Over the 4+ years of attending school board meetings regarding bond financing I discovered various ways in which CABs were misrepresented to the public.
| Month | Speaker | Paraphrased Comment | Hari's response | Speaker's retort | Severity _________ |
|---|---|---|---|---|---|
| Aug-2013 | School District | Issued Series E Capital Appreciation Bond (CAB) with no advance notice to the public | Not possible. | This decision was made outside of public view. | |
| Sep-2013 | Ruth @ KNN | Presented all outstanding bonds to the school board with a minor mention of Series E having a repayment "factor" of 5.3 | I didn't see this presentation until Oct-2013 but I mentioned in an article that it is better to call it a "repayment multiplier" since that's what you multiply the borrowed amount with to get to total repayment tax liability. | KNN continues to use the term "repayment factor" if mentioned at all. | The total repayment and repayment multipliers are probably the best indicators for which type of financing is best for taxpayers. |
| Nov-2013 | Andrea @ Board | Capital Appreciation Bonds are not on the table for Measure H | Did you notice the compound interest in Series E? | We had no choice. (no taxing authority left!?) | It turned out another CAB was on the table for Measure H and KNN later reported only CABs were considered for Series E. |
| Dec-2013 | Ruth @ KNN | Capital Appreciation Bonds are just like US Savings Bonds! | I agree a bond investor's investment is appreciating because interest is compounding. However a taxpayer's total tax liability is correspondingly growing. | I wouldn't distinguish between the bond investor and the taxpayer because someday the taxpayer will become a bond investor. | Very condescending and misleading to taxpayers. |
| Jan-2014 | Ruth @ KNN | Renaming CABs to Wrap-around bonds | Still no mention of compound interest in this presentation. | Still not coming clean to taxpayers about compound interest. | |
| Jan-2014 | Ruth + Gautham + Andrea + Roy + Ray | Can discount future dollars using the rate of return as a MUNI bond. The public can invest in their business or home to get even more returns. Using a high compounding discount rate can wipe out the effect of high compound interest rate paid to bond investors and make CABs equivalent to CIBs. | In a followup email I pointed out that an individual taxpayer's deferred tax amount is quite low to invest in a MUNI and they are not being instructed to do so and are just as likely to spend it than invest it. | No response. | Incorrectly applying a present value calculation is very dangerous. Need an actuary to properly apply these financial models. |
| Jan-2014 | Sarah + Rick | The public doesn't understand CABs. Finance industry always trying to get us in more debt. | It's highly unusual "creative financing" that uses unrealistic assumptions on the present value discount rate for taxpayers. | ||
| Feb-2014 | Conna the campaign manager for Andrea, Doug and Amal | She called me and said: You lost the election. Your bond arguments were a bunch of hooey. | Can you tell me where I made a mistake? Did you read my online bond math article? | That's offensive. | A mathematical opinion without doing or following the math is quite reckless. |