Tag Archive for Measures Q and R (Sacramento City Unified School District November 2012)

Voters Approve Selling Bonds to Borrow Huge Amounts of Money for Construction in Four Educational Districts that Use Project Labor Agreements

All four of these school districts require contractors to sign Project Labor Agreements, and the San Diego Unified School District has already approved a resolution requiring contractors to sign a Project Labor Agreement for certain future construction funded by Proposition Z.

  • At the Sacramento City Unified School District, 69% of voters approved Measure Q and 67% of voters approved Measure R. These authorize the school board to borrow $414 million through bond sales for construction.
  • At the Solano Community College District, 62% of voters approved Measure Q. This authorizes the governing board to borrow $348 million through bond sales for construction.
  • At the West Contra Costa Unified School District, 63% of voters approved Measure E. This authorizes the school board to borrow $360 million through bond sales for construction.
  • At the San Diego Unified School District, 60% of voters approved Proposition Z.  This authorizes the school board to borrow $2.8 billion through bond sales for construction.

My Report on www.UnionWatch.org: Tracking California’s November 2012 Elections Related to Labor Issues

See my article posted this morning (November 5, 2012) on www.UnionWatch.org called Tracking California’s November 2012 Elections Related to Labor Issues.

If you are a regular reader of the Dayton Public Policy Institute blog (a project of Labor Issues Solutions, LLC), you know a lot about the following races in California:

  • Proposition 32 – Stop Special Interests state ballot measure (includes “paycheck protection”)
  • Measure V – proposed charter in Costa Mesa
  • Proposition P – proposed charter in Escondido
  • Measure I-12 – proposed charter in Grover Beach
  • Measures Q and R – authorization to borrow $414 million through bond sales for construction at Sacramento City Unified School District (which imposes Project Labor Agreements)
  • Measure Q – authorization to borrow $348 million through bond sales for construction at Solano Community College District  (which imposes Project Labor Agreements)
  • Measure E – authorization to borrow $360 million through bond sales for construction at West Contra Costa Unified School District (which imposes Project Labor Agreements)
  • Proposition Z – authorization to borrow $2.8 billion through bond sales for construction at San Diego Unified School District (which imposes Project Labor Agreements)

There are also some elections for local government offices in California that have significance for people interested in labor policy issues.

City of San Diego

If Republican Ray Ellis defeats Democrat Councilwoman Sherri Lightner for the one undecided city council race (in La Jolla), Republicans will have a 5-4 majority on the city council. What a change from ten years ago, when Republicans almost disappeared from a city council they had long controlled. (I credit the Republican Party of San Diego County for this transformation: see my www.FlashReport.org article The Untold Story: Years of Challenging, Unglamorous Work Led to Big Republican Election Night in San Diego on June 5.

Republican Councilman Carl DeMaio stands a good chance of defeating Democrat Congressman Bob Filner and getting elected as Mayor of San Diego. A few weeks ago I wrote an article comparing DeMaio’s campaign to the 2010 campaign of Rob Ford, a libertarian-oriented city council member who unexpectedly won election as Mayor of Toronto, Ontario, Canada. (See Carl DeMaio’s Campaign for Mayor of San Diego Echoes Rob Ford’s Successful Campaign for Mayor of Toronto.) Chris Reed wrote the following in a November 1, 2012 article for The American Spectator (Anger Mismanagement on the Ballot; linked at www.CalWatchdog.com as Will San Diego Elect a Gay Libertarian or a Snarling Misanthrope as Mayor?):

All this is remarkably good news for DeMaio and for libertarians who have long wondered what a government run by a Reason-blessed true believer would be like…If Filner has this [negative] effect on enough people, in five weeks time, America’s eighth-largest city will inaugurate as mayor a brash reformer bent on transforming the government status quo. Thanks to a June initiative primarily authored by DeMaio, San Diego is by far the largest U.S. city to have ended costly defined-benefit pensions for nearly all its new hires. As mayor, DeMaio would ramp up San Diego’s already-aggressive attempts to bid out a wide array of government services. He also wants to end automatic “step” pay increases given to public employees just for years on the job and to finally bring to government the productivity revolution that has fueled U.S. private-sector growth for two decades. The goal, DeMaio told me in April, is to set up a national model for downsized, efficient government. If elected, DeMaio appears likely to have a GOP majority on the City Council. If these more conventional Republicans back him up, San Diego could become Ground Zero for government experimentation – of a sort that many will call radical but that libertarians will call long-overdue.

City of Costa Mesa (Orange County)

In the City of Costa Mesa, three of the four city councilmembers (the 3Ms, Gary Monahan, Steve Mensinger, and Colin McCarthy) who voted in 2011 with Councilman Jim Righeimer to “outsource” government services and put the Measure V charter on the ballot in 2012 are running as a slate. They are challenged by a slate of three candidates associated with a group called Costa Mesans for Responsible Government who oppose outsourcing and the charter. Obviously this a battle based largely on labor issues.

City of Brentwood (San Francisco Bay Area, in Contra Costa County)

In the City of Brentwood, unions are trying to keep Mayor Bob Taylor in office. Taylor voted in 2009 and 2010 to require contractors to sign a Project Labor Agreement to build the city’s civic center and associated parking garage. I wrote about this race in Electrical Workers Union Tries to Salvage Political Career of City of Brentwood Mayor Robert Taylor (Bob Taylor) and Contra Costa Times Recognizes Fiscally Responsible Candidates for Brentwood City Council: Endorsements EXCLUDE Project Labor Agreement Supporters.

Who’s Paying to Convince Sacramento Voters to Take On $414 Million of Additional Debt – Plus Interest – with Measures Q and R?

Measures Q and R on the November 6, 2012 ballot ask Sacramento voters to let the Sacramento City Unified School District Board of Trustees borrow a total of $414 million for construction by selling bonds to institutional investors. Sacramento taxpayers must pay this money back to the investors – with interest! It will cost at least $734 million – perhaps more if the district is lured into selling Capital Appreciation Bonds.

The opposition web site to Measures Q and R: www.fairandopencompetitionsacramento.com

Here are a couple of my observations about contributions to the campaign, based on the Sacramento City Unified School District – Yes on Q and R Campaign Form 460 – through September 30 2012 and the Sacramento City Unified School District – Yes on Q and R Campaign Form 460 – through October 20 2012.

1. This Campaign Is a Sitting Duck for Accusations of “Pay-to-Play”

Here’s a list of all of the campaign contributors through October 20, 2012, with links to the company web sites, the amounts contributed, and the business interest of the contributor.

Plumbers and Pipefitters Local Union No. 447 Construction trade union $25,000
Lozano Smith Law firm for school districts $10,000
Cumming Construction management $5,000
California Association of Realtors Selling houses and protecting interests at the state capitol $5,000
Landmark Construction Construction company – built past SCUSD schools without and then with a Project Labor Agreement $5,000
Lionakis Architect $5,000
Orrick, Herrington & Sutcliffe Bond counsel $5,000
Sacramento-Sierra’s Building and Construction Trades Council Construction trade unions $2,500
[Central Valley Sheet Metal Industry] Labor Management Cooperation Trust Union-affiliated labor-management cooperation committee $2,500
DLR Group Architect $1,500
Northern California Carpenters Regional Council Construction trade union $1,000
Operating Engineers Local Union No. 3 District 80 Construction trade union $1,000
Kronick, Moskovitz, Tiedemann & Girard Law firm for school districts $500
Loan from Patrick Kennedy for SCUSD Board of Education School board member’s political campaign fund $528
Williams + Paddon Architects + Planners Architect $500
Bricklayers and Allied Craftsworkers Local Union No. 3 Construction trade union $250
Other $25
TOTAL $70,303.00

2. Another Labor-Management Cooperation Committee Contributes to a Campaign

How many people in Sacramento know about the Central Valley Sheet Metal Industry Labor Management Cooperation Trust? There’s only one place on the web where you’ll read about labor-management cooperative trusts, and you’re reading it now. These trusts are arcane entities authorized by the obscure Labor-Management Cooperation Act of 1978, a law signed by President Jimmy Carter and implemented by the Federal Mediation and Conciliation Service. There are no federal or state regulations specifically addressed toward these trusts, and these trusts do not have any reporting requirements to the U.S. Department of Labor’s Office of Labor-Management Standards.

Sacramento City Unified School District Superintendent Latest School Official to Use Public Resources to Campaign for $414 Million Bond Measures Q and R

The Fair and Open Competition – Sacramento committee – the primary organized opposition to Measures Q and R in Sacramento – submitted a complaint this afternoon (October 22, 2012) to the board of trustees of the Sacramento City Unified School District objecting to the latest example of using school district resources to campaign for Measures Q and R on the November 6, 2012 ballot. The letter demands that the school district cease and desist from use of school district resources to campaign for these bond measures.

According to the email, “Superintendent [Jonathan P.] Raymond is illegally using school district resources to campaign in favor of Measures Q and R.” The letter refers to and includes an email received at 11:23 a.m. on Friday, October 19, 2012 from Superintendent Raymond to “All SCUSD Users” entitled “Letter to Staff – October 19, 2012.”

Superintendent Raymond writes that schools need updating, and Measures Q and R would provide the funding to upgrade and renovate the facilities. He claims that “The cost of failing to make a move in the direction of the future is huge.” He then urges recipients to “learn more about Measures Q and R” and “remember to vote on November 6.” Just in case staff cannot figure out the subtle message, the superintendent happens to mention that the Sacramento City Teachers Association and the Service Employees International Union (SEIU) endorsed Measures Q and R. (Do the will of your union!)

I’m sure the school district will defend the email with the same argument it uses on the Sacramento City Unified School District web site page for Measures Q and R: “SCUSD cannot tell people how to vote, and SCUSD employees are precluded by law from using tax-supported resources, time or equipment to lobby either for or against any ballot measure. SCUSD can, however, share factual information about a ballot measure’s impact.”

The FACTUAL INFORMATION is that the measurable cost for the future will be huge if voters approve Measures Q and R, while the measurable cost if the voters reject Measures Q and R will be nothing beyond how much the district has already spent to develop the bond measures and place them on the November 6, 2012 ballot.

These two measures authorize the school board to borrow $414 million by selling bonds. To its credit, the Sacramento News & Review, in its pro-bond measure article Homework Improvement, actually informed its readers how a bond works and provided an estimate of the interest that taxpayers will pay on these bonds:

Each requires 55 percent approval by voters. And each would be paid back over time by additional taxes on area homes and commercial property. The district says the measure will cost the average homeowner about about $7 a month on their property taxes.

As with any financing, there’s interest, and the amount of money that has to be paid back is much higher than the amount borrowed. The district estimates that the bonds will ultimately cost taxpayers $734 million over 25 years, in exchange for $414 million borrowed today.

This is not the first time the school district has been accused of using public resources to promote Measures Q and R. I’m hearing reports from Sacramento voters that officials of the Sacramento City Unified School District are testing the limits and exceeding the limits of the use of public resources to promote a Yes vote on Measures Q and R. In addition, the California Taxpayers Association reported the following campaign antics at the Sacramento City Unified School District in its article “Public Education Officials Using School Resources to Campaign for Tax and Bond Measures”:

In the Sacramento City Unified School District, School Board Member Patrick Kennedy addressed a mandatory meeting for parents at Leonardo da Vinci K-8 School on September 12, and used his entire presentation to urge support for Proposition 30 and two local school bonds. He did not mention Molly Munger’s tax initiative, Proposition 38, which is focused on directing more money to schools, nor did he discuss how the local bond proposals (Measure Q and Measure R) would increase taxes for property owners in the district. The school’s September 4 newsletter, distributed by the school to all parents, also included a message urging support for the two bond measures, with no details to educate parents about the proposals.

I suspect the school district’s use of public resources to promote Measures Q and R are an indication that supporters of the bond measures (and their political consultants) are concerned that voters might reject them on November 6, 2012. For the official, comprehensive arguments against the bond measure, see the web site Vote NO on Sacramento’s MEASURES Q and R: Borrowing $414 Million from Investors, Paying It Back with Interest.

California Local Election Report: Construction Bond Measures for School Districts and Community College Districts – Four That Obviously Deserve a NO Vote

California’s elected school boards and community college boards have put 106 measures on local ballots for the November 6, 2012 election asking voters to authorize borrowing money for construction through bond sales. At least four of these proposed bond measures are so stunningly misguided that citizens in these districts should take democratic action, defy the well-funded Establishment, and reject the debt with a NO vote.

Below, I list and explain the four districts where voters should Close the Spigot of taxpayer money to the elected boards. First, some general background about educational facility bond measures on the November 6, 2012 ballot:

CALIFORNIA – 106 Bond Measures for Construction at Educational Districts

A web site – www.californiacityfinance.com – lists 106 school construction bond measures on the November 2012 ballot in California. An article from School Services of California and reprinted on September 26, 2012 by the Coalition for Adequate School Housing (CASH) confirms there are 106 proposed bond measures. That article also notes that 106 is the highest number of California school bond measures ever considered in an election. It also claims that voters authorize the sale of bonds in California school districts about 70% of the time.

The number of bond measures presented to voters throughout California has trended relentlessly upwards since November 2000, when 53.4% of California voters narrowly approved Proposition 39, which dropped the voter threshold for approval of educational construction bond measures from 66.67% to 55%. This was the start of California’s massive accumulation of debt for educational construction at the state and local levels of government.

A few professional political consulting firms (such as Tramutola Advisors, based in Oakland, and TBWB Strategies, based in San Francisco) specialize in the business of convincing voters to vote Yes for school bond measures. They are adept at emotive messaging (“it’s all about the kids”) and at exploiting technical loopholes to leverage public funds as much as legally possible to develop and promote the bond measures.

Funding for the campaigns to pass the bond measures is collected from banks, bond brokers (underwriters), and other financial service corporations that make money from bond transactions. This has generated some criticism; see Vote No on Sacramento’s Measures Q and R web site for a compilation of 2012 news articles about bond underwriters and campaign contributions.

Bond measures also generate business for the construction industry. A perusal of contributors to bond measures usually reveals architects, engineers, contractors and construction trade associations, and construction trade unions.

Have YOU checked the list of contributors to campaigns to pass bond measures in your K-12 school and community college district?

Rarely does significant opposition develop against proposed bond measures, as shown by how often official voter information guides outright lack an opposition statement to a proposed bond measure. When there is organized opposition, it usually centers around a regional taxpayers association, with help from the local Libertarian Party or Tea Party organizations. Generally, opposition campaigns are passionate, but amateurish. They usually don’t have any money to spend on getting their message out to voters.


Earlier this year, I circulated a proposal for “Operation Close the Spigot,” a program to have a well-funded, coordinated opposition campaign statewide against the most egregious bond measures proposed for California K-12 school districts and community college districts. While a formal organization has not yet emerged to close the spigot of taxpayer funding, my agitation on this issue – like my agitation for charter cities – has inspired some promising grassroots movement for local individuals and organizations to gather together and make a more serious effort to inform voters about the huge debt burden accumulating on Californians as a result of the parade of bond measures.

As the November 6, 2012 election approaches, here are the most promising developments for organized opposition against four foolish proposed educational construction bond measures in California.


The “Fair and Open Competition – Sacramento” committee that had organized in 2011 to enact Fair and Open Competition ordinances in the City of Sacramento and the County of Sacramento reorganized its leadership and membership and decided to expose the foolhardiness of the Sacramento City Unified School District’s proposal to borrow another $414 million by selling bonds. (District taxpayers currently owe $522 million from the last two bond measures.) This group was inspired to oppose Measures Q and R on the November 2012 ballot because the school board requires its construction contractors to sign a Project Labor Agreement with unions to work on Sacramento City Unified School District contracts. In fact, the leading spokesperson to pass Measures Q and R is school board member Patrick Kennedy, who has been and may still be employed by Sacramento construction trade unions or affiliated entities.

The Sacramento City Unified School District sold notorious Capital Appreciation Bonds to bury future generations in debt. These are bond issues for which investors collect a huge amount of compound interest when the bonds mature, rather than getting interest payments at regular intervals and then getting the principal back when the bonds mature.

Fair and Open Competition – Sacramento submitted excellent arguments against Measure Q and against Measure R for the official voter information guide. They tried to discourage Sacramento area business groups from knee-jerk “it’s for the kids” endorsements of Measures Q and R. Finally, they established a web site to make a logical, fact-based case against borrowing more money through bond sales to investors. As I declared in a Tweet yesterday, “Never before has a campaign web site so thoroughly analyzed and hammered a California school construction bond measure: http://fairandopencompetitionsacramento.com.”

The Sacramento Bee’s editorial board has not taken a position yet on Measures Q and R. On October 14, 2012, the Sacramento Bee endorsed Measures Q and R (Sacramento City Unified School Bonds Are a Smart Investment for Students), with the Project Labor Agreement policy as the only negative reference:

Opponents object to the district’s use of project labor agreements for large projects – as has this editorial board. But the district points out that only 14 of 74 projects since 2005 have had project labor agreements. Union and nonunion shops get a chance to bid on the vast majority of projects under $1 million.


The Official Statement for the West Contra Costa Unified School District’s latest bond sale contains some harsh facts about this fiscally irresponsible, mismanaged school district in an economically struggling area. Residents and businesses in this school district have taken on a staggering amount of debt through construction – $1.77 billion to date by borrowing money from five bond measures since 1998. (A sixth attempt failed in 2003.) Five is not enough, so now there is the $360 million Measure E.

Chevron owns 13.1% of the assessed property value of this district, and what will happen when Chevron finally decides to shut down its Richmond refining facility? (I’ve been predicting for 14 years it will become a distribution center for fuels refined in Mexico.) And Chevron is not the only problem with the school board’s rosy expectations for future tax collection. In 2009-10, total property value tax assessment in the district dropped 12.3%, and it dropped another 7.7% in 2010-11. (It was up 1.1% in 2011-12, but that’s not a good rationale to take on more debt.)

Bond Measures for West Contra Costa Unified School District

Authorized Bond Amount. Does Not Include Interest and Fees. Does Not Include State Matching Grants.

Date of Election

Ballot Designation


$40 million June 2, 1998 Measure E Approved by 76.0% of voters
$150 million November 7, 2000 Measure M Approved by 77.5% of voters
$300 million March 5, 2002 Measure D Approved by 71.6% of voters
$450 Million September 16, 2003 Measure C Rejected in a special election because only 59.1% of voters approved the bond measure, which needed two-thirds voter approval
$400 million November 8, 2005 Measure J Approved by 56.9% of voters
$380 million June 8, 2010 Measure D Approved by 62.6% of voters
$1.27 billion Total from five bond measures from 1998 to the present.
$360 million November 6, 2012 Approved for consideration by district voters through a resolution of the school board on August 1, 2012

No surprise, the school board requires its construction contractors to sign a Project Labor Agreement with unions to work on West Contra Costa Unified School District projects. It was the first school district in Northern California to adopt a Project Labor Agreement, leading the way for followers such as the Vallejo City Unified School District, the East Side Union High School District (in San Jose), and the Oakland Unified School District. (By the way, Oakland USD and East Side Union HSD also have big bond measures on the November 2012 ballot.)

Of course, the West Contra Costa Unified School District sold Capital Appreciation Bonds to bury future generations in debt. One school board member – Charles Ramsey – even recognized the risk, but voted for the West Contra Costa Unified School District to sell Capital Appreciation Bonds anyway.

The Contra Costa Taxpayers Association is leading the opposition to Measure E and submitted excellent arguments against West Contra Costa Unified School District’s Measure E for the official voter information guide. Opposition also includes a small group of local activists who understand the debt implications of this latest bond measure. Unfortunately, the web presence of opposition arguments to Measure E is sparse. A local political and community activist, Charley Cowens, writes a blog called Mystery Education Theater 3000 about this district, which his kids went through, and there is also a blog called West Contra Costa Unified School District Quality Improvement Project. This is a tough place to advocate for fiscal responsibility.

Today (October 13, 2012), the Contra Costa Times newspaper endorsed four bond measures in San Francisco’s East Bay (Four School Bond Measures that We Believe Should Pass), but held off on discussing West Contra Costa Unified School District: “Five East Bay school districts seek voter approval Nov. 6 for bond measures to fund school construction. We recommend passage of four. We will consider the fifth, West Contra Costa’s Measure E, on Monday.” It looks like this district’s proposed bond measure will get a special editorial from the Contra Costa Times on Monday, October 15, 2012.

UPDATE: The Contra Costa Times slammed the proposed bond sales through Measure E at the West Contra Costa Unified School District: see Yes on Measure G, No on Measure E in West County – Contra Costa Times – October 15, 2012. The editorial points out that the official ballot information for Measure E neglects essential information for voters to consider (business as usual), including the huge outstanding debt obligations from five previous bond measures, the projected tax burden in a few years of $290 per $100,000 of property value, and the projection for repayment in 40 years at disproportionately high interest rates. The editorial concludes with this blunt statement:

District leaders say they need the additional bond money to complete their school construction program. That’s what they said 2½ years ago for the last bond measure. They claimed then that they needed more because rising construction costs had eroded their purchasing power. In today’s economy, that excuse won’t work. We endorsed the successful 2010 measure. But we warned that would be the last time. We meant it. As far as we are concerned, this train has run out of track. Vote no on Measure E.

3. SAN DIEGO UNIFIED SCHOOL DISTRICT – $2.8 Billion Proposition Z

No, that $2.8 billion jaw-dropping figure is not a typographical error. It represents the unapologetic arrogance of a union-controlled school board that is spending itself close to bankruptcy; in the meantime, let the good times roll!

In November 2008, voters in the San Diego Unified School District approved a ballot measure (Proposition S) authorizing the school board to borrow a whopping $2.1 billion for construction by selling bonds to investors. With a new pro-union majority also elected to the school board, the board (on a 3-2 vote) subsequently required construction companies to sign a Project Labor Agreement to work on San Diego Unified School District construction projects of more than $1 million funded by Proposition S. Unions now have total control of the San Diego school board, which has already voted 5-0 for a union Project Labor Agreement on construction funded by the proposed Proposition Z.

Of course, the San Diego Unified School District sold Capital Appreciation Bonds to bury future generations in debt. The board passed a resolution claiming they wouldn’t sell any more Capital Appreciation Bonds. (See my article Board of San Diego Unified School District Senses Voters May Reject $2.8 Billion Bond Measure (Proposition Z) Because of Board’s Past Use of Capital Appreciation Bonds.) Now the Voice of San Diego reports (on October 12, 2012 in School Officials Pitch Prop. Z As The Only Alternative to Exotic Loans) that school district officials are claiming the San Diego Unified School District will have to sell MORE Capital Appreciation Bonds if voters reject Proposition Z. Unbelievable!

The San Diego County Taxpayers Association jumped on Proposition Z right away as unworthy of voter support. This particular taxpayers’ organization in San Diego extensively researches ballot measures and is very cautious about taking opposition positions.

The San Diego Union-Tribune editorial board has urged voters to reject Proposition Z: Vote No on San Diego School Bond: It Props Up a Broken Status QuoSan Diego Union-Tribune – September 22, 2012.


The $124.5 million Measure G bond approved by Solano County voters in 2002 was not enough for the businesses and individuals who feed off money borrowed through bond sales. Especially interested in this new proposed $348 million bond measure are construction unions who obtained monopoly control of Measure G work with a Project Labor Agreement on Solano Community College District projects.

Stunningly, one of the board members – Catherine Ritch (representing Fairfield) – voted NO on putting the bond measure on the November ballot. Ritch was appointed to the Solano Community College District Governing Board in March 2012. She is not running in 2012 for a full term, so she could actually vote based on what is right for the people rather than for what is politically expedient. She also has a professional background as a legislative and administrative government analyst, so she was evidently too informed to be hoodwinked by this scheme.

The Fairfield Daily Republic newspaper was not impressed with the 6-1 vote to ask voters to borrow $348 million by selling bonds. In an August 5, 2012 editorial entitled “Board Appears Set for Local Tax Measures,” the Daily Republic said the following:

Solano Community College jumped on the tax bandwagon this week when trustees voted 6-1 to place a $348 million property tax measure on the November ballot. Trustee Catherine Ritch voted no, and for good reason. She said the finer points of the proposal had not been laid out completely for the board to consider, and called for the board to take “a deep breath” before approving the staff recommendation.

The Central Solano Citizen/Taxpayer Group is opposing Measure Q, as reported in Opponents Mobilize Against Local Tax MeasuresFairfield Daily Republic – October 4, 2012.

In an October 13, 2012 opinion piece in the Vallejo Times-Herald (We Deserve the Entire Story on Measure Q), Eric Christen of the Coalition for Fair Employment in Construction considered the cost increases caused by the Project Labor Agreement on construction funded by Measure G:

…now this same college [Solano Community College District], which still has governing it three of the board members who voted for the PLA [Project Labor Agreement], wants almost $350 million for another bond measure. The reason? Measure G wasn’t large enough to cover the college’s needs. Do you think they could have used that extra $24 million they wasted under a PLA?

The SCCD Governing Board should be honest about whether or not a PLA will be used on this bond should it pass. Voters should have all the information possible before voting to put themselves another $350 million in debt, especially if what they get for that debt is reduced in value in order to placate union special interests. Every candidate running for the board should also be asked whether they would vote to have a PLA placed on Measure Q.

Board members and candidates won’t answer that question. Although the answer is YES to a Project Labor Agreement, Solano County voters won’t support Measure Q if they learn that unions will get a costly government-mandated monopoly on the work.

Solano Community College District sold $1,584,811.70 in Capital Appreciation Bonds in 2005 as part of a large package of refunding bonds. Will the college board do it again on a much larger scale when they have authority from voters to sell $348 million instead of $124.5 million in bonds?

A FINAL QUESTION: Why Should You Care?

As a beleaguered Californian bombarded by bad economic and political news every day, you may now be cynically asking, “Why should I care?” You might have these thoughts:

  • If you live in or pay property taxes to one of these four educational districts, you have probably assumed that any local community opposition to the bond measure will be weak, ineffective, and easily crushed by the bank-and-union funded campaign machine that supports it.
  • If you don’t live in nor own property in one of these four educational districts, you may conclude that citizens who choose to live there accept or are resigned to seeing their school districts waste taxpayers’ money. It’s not your problem – you live elsewhere.
  • And if you live in California but don’t own any property, you may assume that these ballot measures don’t apply to you, because you don’t pay the property taxes for the principal and interest that goes to bond investors, nor the fees to financial service companies for issuing the bonds. You think you have no financial interest in the matter.

Well, you SHOULD care, for four reasons:

  1. Imagine the power of the message voters would send to the state’s political leadership if they rejected huge bond measures to pay for construction in these districts. By using their democratic power and defeating these bond measures, California citizens would nudge their elected officials toward more accountability to the taxpayers instead of the financial industry and union lobbyists.
  2. Voter rejection of bond measures in these four districts would repudiate thoughtless borrowing, taxing, and spending, including the sale of Capital Appreciation Bonds and the adoption of public policies such as Project Labor Agreements that impose costly union monopolies on taxpayer-funded construction.
  3. Voters might encourage some relatively thoughtful school board members in these four districts and other school districts to stand up to the most absurd demands from union lobbyists for more money and more laws. (Surely there are elected board members in school districts who honestly want to focus on student academic performance and aren’t warped by selfish ambitions for higher office.)
  4. Finally, voters would send a message to every California school board member that “it’s for the children” is no longer a sufficient message in itself to collect more taxes for the purpose of repaying money borrowed with interest and fees from investment banks and insurance companies.

Californians need to realize that EVERYONE in the state pays for construction in these three large school districts. The obscure State Allocation Board regularly provides matching grants for construction projects at school districts with proceeds from bond sales authorized by three past statewide propositions totaling $35.8 billion:

Even renters and consumers pay for bond measures. Property owners consider property taxes as a cost of doing business. The tax burden “trickles down” to all Californians.

In addition, Californians need to start thinking about how some of the largest beneficiaries of these bond measures are investment banks, brokerage firms, and other corporate providers of financial services. The so-called “One Percent” makes good money off of Californians’ emotional desire to “help the children.” School districts borrow money now and arrange for property owners to pay it back, along with significant interest payments and financial transaction fees.

Future generations of Californians are going to be crushed under the burdens of debt repayments for the school construction programs of today. For example, the debt of the San Diego Unified School District for school construction bonds was listed in May 2012 at $4.7 billion. It’s time to Close the Spigot and protect those future generations.

An Overlooked Feature of Bond Measures for School Districts: Fees to Underwriters and Financial Service Firms

Under contract to Fair and Open Competition – Sacramento, I’ve developed a modest web site presenting an argument against Measures Q and R, two proposed bond measures at the Sacramento City Unified School District. It’s not a pretty web site, but it’s packed with information obtained from primary source material – information not available anywhere else. See Vote No on Sacramento’s Measures Q and R.

If voters in the school district approve these ballot measures at the November 6, 2012 election, the school board of Sac City Unified will have authority to borrow up to $414 million for construction by selling bonds to investors. Property holders in the district will pay that back – with interest – through taxes. Current debt for the school district’s two previous bond measures totals $522 million. Basically, these proposed new bond measures will create a billion-dollar debt for this school district.

During my research, I decided to investigate how much the district has paid in fees to underwriters (bond brokers) and other financial service firms that assess fees when bonds are prepared and sold. The total comes to almost $6 million.

Bond Issue Financial Transaction Fees
Official Statement – Sacramento City Unified School District – $50,000,000 – General Obligation Bonds, Election of 1999, Series A 2000 $404,375.42
Official Statement – Sacramento City Unified School District – $52,310,000 – General Obligation Refunding Bonds 2001 $592,524.77
Official Statement – Sacramento City Unified School District – $45,000,000 – General Obligation Bonds, Election of 1999, Series B 2001 $394,463.50
Official Statement – Sacramento City Unified School District – $45,000,000 – General Obligation Bonds, Election of 1999, Series C 2002 $486,543.56
Official Statement – Sacramento City Unified School District – $80,000,000 – General Obligation Bonds, Election of 2002, Series A 2003 $483,000.00
Official Statement – Sacramento City Unified School District – $64,997,966.35 – General Obligation Bonds, Election of 1999, Series D 2004 $615,158.17
Official Statement – Sacramento City Unified School District – $80,000,000.00 – General Obligation Bonds, Election of 2002, Series 2005 $737,700.00
Official Statement – Sacramento City Unified School District – $64,997,966.35 – General Obligation Bonds, Election of 2002, Series 2007 $757,134.42
Official Statement – Sacramento City Unified School District – $79,585,000 – General Obligation Refunding Bonds 2011 $522,897.60
Official Statement – Sacramento City Unified School District – $113,245,000 – General Obligation Refunding Bonds 2012 $849,939.95
Total Fees $5,843,737.39

Supporters of Measures Q and R might defend these fees by pointing out they only comprise 1.4 percent of the total amount of $420 million borrowed under the authority of Measures E (1999) and Measures I (2002), and the fees paid for the sale of the three refunding bond series were offset by the resulting reduced cost of interest payments. Fair enough, but don’t claim in your ballot arguments for Measures Q and R that “Every penny from Measures Q and R will stay in our community” and “ALL of the money raised by these measures will stay in our community.” That’s just not true. Set aside the issue of interest payments to wealthy individuals and institutional investors in New York City and other financial centers – the $5.8 million in transaction fees is proof that some of the money did NOT stay in the community.

I suspect such statements from proponents reflect a lack of understanding of municipal bonds or a cynical recognition that ordinary voters don’t understand municipal bonds.

One thing I did not research was whether or not the underwriters who assessed these fees were donors to the campaigns to pass Measure E (1999) and Measure I (2002). Here is another excerpt from the Vote No on Sacramento’s Measures Q and R web site:

Learn How Bond Brokers, Bond Dealers, Bond Underwriters Spend a Little Money to Make a LOT of Money Selling Bonds for California School Districts.

Not all bond brokers improperly influence school boards. In fact, some have high integrity and are speaking out against the inappropriate conduct of some underwriters in their industry.

But clearly things have gotten out of control since California voters narrowly approved Proposition 39 in November 2000. Borrowed money began gushing into California school districts, and everyone wanted a piece of the action.

In fact, a September 13, 2012 letter to the Municipal Securities Rulemaking Board from the California Association of County Treasurers and Tax Collectors urged the Board to consider a complete prohibition on brokers, dealers, and other municipal finance professionals from making political contributions to campaigns of local governments (such as the Sacramento City Unified School District) to get voter approval to borrow money from investors by selling bonds. The letter identifies the origin of the problem as Proposition 39.

The issue of bond brokers being major donors to campaigns to pass bond measures has not gained much attention, but it should. A specialty publication –The Bond Buyer – and a news service – California Watch – have been the leaders on investigating this obscure but significant scheme. Here are some articles that reveal the problem:

Brokers’ Gifts That Keep Giving – The Bond Buyer – January 13, 2012

When broker-dealers give money to California school bond campaigns, it appears to be money well spent. A review of campaign finance records by The Bond Buyer found a nearly perfect correlation between broker-dealer contributions to California school bond efforts in 2010 and their underwriting subsequent bond sales…

With Campaign Donations, Bond Underwriters Also Secure Contracts –California Watch – May 3, 2012

Leading financial firms over the past five years donated $1.8 million to successful school bond measures in California, and in almost every instance, school district officials hired those same underwriters to sell the bonds for a profit, a California Watch review has found…

Critics Struggle to End ‘Pay to Play’ in School Bonds – California Watch – May 14, 2012

Critics of the practice in which financial firms help pass school bonds that they profit from are continuing to push for reforms, but so far have faced resistance and failure. In California, underwriting companies hired by school districts to sell bonds often make campaign contributions to help convince voters to pass the bond measures…

Some California FAs [Financial Advisors] Use Pay-to-Play Tactics, Critics Say –The Bond Buyer – May 24, 2012

Firms that work as financial advisors helping California school districts issue bonds after serving as campaign consultants on the preceding bond measure have a conflict of interest and are engaged in a form of “pay-to-play,” critics say. Such firms, a small subset of the financial advisor sector in California, walk the school districts through the bond election process, then help the them select and negotiate prices with underwriters and bond counsel for the subsequent sale. In many cases, they are paid both by the political action committee formed to pass the bond measure, which receives contributions from underwriters and the bond counsel, and then by the district…

Underwriters Paying to Pass Bond Issues Face Scrutiny – Business Week – May 24, 2012

Over the past five years, underwriters gave $1.8 million to successful school-bond campaigns in California and got almost all the work selling the approved bonds, California Watch reported earlier this month.

Underwriter Bought Meals For Poway Board – San Diego Union-Tribune – September 1, 2012

The underwriter of Poway Unified’s controversial $105 million bond deal hosted $2,200 in dinners for the school district’s officials in recent years — most of which they accepted and initially failed to report on state-mandated disclosure forms. In March, the officials belatedly disclosed the meals dating back several years, as the District Attorney’s Office prosecution of South Bay school board members for failing to report such meals made the news…

Muni Groups Urge More Action on Bond Ballot Campaigns – The Bond Buyer – September 18, 2012

Municipal analysts and other muni market participants are urging the Municipal Securities Rulemaking Board to strengthen a proposal to tighten bond-ballot campaign contribution reporting requirements for dealers. In comment letters filed in recent days, several participants urged the board to do more to attack corruption and protect the voting public, with some suggesting there should be an outright ban on such contributions rather than disclosure requirements.

California Capital Appreciation Bonds Have Unintended Consequences – The Bond Buyer – September 20, 2012

The recent controversy over the way some California school districts use capital appreciation bonds may reflect the law of unintended consequences…

Feds Urged to Crack Down on Donations to Bond Measures – California Watch – September 21, 2012

Critics of political donations to school bond campaigns from companies that profit from the bonds are urging federal regulators to take bolder steps against what they call a “pay to play” practice.