Tag Archive for Santa Ana Unified School District

2013 Annual Conference of California League of Bond Oversight Committees Highlights Current Controversies on Municipal Bond Sales for Schools (and High-Speed Rail)

I’m on the Advisory Board of the California League of Bond Oversight Committees (CalBOC), which held its annual conference today (May 10, 2013) in Sacramento. To improve public accountability for California K-12 and community college construction programs funded by money borrowed through bond sales, this non-partisan organization improves the training and resources available to bond oversight committees; educates the state legislature, local school boards, and the public about the oversight and reporting authority of bond oversight committees; and advocates on a state level, where appropriate, on issues of common concern to bond oversight committees.

California League of Bond Oversight Committees Logo 2013

Citizens’ Bond Oversight Committees were established through a section of Proposition 39 in 2000 that became California Education Code Sections 15278-15282Michael Day, president and co-founder of the California League of Bond Oversight Committees, said that attendees should “go with the knowledge that you’re doing good things” as ordinary California citizens. Day kicked off the 2013 conference by asserting that “spending wisely shouldn’t be a partisan issue.” (I would have added that spending foolishly doesn’t seem to be a partisan issue.)

Presenting first at the conference were two finance and business administrators from the Santa Ana Unified School District, which is getting criticized for borrowing $35 million in 2009 by selling Capital Appreciation Bonds at an almost 10:1 debt-service-to-principal ratio. In addition to suggesting that Capital Appreciation Bond sales can be a valid business decision under certain conditions, they insinuated that school districts know best how to sell their bonds, and perhaps the state legislature is needlessly interfering in their own local affairs. To boost their case, they asked two rhetorical questions to show the arbitrary nature of the provisions in Assembly Bill 182 that would restrict school district sales of Capital Appreciation Bonds:

1. What’s the proper maximum maturity period for school bonds?

(AB 182 proposes 25 years)

2. What’s the proper maximum ratio of debt-service-to-principal on school bonds?

(AB 182 proposes 4:1)

Following their presentation was Assemblywoman Joan Buchanan (D-San Ramon), who introduced Assembly Bill 182 to restrict the sale of Capital Appreciation Bonds. (The bill passed the Assembly on April 8, 2013 with a 75-0 vote.) Catching my attention during her speech was her assertion that the legislature should expand state-mandated performance reviews for school bond measures to include such items as an examination of the school district’s labor compliance program. Knowing how the old labor compliance program laws and regulations had changed starting in 2009, I asked what she meant. Assemblywoman Buchanan said that the State Allocation Board had discovered that some school districts had applied for and received state reimbursement for labor compliance program expenses but weren’t actually following the state requirements and didn’t deserve the reimbursement.

California State Treasurer Bill Lockyer Speaks at 2013 California League of Bond Oversight Committees Conference

California State Treasurer Bill Lockyer speaks at the 2013 California League of Bond Oversight Committees annual conference.

California State Treasurer Bill Lockyer was the keynote speaker. He declared that the Poway Unified School District officials who engineered its notorious 2009 Capital Appreciation Bond sales were “stupid” and should be fired or recalled. Many people in the meeting room clapped in response, although I don’t know what the representatives from the Poway Unified School District did.

Lockyer sees “a whole industry that lives off of this” scheme for Capital Appreciation Bonds and detects “an odor” of underwriters and other financial management firms engaged in “corrupt practices” and taking advantage of school districts through bond sales. He said he heard a story about how an underwriting firm turned down a school district’s request for handling a ill-advised, foolish Capital Appreciation Bond sale, and then the school district asked another firm with fewer scruples, which was pleased to do it for a fee.

Lockyer noted that the 4:1 debt service to principal ratio for school bonds indicated in Assembly Bill 182 was a political compromise among various parties, including some special interests that demanded either absurd ratios (such as 9:1) or no ratio at all. He actually supports an outright ban on Capital Appreciation Bond sales by school districts. (Michigan enacted such a ban in 1994.)

At the March 18, 2013 meeting of the board of the California High-Speed Rail Authority, chairman Dan Richard told me to ask the State Treasurer about the details of the bond sales for the California High-Speed Passenger Train for the 21st Century. So I was ready with the first question for Bill Lockyer: when will the authorized High-Speed Rail bonds be sold, what will be the rate, will they be 35-year bonds as authorized, and will some of them be sold as Capital Appreciation Bonds?

Lockyer answered by revealing that California High-Speed Rail bonds will not be issued separately but will be “mixed in” with general state bond sales (such as the state bond sales in mid-April 2013). Then to my surprise, he said that a small amount of the high-speed rail bonds had already been sold! I sent out a tweet that’s now getting some attention:

California Treasurer Bill Lockyer says small amount of bonds for California High-Speed Rail have been sold already. Did anyone know this?

He also told me that the market sets the rates – a clever answer from an experienced politician who knows how to evade the tough questions.

Regarding state K-12 school bonds, Lockyer said about $2 billion was left from the state school bond measures approved in the 2000s and that it was likely that the state legislature would put another school construction bond measure on the November 2014 ballot. (Three school bond measures approved by California voters in 2002, 2004, and 2006 authorized the state to borrow $35.8 billion by selling bonds. The State Allocation Board disperses the grants.)

Finally, in response to an excellent question from Kern County Taxpayers Association executive director Mike Turnipseed, Lockyer said that perhaps some of very old voter authorizations for bond sales that never happened in the end could be “erased” or cancelled, thus eliminating the state’s liability for repaying the principal on those bonds.

Kevin Carlin of the Carlin Law Group in San Diego made a presentation about single-source alternative construction procurement methods, including design-build and lease-leaseback. The presentation was routine until he began advancing his view that there’s a “proliferation of illegal lease-leaseback school contracting” in California and cited the Sweetwater Unified School District in Chula Vista as an example. A vocal faction in the audience – primarily school district officials and an attorney for school districts – disputed these claims. During the question-and-answer session, I told Carlin that his only ally in the state legislature was the self-interested Professional Engineers in California Government union and that his best chance for addressing the problem was to add provisions to law that ensure better public access to bidding and contract documents on design-build and lease-leaseback projects. (See California Public Contract Code Section 20133 (g).) Supporters of lease-leaseback complained that I wasn’t asking a question.

Joel Thurtell Speaks on Capital Appreciation Bonds at 2013 California League of Bond Oversight Committees Conference

Joel Thurtell speaks on Capital Appreciation Bonds at the 2013 California League of Bond Oversight Committees annual conference.

Retired Detroit Free Press reporter Joel Thurtell, now a blogger at www.JoelontheRoad.com, was the last speaker at the conference. His investigative report “Michigan Schools Load the Future with Debt” was the headline story in the April 5, 1993 Detroit Free Press, and it led to a 1994 state law banning Michigan school districts from selling Capital Appreciation Bonds.

One of the reasons why the article was effective in changing public policy was the directive of a Detroit Free Press editor to Thurtell to produce a “Big Graphic” showing the extent of Capital Appreciation Bond sales by Michigan school districts. Thurtell had to perform many days of tedious paper-based research at the state treasurer’s office in Lansing, but the result was stunning. (Likewise, I believe that the graphic elements of the www.VoiceofSanDiego.org articles on Capital Appreciation Bond sales by California school districts was a major factor in finally bringing state and national attention to the issue.)

In January 2009, Thurtell posted the text of his old Detroit Free Press articles on his web site. Nothing more happened with them until March 2012, when Alicia Minyen, a member of the Board of Directors of the California League of Bond Oversight Committees (CalBOC), found his articles with a web search using the terms “Capital Appreciation Bonds” and “ban.” At this time the word was beginning to spread about the astonishing 10:1 debt service to principal ratio for bonds sold in 2009 by the Poway Unified School District, and the Los Angeles County Treasurer was publicly warning against Capital Appreciation Bond sales.

Joel Thurtell and Alicia Minyen

Champions of fiscal responsibility: Joel Thurtell from Michigan and Alicia Minyen from California.

Minyen contacted Thurtell and then reported on what she learned at the 2012 California League of Bond Oversight Committees. I heard Minyen’s presentation on Capital Appreciation Bonds and then reported it on my blog on May 11, 2012 as Please Read This, Even If You Think Municipal Bonds Are Really BORING: We’re Setting Up the Next Generation of Californians to Pay Staggering Property Taxes, apparently being the first Californian to post a journalistic report on the web about this practice in California.

Thurtell noted today that the worst abuse of Capital Appreciation Bonds in Michigan was at a school district that even used bond proceeds to buy personal computers. I immediate thought about how California school districts are using bond proceeds to buy electronic tablets, with Los Angeles Unified School District and San Diego Unified School District being two prominent examples.

A Compilation of Construction Trade Union Project Labor Agreements for K-12 School and Community College Districts in Orange County, San Bernardino County, Riverside County, and San Diego County

Nativo Lopez Retires from Public Life, Nine Years After “I Became a Target of the Wrath of the ABC”

Orange County professional political activist Nativo Lopez announced on April 30 that he is retiring from public life and resigning his leadership positions with groups such as Hermandad Mexicana Latinoamericana (formerly known as Hermandad Mexicana Nacional) and the Mexican American Political Association.

Best known for his work defending illegal immigrants and bilingual education, Lopez also dabbled in construction labor issues. As an elected board member for the Santa Ana Unified School District, he was part of the 4-1 majority that voted on March 14, 2000 to require contractors to sign a Project Labor Agreement (PLA) for construction funded by Measure C, a $145 million bond approved by 70% of Santa Ana voters in June 1998. In that election, voters had no inkling that the school board would subsequently give unions a monopoly on school construction funded by their taxes.

See the Santa Ana Unified School District Project Labor Agreement here. (It was not renewed by later school boards and terminated as of June 9, 2005.)

See news coverage of the Santa Ana Unified School District Project Labor Agreement and its consequences here, including the November 2003 admission of the district’s facilities director that the Project Labor Agreement increased the costs of construction.

In February 2003, almost three years after the school board mandated that its construction contractors sign a Project Labor Agreement with unions, 70% of voters recalled Lopez. Unions tried to keep their ally in office with a series of mailers to voters (see three of them here), but apparently the voters of Santa Ana were fed up with Lopez’s endless agitation over bilingual education and the failure of the Measure C construction program to build schools in a timely and cost-effective manner.

On January 7, 2004, Lopez was a guest on the Berkeley-based KPFA (Pacifica) weekly labor show, “David Bacon on Labor,” along with Victor Narro, director of the Downtown Labor Center in Los Angeles (an operation of the taxpayer-funded Institute for Labor and Employment at the University of California, now absorbed into the University of California Miguel Contreras Labor Program). Lopez blamed my former employer Associated Builders and Contractors (ABC) in part for his recall. Below is a paraphrasing of the remarks, which you can hear starting at 48:10 of this podcast:

The Morning Show – January 7, 2004 at 7:00am

Click to listen (or download)

 

Bacon (to Narro) – Now your funding is being cut by Arnold Schwarzenegger. Your group received the wrath of ABC, Associated Builders and Contractors, the group for non-union contractors that got the governor to pull that out from the budget.

Narro – They’ve been targeting us for a few years now. We face elimination this month and the closing of the Downtown Labor Center. We’re fighting like crazy to save the program with a foundation like the California Endowment. We do research strengthening the labor movement.

Bacon (to Lopez) – Nativo Lopez, I understand you also were a target of the ABC.

Lopez – Oh yes, “a very nice group.” I was on the school board in Santa Ana and shepherded a proposal to create a PLA, signed between the school district and the building trades, much to the chagrin of ABC. (Explains a PLA.) It was the only agreement of that character in California. I became a target of the wrath of the ABC with the Republicans in Orange County and Ron Unz. They tried to recall me, ABC was a big contributor. They were successful. I thank the ABC and Ron Unz, “because they really freed me up” to do organizing work for immigrants.

Lopez appeared to be an exception to my axiom that “behind every Project Labor Agreement is a politician with ambition for higher office.” He truly seemed to believe in the causes of the anti-establishment Left and pursued them relentlessly. He was entangled in many controversies, including a guilty plea in 2011 for one felony count of voter registration fraud (by registering to vote using his business as his address), as he sought to advance his agenda.

Here’s some of his parting wisdom from his retirement announcement:

…What I have learned over close to half a century is that the capacity of capitalism to re-invent itself, to absorb its losses and re-adapt, but most importantly, to beguile, co-opt, and corrupt its opponents and the general citizenry, is truly astonishing. It utilizes its political parties (of differing persuasions), private foundations, tax code, public institutions, corporations of all categories, churches – traditional, new age, and evangelical, – its monopolized media, public and private education, its regulatory agencies, statutes and codes, lawyers, judges, and courts, and the public administrative bureaucracy, etc. to induce consent of the citizenry. And when consent is not secured by voluntary means, it has at its disposal the ever-ready repressive tentacles of the state apparatus to crush any and all opposition and dissent, however miniscule, to thus compel consent, and performance.

Never in the history of human-kind has an imperial power of planetary dimension had available to it the reserve of monetary and human capital resources to induce consent of the governed by voluntary and involuntary means, and even extra-legal measures, as does these United States of America…