Moratorium on CABs

KNN Public Finance is the outside consultant that Piedmont Unified uses to help craft bond measure options.

KNN Public Finance is also used by the San Leandro School District.

In one of the reports KNN did for San Leandro, KNN stated a moratorium on CABs was issued to all School Districts in California:

On January 17, 2013, State Superintendent of Public Instruction Tom Torlakson and State Treasurer Bill Lockyer sent a letter to all school districts asking for a “moratorium” on issuing CABs until the Legislature and the Governor decide on reforms.
(slide 7)

I did not see any mention of this fact in the reports KNN created for Piedmont and I don't know if the Piedmont School Board was aware of this 2013 moratorium.

The above presentation goes on to say:

On January 24, 2013, Assembly Members Buchanan and Hueso introduced legislation (AB 182) that will:

  1. ƒ Restrict school districts from issuing under the Government Code, which allowed for up to 40 year repayment. Schools will only be allowed to issue under Education Code, which limits the repayment term to 25 years.
  2. ƒ Require CAB repayment to be no more than 4 times the original principal amount.
  3. ƒ Require more disclosure up-front, at a Board meeting, when CABs will be issued.

This legislation (AB 182) was passed in late 2013 and made effective January 1, 2014.

As we know, Piedmont Unified issued a CAB in August 2013 (Seismic Safety Bond, Series E) that has a repayment of 5.33 times the original principal amount, has a 30 year repayment term and was not fully disclosed to the public at a Board meeting prior to issuance and is not callable (ability to refinance) for 10 years.

In other words Series E violates 3 rules of AB 182 (listed above) and was issued while the CAB moratorium was in effect.

I don't know if this moratorium had a "grandfather" clause that allows CABs to be issued in 2013 if they were part of an earlier (e.g. 2006) voter authorization.

For a way out to stay in compliance with the moratorium and achieve District goals, see an alternative financial arrangement that could have been done:



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