed.

Board members defended the choice to issue the second series bonds in 2011, saying they feared a tightening bond market due to the recession and an inability to make a forthcoming payment on money borrowed to advance funding on two previous school repair bonds. The Proposition C funds were used to cover the costs of this borrowing from 2008 and 2010. Collins argued that though the terms of the second series Proposition C bonds were not a good deal—"In this climate, you don't get a good deal."—the terms of the overall package of bonds for the 24-school repair project end up being "reasonable."

The superintendent contended that what voters received were $543 million worth of school repairs ($377 million across five bond series, plus $166 million in state and capital funds with no repayment cost) at a total repayment cost of $1.6 billion—a diluted payment ratio of 2.9.

But the presentation and board member defenses seemed to do little to persuade the crowd that the pricey $105 million series—and the forthcoming property tax hikes for locals—were justified.

"My initial response to this presentation is you are once again wrapping a pig in the blanket of schools," said Clariece Tally, a Poway resident who was the first public speaker and contributes columns to Patch.

Board member Todd Gutschow had said, in an extended defense of the decision, that the board was not hiding behind the notion of doing the project for the students.

"Whether it was the right decision or not, time will tell. And others, through the lens of hindsight, will judge," Gutschow said, adding that he made the best decision he could with the information he had and was not pleased with the results so far.

The board member gave the example that the owner of a $300,000 home is now paying about $165 per year to cover the project bonds. After average increases of 7.6 percent per year over the next 20 years, that homeowner would be paying $710 in 2033 and $842 in 2051, Gutschow said, eliciting a few gasps and grumbles from the crowd when he deemed these amounts "not insignificant" but not "catastrophic."

"This is the classic example of kicking the bucket down the road and letting our grandchildren pay for it," said Joyce Haas, a local woman who said she had three children go through PUSD schools.

But amid the pushback, including Poway resident Tom Moore who called for a grand jury investigation, there were those who spoke out in support of the board.

"Spreading hate and dissension and polarization is not problem-solving," said Poway resident Dick Lyles. "Let's focus on the problem, not the people, and let's solve it for crying out loud."

Christine Mangum, the wife of former board member Jeff Mangum, said she hates seeing the district dragged through the mud by "opportunists seeking a juicy story."

Gary Vineyard August 24, 2012 at 05:00 PM
"Remember, it wasn't the board that passed the bond," former board member Jeff Mangum, who held the seat now filled by Marc Davis until 2011 and is now running for the Poway City Council, said during public comment. I don't know about the rest of you but this dodge is getting really old. Yeah Jeff, they (I voted against it) voted it in but they did that cuz you guys didn't bother to tell us what a bad deal it was gonna be. And before you start up with that other excuse about 'you didn't know what the final cost was gonna be'... well you certainly SHOULD HAVE KNOWN...THAT'S YOUR JOB!
Gary Vineyard August 24, 2012 at 05:01 PM
"Board members defended the choice to issue the second series bonds in 2011, saying they feared a tightening bond market due to the recession and an inability to make a forthcoming payment on money borrowed..." I was brought up to know this as borrowing from Peter to pay Paul which is NEVER a good idea. "...Proposition C bonds were not a good deal..."In this climate, you don't get a good deal."— Well maybe you board members should have told the public that bit of pertinent information.
Gary Vineyard August 24, 2012 at 05:01 PM
"Spreading hate and dissension and polarization is not problem-solving," said Poway resident Dick Lyles. "Let's focus on the problem, not the people, and let's solve it for crying out loud." Well Dick, I personally don't know about the hate and dissension but the polarization is what makes us in this country strong. We get taken by some 'fast talking' and we try not to let that happen again. You say to focus on the problem and not the people...well the people that did this are part of the problem. This whole thing is like making a bad pot of coffee...instead of of just minimizing your loss and throwing the pot of bad coffee out, you guys are trying to add more coffee to dilute the bad coffee and make it OK...doesn't work cuz you still have the bad coffee in the pot. AND BTW just what is YOUR solution to this problem Mr. Lyles? I'd like to hear it cuz I haven't been able to figure one out yet...that is, of course, unless a Grand Jury finds some criminal wrong-doing afoot.
Clariece Tally August 24, 2012 at 06:09 PM
Well it helps to refresh memories when you're trying to dodge this financial bullet. Mr. Mangum was present in 2006 when the Board issued a bond for $13M+ and its payoff is 6 to 1 ($19m+). I think Mr. Mangum is a very nice man with a loving family he should be proud of. I think the Trustees have performed a service for the community over the years. But they may a big big financial mistake and one that will cost this community for decades to come. I by no means think he was alone in this. It was a group effort. And unfortunately what it means that until all of this is unraveled, none of them should hold public office. There will be litigation over this (not by me) regarding the breach of fiduciary duty. It's inevitable and unfortunately probably necessary. Until this is fully resolved it will cloud the credibility of all the Trustees.
Rollie Herberg September 01, 2012 at 05:32 PM
There has been a lot of "reporting" and "editor's Opinions about the latest Poway Bond issue. One simple fact has not been included in their reporting and that is: Is the District prohibited under the terms of the bond issue from making early prepayments on the Note? 1.] If so, then the fussing is justified. 2.] If not, which I suspect, then the bond issue is a brilliant one for the District. Because it provides important flexibility since they can pay it off as fast as any other bond issue and they can pause if the economy gets worse and they have lots of time to wait. Please provide that information to your readers.

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