It’s hard to persuade people to vote for school construction that costs property owners, say, four bucks on a thousand dollars of their property’s value.
But tell them the cost will be a buck and hey! Nobody begrudges the cost of a cup of coffee.
Especially when they’re told, further, that the next generation will pay.
At least, that was the logic that was used in some school elections in Michigan, and the same thinking is at play in California now, where supposedly “low cost” bonds are loading a future generation with debt.
Incidentally, the California Legislature hearing on banning Capital Appreciation Bonds that was to take place May 9?
Cancelled. The whole question of ridding California of this pernicious form of borrowing has been kicked down the road to 2013. But that’s not the end of discussing CABs…
Reprinted with permission of the Detroit Free Press.
Headline: SUPERINTENDENT IS SATISFIED, BECAUSE THE KIDS WILL PAY
Sub-Head:
Byline: JOEL THURTELL FREE PRESS STAFF WRITER
Pub-Date: 4/5/1993
Memo: ; BUYING NOW, BUT PAYING LATER
Correction:
Text: Coloma schools Superintendent Clifford Tallman had no qualms about
saddling future taxpayers in his southwestern Michigan district with big debt
for a new gym.
A 1991 ballot proposal that had failed five times passed easily when
school officials assured voters their children would foot the bill and tax
rates would rise by only 1 mill.
“I told senior citizens that this would be paid off by the students who
are using it,” Tallman said.
Coloma’s new gym cost $4.8 million, with $2.04 million coming from CABs
and the rest from conventional bonds.
Interest on the CABs will amount to about $6.97 million over 29 years.
Traditional bonds would have cost about $2 million in interest.
“If we went traditional, it would have cost us 4 mills, plus or minus,”
Tallman said.
“It is more expensive in the long run to do it this way,” acknowledged
Tallman. “But if you paid cash for your car, it would be cheaper than
financing it over five years.”
To keep the rate at the 1-mill level promised to voters, Coloma’s tax
base must increase in value between three and seven percent a year for 30
years.
“Property is going up just because of the prime location in relation to
Chicago,” Tallman said. “Consequently, we do have a sound tax base.”
Former Farmington school board member and retired National Bank of Detroit
bond expert Richard Wallace disagrees.
“Who knows what our economy is going to be like 15 or 20 years from now?”
he said. “You cannot predict . . . inflation any more than you can predict
what the stock market will be in 10 years.”
But Tallman stands by the financing for the gym: “The students who are
using it will be the major payers on this one,” he said. And for now, “they
are getting the benefit of it.”
Caption:
Illustration:
Edition: METRO FINAL
Section: NWS
Page: 9A
Keywords: ; SCHOOL; FINANCE
Disclaimer:
