School bonds leave residents paying over long period
by Maddy Houk | Patterson Irrigator
May 16, 2013 | 1899 views | 0 0 comments | 4 4 recommendations | email to a friend | print
Local residents indicated at the ballot box in 2008 that they were willing to pay $50 million in bonds for a long-awaited school on Patterson’s east side and a few other local school upgrades. Now, after collecting $16.1 million of that total, it appears the bonds that were issued could cost seven times as much.

Patterson taxpayers will end up shelling out almost $120 million for projects that used Measure V funds by time the last payment is made in 2049, paying down a debt ratio that’s higher than any other in Stanislaus County.

That doesn’t include $22 million in past school bonds that could wind up totaling $44 million that the district is paying off for other projects from a bond measure passed in 1996 to remodel Patterson High and Measure G approved in 2001 to build Creekside Middle School and other projects.

Some community members have expressed shock about the enormous debt, but school district officials defend the bonds, saying that they have helped keep residents from paying sky-high property tax bills.

“I think people know what they were getting in to,” Superintendent Phil Alfano said last month. “The community was well informed on this issue.”

A different type of bond

Measure V projects rely upon capital appreciation bonds, which can be paid off in the distant future but cost far more than traditional bonds in the long run.

Taxpayers wanted to pay $72 per $100,000 of assessed value of their land and $60 per $100,000 of a home’s assessed value, according to a survey taken before Measure V went to the voters.

The capital appreciation bonds were used to make that happen. Still, not everyone is a fan of the special bonds.

Local resident Dan Ruiz, who spoke about the bonds at the May 13 school board meeting, worries about the high payback over several years.

“I liken it to buying a new vehicle,” Ruiz said by phone on Tuesday, May 16. “It’s got all the bells and whistles and everything you need or want — but you can’t afford it. It’s too much money. But the salesman says, ‘Let me see what I can do for you. We’ll get you into this car.’”

Ruiz stated then the salesman comes up with a payment you can afford, and everybody’s happy and the whole family jumps in the car and takes off, and years later the car is not running anymore and you are still making payments, and now it’s time to buy a new car.”

District officials contend that the bonds were necessary to keep residents’ property tax bills down.

Surveys conducted five years ago indicated that residents would be willing to support Measure V if they paid no more than $72 per $100,000 of assessed value of their property taxes, according to Steve Menge, PJUSD assistant superintendent of administrative services. The measure ultimately passed with 66 percent voter approval, though the initiative only needed 55 percent support to pass.

Menge said he has heard more complaints from the public about that amount rising to about $80 per $100,000 of assessed value because of housing market woes than he has heard about the long-term costs associated with those bonds.

Officials defend bonds

Alfano, who was not working for the local district at the time of the 1996 and 2001 bonds and was superintendent of human resources when Measure V was passed, defends the decision to stretch out payments over a long period of time in trade off for lower tax payments over the years.

People also must remember that the costs of building schools goes up over time, he said.

It can take more than a year for a school district to pass city, county and state review boards for school plans, hire contractors, follow labor laws, pay prevailing wages, draw up architect plans and submit plans to state authorities, Alfano said.

“You weigh it out: What is the cost to build a school?” Alfano said. “The longer one waits, the more expensive it is. The price goes up and never goes down.”

Walnut Grove ended up costing $12.7 million to build, while the remodel of the Patterson High School Ag Auto Buildings cost almost $1.9 million and other district wide modernization projects came in at $1.5 million. The district also paid off a Certificate of Participation loan taken out a few years prior to the construction of Walnut Grove.

The remaining $743,195 of the Measure V bonds issued so far has gone to various projects for local schools in 2012. Those include the installation of a new district-wide phone system; a district-wide heating, ventilation and air-conditioning system; a district-wide security system and a new parking lot for Del Puerto High School.

Alfano stresses that the use of capital appreciation bonds was a trade-off — it was the best thing for the community at the time.

“When you finance a project like this and spread it over a period of time you are going to spread it over multiple generations,” he said.

A time of growth

Residents also must remember that the years leading up to 2008 were a time of explosive growth in Patterson, district officials say. The town’s population had grown from 13,709 in 2003 to 21,090 in 2008, and schools were bursting at the seams with 5,536 students enrolled that year. Elementary schools were running on year-round school schedules to avoid classroom overcrowding.

Had Walnut Grove not been built, Northmead Elementary School would have had 1,200 students and Creekside Middle School would have housed 1,500 pupils. As of May 10 of this year Northmead had 581 students and Creekside has 1,158 students enrolled.

Walnut Grove, at 775 N. Hartley St., was built primarily for safety issues, Menge said, as children from the east side of town would run across busy Highway 33 to get to school. Yet at the same time, the school was to be part of the Villages of Patterson mixed-use development, a project that was expected to add 3,400 new homes to the city. District officials expected to use mitigation payments from the Villages project to pay off a $12 million Certificate of Participation loan to complete school construction, but the economy tanked and the project never got off the ground.

District leaders reflect, look forward

Administrators are planning to refinance the 2001 bonds at a better interest rate, saving taxpayers about $300,000 in the long run, Menge said. They also eventually hope to refinance the Measure V bonds in about five more years, he said.

“We are looking at refinancing the bonds in the future, which will lower the cost of the bonds,” Menge said.

In the meantime, most district officials say they are content with using capital appreciation bonds, even if they will be far more costly in the long term than more traditional bonds.

School board Trustee Ruben Piña noted that Measure V bonds will be costly, but he placed the blame on the lenders.

“There’s got to be regulations for public agencies for borrowing the money, so they are not taking advantage of public entities,” he said.

Despite the long-term costs, he said the investment in Walnut Grove was worthwhile.

“We got the school done on the east side when there’s never been a school built there before,” he said. “It’s better than spending money on building prisons.”

Contact Maddy Houk at 892-6187, ext. 22, or maddy@pattersonirrigator.com.

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