California town pioneers in fiscal irresponsibility
A loan shark wants to lend your town a hundred million dollars. And since this loan shark is such a swell guy he says, "Look folks, don't you worry about nuthin'. In fact you don't have to pay any interest or principal until the year 2033, almost 20 years from now! Ain't that a really sweet deal?"
Of course it's a rotten deal. We all know that the money comes from a loan shark and there must be few gottcha's buried in the fine print.
So, what are the catches? Starting in 2033, the first of the town's twenty annual payments will be $50 million dollars a year. And even if everyone who signed the original note has died, there children and their children children's will still have to pay off the entire marker in full. Plus, the interest and principal payments on that initial $100 million dollar loan will run almost a billion dollars, nearly ten times the amount of the original loan!
No one person or government entity could be that stunning stupid...except we're talking about California: the fertile land where lying, deceitful politicians grow abundantly in the warm sunshine.
From the Voice of San Diego, we read of the Poway Unified School District, the obvious choice for this year's Darwin Award. Read the entire article, it's shattering indictment of the California education system and the dupes involved who make the Three Stooges sound like French existentialists.
Last year the Poway Unified School District made a deal: It borrowed $105 million from investors to fund a final push in its decade-long effort to revamp aging schools.
In 2008, voters had given the district permission to borrow more money to finish its modernization, and they had received a big promise from the elected school board in return: No tax increases.
Without increasing taxes, the district couldn't afford to borrow money in the conventional way. So, instead of borrowing from investors over 20 or 30 years and paying the debt down each year, like a mortgage, the district got creative.
With advice from an Orange County financial consultant, the district borrowed the money over 40 years in a controversial loan called a capital appreciation bond. The key point for the district: It won't make any payments on the debt for 20 years.
And that means the district's debt will keep getting bigger and bigger as interest on the loan piles up.
The bottom line: For borrowing $105 million in 2011, taxpayers will end up paying investors more than $981 million by 2051, or almost 10 times what the district borrowed. That's wildly more expensive than a typical school bond, in which a district pays back two or maybe three times what it borrowed.
"This is way worse than loan sharking," said Michael Turnipseed, executive director of the Kern County Taxpayers Association in central California, which has lobbied the state Legislature to tighten laws on school district borrowing. "And Poway is the poster child. What they have done is absolutely insane."
For forty years, two full generations of Poway families will be paying off these capital appreciation bonds. There will undoubtedly be other capital projects that will need funding during next forty years, but there will no money available.
This total abdication of fiscal responsibility toward future generations is the logical end game of the progressive agenda. By declaring that only today's gratification matters, that the future is too uncertain to even bother to plan for, that basic common sense is out of fashion; these troglodytes have shown themselves as selfish dolts who reject the American ideal that we can plan, work and strive for a better country and a better world tomorrow.