CVIndependent

Thu09192019

Last updateTue, 18 Sep 2018 1pm

College of the Desert Superintendent/President Joel L. Kinnamon doesn't have an opinion on legislation that could radically impact 2.4 million students in California's beleaguered community-college system.

The legislation in question, Assembly Bill 955, would permit community colleges to offer self-supporting courses at increased rates during winter and summer sessions, following budgetary cutbacks—to the tune of $800 million systemwide since 2008—that have left many of these institutions incapable of meeting ever-increasing demand.

Under AB 955, students would pay tuition of about $200 per unit for these courses, reflecting the actual costs associated with providing them, instead of the state-subsidized rate of $46. A third of the revenue generated from the courses would go to financial assistance for low-income students.

Critics charge that the bill would create a "two-tiered system," in which those who can afford to pay the increased rates are able to get the classes they want and need. Proponents—including the bill's sponsor, Democratic Assemblyman Das Williams—counter that systemic inequality exists now.

"If you fear a two-tiered system, I've got to wake you up: It's already here," Williams told Democratic lawmakers who had objected to the proposal, according to an Associated Press report. "There's one tier that can get in, and one tier that is locked out."

The Assembly passed AB 955 on May 20 in a 50-16 vote; it has received a first reading in the Senate.

Following a request for comment on whether College of the Desert had taken a stance on the bill, it took COD's press office 27 days to issue an awkwardly written non-statement on the legislation, attributed to Kinnamon, and transmitted by email through a "public relations technician."

"Dr. Kinnamon is certainly an advocate of actions that increase student access to the education they desire and the pursuit of the attainment of their goals," the statement read. "Providing a quality education for our students is our No. 1 mission. However, it is important that access be provided in an equitable way that adheres to the values of the community college system."

The intermediary, responding to an emailed follow-up question asking what the statement meant regarding Kinnamon's position, replied that Kinnamon did not, in fact, have an opinion on the legislation. This statement was attributed to Pam Hunter, College of the Desert's executive director, institutional advancement/Title V project director and public relations officer.

In contrast, it took Victor M. Jaime, superintendent/president of Imperial Valley College, precisely 28 minutes to fire off an email detailing his view on the legislation.

"Imperial Valley College serves a very high number of low-income minorities who are also first-generation college students," Jaime wrote. "This bill would negatively impact these students and place us back to a time when higher education was mostly accessible to those who could well afford the cost of higher education, placing low-income, disadvantaged students at the end of the line.

"I was one of those students who greatly benefited from the access provided to me as a low-income, first-generation college student. I have worked very hard for the last 30-plus years encouraging just this type of student to pursue a college degree and become role models for others in their family."

Roger Wagner, superintendent/president of Copper Mountain College in Joshua Tree, made himself available for a phone call about an hour after his institution was contacted by the Independent.

"Without a doubt, it's going to be a controversial bill," Wagner said. "I think it serves people in two ways: One, it serves students who otherwise couldn't take classes. So students who can afford it, who otherwise would go to (pricier) private colleges, can take them, and then it would free up courses (during the regular term). And then my understanding is that revenues would go to financial aid for students who can't afford classes."

Perhaps the most thoughtful and nuanced picture of the legislation and its context came from Denise Whittaker, interim superintendent/president of Palo Verde College in Blythe, who was also quick to respond to the Independent.

"I can tell you this is not an easy or simple conversation or topic because of the complex nature in which community colleges are funded," Whittaker wrote in an email.

Funding for community colleges is largely based on a state formula that revolves around the aggregate number of units taken by their students, with an overall "cap." Optimally, colleges maintain enrollment at that cap, and if demand for courses still exists, any additional offerings don't receive funding.

In the past, there was wiggle room for growth, allowing colleges to exceed the cap by as much as 2 percent and still receive financial support for enrollment above that limit. The economic downturn killed that, and now many institutions can't afford to offer intersession or summer courses without state help.

Other factors impose further restrictions. Community-college budgets have been downsized over the past half-dozen years, so cuts have been made to pay ongoing expenses—like utilities—that increase annually.

And then there are "workload reductions," which mean the enrollment caps mentioned above have been cut back—meaning colleges must slash course offerings to meet the lowered caps.

"Reduced course offerings mean students have fewer courses to choose from; fewer students enroll; and slower graduation and transfer rates result, because it takes longer for students to get through when fewer courses are being offered," Whittaker wrote.

In the end, according to Whittaker, demand for classes is greater than what many community colleges are financially capable of offering.

"Fall-and-spring, traditional course offerings have generally been reduced over the past few years due to budget restrictions, shutting students out, and colleges reached their lowered cap levels without having to provide intersession or summer school," she wrote. "It is a vicious cycle."

This is where AB 955 comes in. The question, according to Whittaker, is that when community colleges don't receive funds for summer or intersession courses, "how can access to higher education be provided to students while still remaining financially prudent?" Most community colleges do not have the money to pay for the courses without state support, and AB 955 provides a possible alternative.

"However, the issue or controversy then becomes one of equity or equal access—this option only applies to those who can afford it, and most of our colleges have high-poverty students where this option would exclude them," she wrote. "I see this as being the main issue, although there definitely is a problem in that many community colleges cannot meet the student demands, and there are no good alternatives."

If only Kinnamon and his College of the Desert colleagues were as forthcoming.

Jimmy Boegle contributed to this story.

Published in Local Issues

While other Coachella Valley cities tend to get more attention, it’s the city of Indio that—by a fairly wide margin—has the largest population.

With more than 80,000 residents, it’s one of California’s fastest-growing cities; it’s also the home of the Coachella and Stagecoach music bonanzas. In fact, city leaders recently gave Indio the tagline “The City of Festivals.”

However, a drive down once-bustling Fargo Street in the downtown/old town part of Indio reveals that all is not well: Most of that population growth has been in the suburbs, and the city’s core features numerous vacant, boarded-up buildings. Meanwhile, the city government’s reputation is still recovering following the 2010 retirement of Indio City Manager Glenn Southard following a series of financial controversies. (Editor's Note: Elaine Holmes wants to make it clear that she was a supporter of Southard and his "positive approach to Indio.")

But there are signs of progress in downtown Indio, too. For starters, the College of the Desert’s new East Valley Center is rising on Oasis Street, and is slated to open in a year or so. And back down on Fargo Street, the quirky Indio Performing Arts Center is drawing people to downtown for a variety of entertainment.

One of the people who is leading the charge to improve both Indio itself and its reputation is Elaine Holmes. She and her husband, Doug, gave up jobs in corporate America to move from San Clemente to Indio in 2004, when they bought PJ’s Desert Trophies and Gifts, located in downtown Indio on Miles Avenue. During her nine years in Indio, she’s gotten increasingly involved in the city leadership. She was on the board of directors of the Indio Chamber of Commerce, and 2 1/2 years ago, she was elected to the five-member Indio City Council. This year, she’s serving as the city’s mayor (a title that rotates among members on an annual basis).

The Independent recently sat down with Holmes at PJ’s Desert Trophies and Gifts to talk about the city of Indio, her involvement, the city’s future—and even medical marijuana.

So, why Indio?

The people. The people in this community are wonderful. They are very giving; they’re very generous with their own selves and their own time. They are people who are eager to see other people successful. … You just can’t help but get involved with that, and we did, and we really got engaged.

Was there something special—something different—that you noticed about Indio when you moved here that, for example, you hadn’t seen in San Clemente?

It’s a whole different way of life, and, certainly, Indio is a smaller community. It’s a tightly knit, more-close-knit community. When were in San Clemente, because we both worked in corporate America, we didn’t have time to get involved with the community, so when we moved here, we became more engaged.

What made you decide to jump into political life? Even in a relatively small town, politics is politics …

I am a businessperson—really, a small-business-person now—and I felt that I needed to be an advocate for other small-business folks in the city of Indio. That really was the first launch. Secondarily, we are involved with this old town, or downtown, and became a part of the revitalization. I saw the potential; there’s so much potential in Indio, up by the freeway, but also in this old town area, and I really wanted to be involved and be a part of it.

The first time I drove through here (downtown/old town Indio), I went: “Whoa. This looks rough,” especially the part that IPAC is on (Fargo Street). Here (Miles Avenue), it looks nicer, and you’ve got the big (College of the Desert east) campus going in just a few streets down, which is great, but, frankly, there’s a long way to go. Tell me what steps you want the city to take to get it so downtown Indio is vital again.

It’s been a work in process for several years. We began the revitalization process before the downturn in the economy, on Miles Avenue here, predominantly. … Here on Miles Avenue, we redid all of the electrical, the underground (work), the sewers, the water. We tore up the streets and created a walkable area, a well-lit area … because before you can entice business in, you have to have water; you have to have sewer. If a restaurant comes in, you have to have the ability to put in, say, a grease trap. So we put in all of the infrastructure, all of the not-pretty things, first, so we could then work on the rest of it. College of the Desert is something that’s been in the works for several years, and we’re seeing it come out of the ground.

The great thing about Indio, and about this downtown: It used to be that they called it the hub of the valley. This downtown area used to be absolutely thriving with shops and visitors and all of that stuff, and then, as things changed, and the world changed, it continued to deteriorate. … People have a perception that the area’s rough. There’s not an issue with (violent) crime. There’s theft; there are theft issues, sure, but there are theft issues everywhere, particularly now with the downturn in the economy. … We work day and night here; we always have at this store. That’s what small businesses do. We saw the fact that this was a safe place; it had just fallen into disrepair, and I when (my husband) Doug and I look at something that’s in disrepair, we think: “Ah ha! Potential. We can fix it up.”

Concrete steps: How is downtown/old town Indio going to become a place that’s vital again?

It starts with College of the Desert and the fact that there will be 3,000 students at peak enrollment in the downtown area. You need people here, day and night, in order to make an area successful, because that’s what will drive retail and restaurants and the housing component. … (On May 15), the council approved moving forward with mixed use, so there will be restaurants and retail on the bottom, and living (spaces) on top.

Where?

Right across the street from the College of the Desert, there’s an empty lot. … The new detention center’s coming up; the new county administration center is also coming up, so in the next three years, there will probably be an additional 5,000 people in the downtown area. … Both (the detention center and the county administration building already) exist on a smaller scale; both are going to be torn down and rebuilt on a much larger scale. … There will be a captive audience here.

If it were up to you, would downtown Indio become like El Paseo or downtown Palm Springs is, in the sense that they are draws for tourists and people from elsewhere in the valley alike? Or are you content with Indio being a hub mainly for people who live in the east valley?

The vision for downtown/old town Indio is that it’ll be a combination of both. There will be specialty retail and restaurants. … When you think of the number of people who come into the desert, from Canada and tourists, it will be a draw for them. As it stands now, there are (already) some eclectic and unique stores. But also, with the college and the people who live here, there will be services, so people from the east end of the valley will come here, because there is something specific here that they need. So it will satisfy both as it evolves.

There’s going to be a law school here. Ultimately, my vision is: We have the (Indio) Performing Arts Center; we have the CV Art Center. … The (Coachella Valley History) Museum is just a block away. So, if you will, it’s arts, culture and entertainment, and you’ve got that educational base. So you have people moving here, and you’ll have things to do, places to go and places to eat. That’s ultimately where I want it to be.

How does the state dissolving all of the redevelopment districts affect Indio? Did it hurt the efforts badly?

It did. It threw us a curveball, there’s no doubt about it, because the city amassed quite a bit of this property several years ago, so we could bundle or package it to developers, and they could have a large area. When the state took that over, it all came to a screeching halt. There are challenges with it. Right now, we’re trying to deal with the state of California in terms of leasing some of the building space, and looking at disposition agreements in terms of how we go about selling (the property) to specific organizations or developers for future development. It slowed things down in terms of the forward momentum.

Let’s get a past downtown for a bit and talk about the big festivals. First of all, does it annoy you that everyone calls (Goldenvoice’s biggest festival) Coachella, when it actually takes place in Indio?

You know what? It’s all part of the vibe. It would be great to have Indio in the name, but … I think most people know that the festivals are in Indio.

There was a move last year by a fellow City Council member (Ascencion “Sam” Torres) to add a large tax to Coachella tickets. That got shot down, and you were opposed to it. Since then, Goldenvoice has signed a new agreement to stay in Indio (through at least 2030, and to possibly add two more festival weeks, perhaps in the fall). What are your goals, from the city’s standpoint, in terms of the festivals—bringing people here, what Goldenvoice does, etc.?

First of all, Goldenvoice does an enormous amount with the city, particularly with the kids. I think people see the concerts, and that’s what they associate with Goldenvoice, but what we see of Goldenvoice are people who really spend a lot of time and money focused on the community. We had the (remote area medical) health thing at the fairgrounds just before the concerts. They play soccer with the kids; they support the teen center, the Boys and Girls Club, so they’re already engaged in the community, and we want them to continue with that engagement, and to an extent, become even more engaged.

People come from all over the world; that is so neat, and I want, from a business perspective, for all the businesses in the community to reap the benefits of those tourists who are in town. … I also want the world to see the city, and some people are going to move here, and to have people from different cultures, and different parts of the country and world, to move here, to me, adds more to the eclectic flavor of the city that Indio is.

How do you get the word out to the festival-goers that, “Hey, you should actually stop and look at what’s going on in Indio?”

At (the May 15) council meeting, we put together an ad-hoc committee—I did as the mayor—to look at how we can engage the tourists and the people who come here for the concerts to let them know about all the restaurants and great places to go in the city. So we’re going to be pulling together a committee, myself and Mayor Pro-Tem (Michael) Wilson, with some of the local businesses, to address that very issue, and to see how we can be creative to drive people to our businesses.

Would you like to see more businesses come in that could benefit from the festivals? From what I understand, Indio's first new hotel in decades, a Holiday Inn Express, is soon opening.

Absolutely. … It’s “The City of Festivals.” Let’s look at more festivals. Let’s look at something that the city does every month that draws people and tourists into our city that therefore drives retail, and drives hotels and motels. … The more people we have here on a consistent basis, the more of a need we have for the hotels, the restaurants and the retail, because they’ll be able to sustain themselves.

I want to specifically ask you about IPAC. It’s such an eclectic, work-in-progress venue, and they do some pretty cool stuff there; in what direction would you like to see IPAC move?

… There are three components: community theater; a learning environment, particularly for the kids, because music and the arts just aren’t in schools any more; and a place to hold concerts. There are so many local bands here; let’s have a venue for them to play and perform.

Regarding medical marijuana: Right now, Palm Springs is the only city in the valley that allows dispensaries, and a lot of medical-marijuana dispensaries and collectives are closing up shop (after the California Supreme Court ruled that local governments could prohibit them). If it were up to you, where would Indio fall in terms of allowing dispensaries or other medical-marijuana businesses?

It’s come before the council once, I think, a couple of years ago. I think all of us would look at what a medical-marijuana clinic would bring to the city. We’d look at it on a case-by-case basis and decide if that was something that would be a benefit to the city and to the residents of the city. What decision would be, I don’t know. I know that the council is pretty open-minded or is very good at taking each item that comes to us on a case-by-case basis and asking the questions … to determine if it’s something we want in our city, whether it’s medical marijuana or a business.

The story that we did for our first print-version cover story was on growth. We got some numbers from the Southern California Association of Governments that showed Indio, Coachella and especially the nearby unincorporated areas were going to see the bulk of the growth in the valley between now and 2035. With that growth comes challenges: Indio’s going to have to deal with infrastructure, new roadways, and so on. What kind of a role is the Indio City Council taking for Indio to prepare to be a city of more than 110,000 people by 2035?

We’re updating our general plan, first of all. We always look at infrastructure improvements, and we do infrastructure improvements every year, whether it’s to our roads, or whether (it involves water)—we have the Indio Water Authority, our own water agency—and we are constantly upgrading that in terms of water storage and our ability to deliver water to our residents and businesses. (Growth is) something that’s forefront in our minds all of the time. Our city has grown, for the last 15 years or so, and continues to grow, so we have to be ready for that, and we’re constantly looking at: Where do we need to make changes? Where do we need to upgrade? That’s always top of mind. …

The east end of the valley has the highest number of youth here, so the need for services and the environment for these young people to be entertained or to eat or to hang out is critical. (We need) parks. My dream would be an aquatic center—something that was envisioned several years ago, and the economy kind of took that away from us. … That’s the future … the kids. That ties in to education and the whole economic engine, to have the jobs here for these kids to go to.

One of the things I really miss in terms of living in the Coachella Valley is a full-fledged four-year university here …

It’s coming.

It’s coming? Tell me about it.

I want to defer to Jan Harnik, the mayor of Palm Desert, but what drives that is a student population to go to these schools, and therefore, when they come out of school, the ability to find jobs and careers. … As the population grows … it’s a cycle. That’s how it works. As the desert is growing, so is the need for a university.

This is your first foray into elected office. Are you content to stay on the Indio City Council …

Absolutely.

… Or might you have bigger plans down the line?

No. I am all about being involved with the city. The reason I got on the City Council, as I said, is to be an advocate for small business. I like the city; I like being an advocate; I like being a part of the growth. And that’s the beginning, the middle and the end of my political career.

Published in Local Issues

To readers of the Coachella Valley Independent, the big “iSun Investigation” that ran in the March 3 Desert Sun was not really news at all. 

On Feb. 15, the Independent, in a piece by Saxon Burns, reported that Coachella Valley taxpayers will be on the hook for hundreds of millions of dollars due to questionable bond-issuance decisions by leaders at two area school districts. 

Here’s a selection from that piece, headlined “Generations of Valley Taxpayers on the Hook for Hundreds of Millions After School Districts Issue 'Irresponsible' Bonds”:

When it comes to government these days, maybe, to quote an old Cole Porter song, "anything goes."

Two area school districts, Coachella Valley Unified (the east valley district that runs public schools in Indio, Coachella and points east) and Desert Community College (aka College of the Desert), are among the hundreds in California that have used financing known as capital appreciation bonds, or CABs, to fund construction projects.

These bonds differ from more-traditional cousins in that payments can be put off for years—sometimes decades—allowing districts to save face by not raising property taxes, at least in the short term.

However, interest compounds during those years, and when the bill comes due, many districts—and, therefore, taxpayers within those districts—will be socked with explosive costs. …

Warning bells were raised last year when the Voice of San Diego website, assisted by retired journalist Joel Thurtell, reported that Poway Unified School District would be shelling out a cool billion over 40 years for $105 million in borrowing to renovate buildings. This set off a flurry of coverage from The New York Times, the Los Angeles Times (which published a database of the state treasurer's figures on CABs) and other news outlets.

The fact that things aren't quite Poway bad for our local cases might come as cold comfort. In 2010 and 2012, Coachella Valley Unified School District issued CABs worth slightly more than $35 million. Repayment will set the district back $186.3 million over more than 30 years. …

The Desert Community College District, which serves the College of the Desert, issued nearly $96 million in CABs in 2007, with repayment totaling just north of $430 million over 38.6 years.

Some 16 days later, here are the first two graphs from the piece in The Desert Sun:

A Coachella Valley community college and public school district have engaged in a bond strategy that will cost them hundreds of millions of dollars more than they borrowed by the time the debt is paid off in more than 30 years.

In recent years, both the College of the Desert and the Coachella Valley Unified School District have issued capital appreciation bonds as portions of larger voter-approved borrowing plans. The college and school district used the borrowed money to build new facilities, but the resulting debt — and its escalating interest rates — will linger long after the buildings lose their shine.

The Desert Sun piece, by Brett Kelman, goes on to basically report what the Independent reported, although he did add some nice bits of detail (for example, Kelman broke down what the College of the Desert’s interest payments are slated to be, whereas we didn’t).

He also made one fairly significant mistake: He incorrectly credited nonprofit news orgs The Bay Citizen and California Watch for “uncover(ing)” the story.

While California Watch and The Bay Citizen have indeed done a bang-up job of covering the capital appreciation bond issue, giving them credit for having “uncovered” the story is just plain wrong.

Here’s the anatomy of how this story came to be—first in the Independent, and then in The Desert Sun:

• As we mention above, retired journalist/current blogger Joel Thurtell (translation: unpaid journalist) started covering the financial debacle that is capital appreciation bonds way back in May 2012. While his context was a specific school district, as also mentioned above, he did ring a warning bell about these bonds throughout the state. On May 1, 2012, he wrote: “Let’s hope the California Legislature scraps this abomination. In Michigan 19 years ago, we found that CABs are good only for the handful of bond underwriters, bond attorneys and financial advisers who promote them to enrich themselves at public expense.” 

• On Aug. 6, 2012, news website Voice of San Diego did a piece focusing on Poway. This led to some national attention, from CNBC and other outlets. (It should be noted that Thurtell was apparently upset with Voice of San Diego for not crediting him; VOSD did a piece on that matter, as well as the national attention, here.)

You’ll note that VOSD editor Andrew Donohue writes: “There’s been no concerted effort to act like we were the pioneers. Nor do I believe we have claimed that the information contained within it came to light only as a result of our investigation.”

In other words, VOSD presumably didn’t run the piece under a silly tag like “iSun Investigation.”

• On Aug. 22, California Watch’s Erica Perez did a story noting the coverage of both Thurtell and VOSD. In it, she started expanding the scope of the matter beyond Poway, pointing out the obscene payback amounts some other community college districts were facing in California. 

• On Nov. 29, the Los Angeles Times did a piece on the bonds, presenting them as a true statewide problem. Most valuably, the Times—using data from the state Treasurer’s Office—also published an online database of districts in the state that had issued capital appreciation bonds. 

(Interestingly enough, the Times wound up running a correction on the piece: They initially credited VOSD, without crediting Thurtell, for breaking the news on Poway. Props to them for later amending the piece to credit Thurtell.)

• The Times piece—and the database, especially—led to all sorts of coverage, including localized coverage. In Northern California’s Humboldt County, for example, my friend Hank Sims, of online news source the Lost Coast Outpost, did a story discussing that county’s school districts which had issued capital appreciation bonds. A heads-up from Hank is how I first learned about the Times database, and therefore the Coachella Valley angle.

(Side note: The daily in Eureka, Calif., credited the Lost Coast Outpost for first publishing the information locally—something the folks at The Desert Sun felt no need to do.) 

California Watch did more, expanded coverage (some of which was used in The Desert Sun piece); The New York Times did a piece on the bonds in California.

With the Coachella Valley Independent fully up and running after the first of the year, I asked Saxon to look into the Coachella Valley angle after Hank’s tip. That’s how, to my knowledge, we became the first valley publication to report on the matter.

I am very happy The Desert Sun did their piece; this is an important story that Coachella Valley taxpayers need to know about. But to call this as an “investigation” without properly crediting the journalists who really exposed this matter—especially Joel Thurtell—is wrong, plain and simple.

Published in Editor's Note

When it comes to government these days, maybe, to quote an old Cole Porter song, "anything goes."

Two area school districts, Coachella Valley Unified (the east valley district that runs public schools in Indio, Coachella and points east) and Desert Community College (aka College of the Desert), are among the hundreds in California that have used financing known as capital appreciation bonds, or CABs, to fund construction projects.

These bonds differ from more-traditional cousins in that payments can be put off for years—sometimes decades—allowing districts to save face by not raising property taxes, at least in the short term.

However, interest compounds during those years, and when the bill comes due, many districts—and, therefore, taxpayers within those districts—will be socked with explosive costs.

Repayment of traditional bonds typically runs about $2 to $3 for every dollar borrowed. In contrast, districts using CABs will frequently shell out four to five times what they borrowed in repayment costs, with rare cases extending into the stratosphere at a ratio of 20-to-1.

Warning bells were raised last year when the Voice of San Diego website, assisted by retired journalist Joel Thurtell, reported that Poway Unified School District would be shelling out a cool billion over 40 years for $105 million in borrowing to renovate buildings. This set off a flurry of coverage from The New York Times, the Los Angeles Times (which published a database of the state treasurer's figures on CABs) and other news outlets.

The fact that things aren't quite Poway bad for our local cases might come as cold comfort. In 2010 and 2012, Coachella Valley Unified School District issued CABs worth slightly more than $35 million. Repayment will set the district back $186.3 million over more than 30 years.

CVUSD officials in Thermal, Calif., didn't respond to multiple requests for comment over the phone. An Independent reporter even made an in-person visit to the district offices, and was told that superintendent Darryl Adams was in meetings and could not speak.

The Desert Community College District, which serves the College of the Desert, issued nearly $96 million in CABs in 2007, with repayment totaling just north of $430 million over 38.6 years.

At first, college spokeswoman Pamela Hunter said it was difficult to find someone who could speak authoritatively about CABs, because the person who would normally do so had quit. A week later, she furnished the Independent with the number for the college's director of fiscal services, Wade Ellis, who has proved almost as elusive; we could not reach him after making several calls. (The Independent did miss the one return phone call Ellis made; follow-up efforts to reach him were unsuccessful. We're sure he has a full plate running fiscal services for an institution with a $45 million annual budget and 15,000 students.)

Hunter also emailed a list of two ways in which the district's use of capital appreciation bonds helped achieve "good government public policy objectives"—justifications for why CABs were such a great idea, the first of which noted how the bonds will help pay for "long-lived assets that will benefit multiple generations of local residents and taxpayers."

These bonds "spread out the tax burden," the email read, "more fairly over those multiple generations of local residents than the alternative, commonly known as Current Interest Bonds."

That’s not necessarily accurate. The more-traditional current interest bonds go into repayment, with periodic servicing, almost immediately, functioning much like a mortgage. Given how CABs work, it's difficult to see how they're fairer. On the contrary, they don't seem to ask much of current taxpayers, instead focusing the pain into something potent for future generations.

The Independent isn't alone in that assessment:

  • On Jan. 17, State Superintendent of Public Instruction Tom Torlakson and State Treasurer Bill Lockyer, both Democrats, sent out a non-binding letter asking districts not to issue these bonds: "The transactions have been structured with 40-year terms that delay interest and principal payments for decades, resulting in huge balloon payments and burdens on future taxpayers that cannot be justified. Too frequently, board members and the public have not been fully informed about the costs and risks associated with CABs. In some cases, board members have reported they were not even aware they approved the sale of CABs." Lockyer, who has been especially vocal in his opposition to CABs, has called them "irresponsible" and "bad deals," and has even likened them to "payday loans."
  • California Assemblyman Ben Hueso, a San Diego Democrat who has co-sponsored a bill in the State Assembly that would prevent districts from issuing many of these bonds, told The New York Times, "Right now, if they don't have the revenue, school boards can say, ‘Let's just kick the can down the road 20 years and let them deal with it.’”
  • "This generation will not pay for what it needs, so some of its leaders have decided to saddle future generations with the bills," wrote Floyd Norris, a commentator on economic issues, also in The New York Times.

After hearing these quotes, Hunter said she didn't have the expertise to explain how, exactly, CABs are a fairer way to borrow, adding that Ellis would be the one to talk to on that front. You already know how that turned out.

Hunter provided one final tidbit of information worth noting: When asked where this bogus CAB justification came from—if it was official, etc.—she said it was written by the "bond adviser."

The Independent has been met with silence in trying to confirm if Hunter was referring to the bond counsel for College of the Desert: Stradling, Yocca, Carlson and Rauth, a San Francisco corporation that gets paid for facilitating these deals, and is involved with districts up and down the state.

We've also been unable to determine if these points were made available to district trustees when they agreed to issue the bonds in 2007; the three board members from that time who still have their seats would not return calls from the Independent.

Lockyer told The New York Times that the real beneficiaries of these schemes are the financial advisers, who, according to the state treasurer's office, have received millions in compensation.

Published in Local Issues

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