Over the 4+ years of attending school board meetings regarding bond financing I discovered various ways in which CABs were misrepresented to the public.
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I would like to congratulate the board in responding to the voices of the community who wrote into the board (roughly four years of lobbying later) to view the 2013 CAB negatively and allow for a refinance. However there are a number of issues relating to the process we went through that are troublesome.
The following tool compares Current Interest Bonds (CIBs) with Capital Appreciation Bonds (CABs):
It requires the total assessed valuation for the school district and your individual assessed valuation as an inputs.
It also requires the bond amount(s), the interest rates, the life of the bonds and the first year of taxation for the CAB as inputs.
These inputs are in yellow.
Creative Financing allows the School District to borrow funds and not have to pay the full interest and principal reduction required according to a normal amortization schedule. This is a way to "kick the can down the road" and not deal with the true cost of renovations.
In case readers haven't heard about Capital Appreciation Bonds (CABs) before, Michael Brady, Assistant Superintendent for the School District spoke about these financing arrangements at the November 16 public meeting on the proposed Alan Harvey Theater renovation to an audience of 30 or so community members.
CABs do not pay investors or charge taxpayers for the initial years after the bonds are sold. Instead, compounding interest charges accrue, and are added to the prinicipal debt owed. At some specified time, property taxes go up and taxpayers start servicing this debt.