Senate OKs bill barring high-cost school bonds

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SACRAMENTO, Calif. (AP) — Lawmakers are sending Gov. Jerry Brown legislation intended to prevent school districts from selling high-cost bonds that rack up massive interest costs and cannot be paid off until they mature.

The Senate on Tuesday unanimously approved AB182 by Democratic Assemblywoman Joan Buchanan of Alamo in an effort to curb the sale of so-called capital appreciation bonds.

The bonds delay payments for decades while school districts do construction and renovations. The result is massive balloon payments that sometimes inflate debt services to 10 times or more the principal.

Sen. Ben Hueso said one school district will end up paying $1 billion for $100 million in borrowing. The San Diego Democrat says districts usually begin paying off the bonds “when the buildings are at the end of their functional life period.”

 

Copyright 2013 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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