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.
The School Board has taken to the idea that taxes can be deferred and reinvested to earn a safe return high enough to significantly discount the cost of additional interest charges. This safe return has been chosen to be between 3% and 4% based on a mix of long term Treasuries. The School Board has asserted that as a result of this "discount rate", all financing options including CIBs, interest-only hybrids and CABs cost very close to the same amount! We question this assertion on a number of grounds.
Last week's School Board meeting confirmed that all attendees enthusiastically support renovation of the Alan Harvey Theater. Now, much like buying a home, financing becomes front and center. Do I get a 30-year mortgage? Can I afford 15-year mortgage payments? How about "interest-only"? Can I delay payments until 2018? Oh wait, that last option isn't really an option for mortgages but is for School Bonds.
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.
Last week I mentioned that our School Board will decide in early January on the type of financing for the proposed $14.5 million Alan Harvey Theater renovation. The choice between Capital Appreciation Bonds (CABs) and Current Interest Bonds (CIBs) offer very different costs to taxpayers.
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.
