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Poway Unified School District bond proposition, Measure C (February 2008)

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A Poway Unified School District bond proposition, Measure C was on the February 5, 2008 ballot for voters in the Poway Unified School District in San Diego County, where it was approved.

Measure C authorized the school district to incur $179 million of new indebtedness.

Election results

Proposition C
ResultVotesPercentage
Approveda Yes 28,323 63.9%
No15,99536.1%
These final, certified, results are from the San Diego County elections office.

"Capital Appreciation Bond"

An investigative report published in August 2012 by the Voice of San Diego revealed that the Poway Unified School District used a form of financing called a "Capital Appreciation Bond" that will result in the district having to pay back about $1 billion for a loan of about $105 million it took out in 2011 to implement its Measure C authorization.[1]

When the district's voters approved Measure C in February 2008, they were told in the official voter guide that their taxes would not go up if they voted "yes" on the proposed borrowing. However, unbeknownst to voters, taxes will only be held down for 20 years. After that, for another 20 years, taxes will increase dramatically. This is because the school district arranged a loan repayment schedule where for the first 20 years, no loan payments will be made at all. All the deferred interest from the first 20 years of the loan will be added back to the principal of the loan and it will all start coming due in 20 years.[1]

"In 2008, voters had given the district permission to borrow more money to finish its modernization, and they had received a big promise from the elected school board in return: No tax increases.
Without increasing taxes, the district couldn’t afford to borrow money in the conventional way. So, instead of borrowing from investors over 20 or 30 years and paying the debt down each year, like a mortgage, the district got creative.
With advice from an Orange County financial consultant, the district borrowed the money over 40 years in a controversial loan called a capital appreciation bond. The key point for the district: It won’t make any payments on the debt for 20 years.
And that means the district’s debt will keep getting bigger and bigger as interest on the loan piles up.
The bottom line: For borrowing $105 million in 2011, taxpayers will end up paying investors more than $981 million by 2051, or almost 10 times what the district borrowed. That’s wildly more expensive than a typical school bond, in which a district pays back two or maybe three times what it borrowed."[1]

Ballot question

The question on the ballot:

This text is quoted verbatim from the original source. Any inconsistencies are attributed to the original source.

PROPOSITION C: "To provide safe and modern school facilities, improve student learning, and qualify for approximately $20 million in State matching money, shall School Facilities Improvement District No. 2007-1 of the Poway Unified School District issue $179 million in bonds at legal interest rates to upgrade aging classrooms, libraries, science & computer labs; replace roofs, plumbing, heating, ventilation and electrical systems; improve fire alarms and school security; remove hazardous materials; fund needed facilities, subject to mandatory audits, independent citizens' oversight and without an estimated increase in tax rates?"

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