October 31, 2012

What Were They Thinking?

The election is just a week away. There are 2 seats on PUSD board up for grabs and 2 seats on the Poway Council. I thought the biggest issue this election season, especially for council candidates, would have been, "How will the end of redevelopment affect our budget?" A little less than a year ago, the California Supreme Court decided that Governor Brown and the legislature can dissolve redevelopment agencies and end that state program. The City of Poway had been diverting $40 million in property taxes from local schools, the county and our own general fund, to subsidize developers to clean up blight  and now they won't be able to do that anymore. Unfortunately, the full $40 million/yr in diverted property taxes won't be available for distribution for many years, as Poway's Redevelopment Agency has a large bonded indebtedness and other obligations that must be paid off first. So, the schools won't be made whole right away. And neither will the county or Poway's own general fund.

The council candidates haven't talked too much about how they would deal with the budget shortfall. Mostly, they seem to collectively shake their fists at Sacramento and whine. Two council candidates, Steve Vaus and Jeff Mangum were on the City's Citizen Budget Review Committee. That committee didn't even consider the impact the California Supreme Court's decision could have on Poway's budget during their budget review meetings. I guess they were afraid to plan for all possibilities. After the court decision was made public, the Budget Committee returned to make some adjustments and to add a little "We hate you, Sacramento" to their report.

I've heard very little budget on the campaign trail. This year's buzz is all about the "Billion Dollar" PUSD bonds. That may be due to political opportunism more than anything else. Jim Cunningham will likely be re-elected. Merrilee Boyack is not running again. There are 3 other candidates hoping to grab her seat: Steve Vaus, Jeff Mangum and Gary Vineyard. The school bond has become the "hot" issue between Steve Vaus and former school board member Jeff Mangum. Vaus contends that Mangum is responsible for the bond debacle and Mangum says he isn't because he wasn't on the PUSD board when the last issuance of Prop C bonds were approved.

Personally, I think Mangum should have stood with his fellow PUSD Board members and owned his role in the bonds. Yeah, yeah, I know...he left the board in 2010 and did not vote to issue the last Prop C bonds, but Mangum was very much a part of the whole sequence of events that led up to the bond issuance in 2011 for $105 million in bonds that would cost taxpayers a billion dollars to pay back over the next 40 yrs.

For both Prop U and Prop C bonds, the district first issued "bridge loans" and got started right away on the building projects. When the bridge loans came due, the district needed to issue Prop U or Prop C bonds to pay them back. The plan worked well for Prop U. The complication for issuing Prop C bonds was that the taxpayers were still paying off the Prop U bonds when the Prop C bonds would be issued. In order to keep the tax rate below the promised $55/$100,000AV, PUSD decided to use higher risk CAB(capital appreciation bonds) that wouldn't have to be paid off for 20 yrs or so, although they accrued interest during that time period.

When Prop C's bridge loan came due in 2011, PUSD had to pay them off. PUSD had planned for a best case scenario, with the real estate bubble growing for at least 7 more years. Unfortunately, the housing market collapsed and the bond market tightened up when the loan came due.  I don't know what Mangum could have done differently if he had still been on the board when the bridge loans became due. There were not a lot of choices. Bridge loans are a gamble, if conditions are not too good when they come due, the district still must issue bonds to pay them off.

There is some irony in that Steve Vaus is the most vocal critic of Mangum's role with regard to the bonds. Vaus's supporters have repeatedly said online comments, media interviews and at a school board meeting,  that Mangum should sit out the election for his role in the bonds. Yet, several of Vaus's supporters played key roles in getting Prop C passed. Sabrina Butler, who endorsed Vaus, ran the "Yes on C" campaign. Laura Tyne, was another "core" volunteer. She now says she was "fooled" by the board and that they withheld "details"about the bond, in particular, how much the bond would cost. In my opinion, that is a pretty lame whine because nobody knows what the interest rates will be for a  bond until they are issued. If Laura read Prop C before she tried to get everyone to vote for it, she might have noticed that we voted for bonds that could take up to 40 yrs. to repay after the last bond was issued at up to 12 % interest. PUSD didn't have to issue the bonds for many years, at least not until the bridge loans came due, and even then they could have (and did) stagger the issuance of the bonds for several years. If you repay back a loan over a 50 yr period, it will cost a lot in interest. Those terms were in Prop C and not hidden from the voters. What wasn't revealed was that PUSD planned to use CAB bonds, which accrue interest for many years before payments are made. But without using CAB bonds, there was no way PUSD could have issued the Prop C bonds and still have kept rates below $55/$100,000AV. That is why I questioned what the Yes on C committee was telling the voters in 2008. It certainly did not seem mathematically reasonable, and it wasn't.

PUSD did tell the San Diego Taxpayer's Association that they planned to use CAB bonds. And they told them that they expected assessed valuation to grow from 5-8% per year from 2008-2015. They gambled on that real estate bubble growing for 7 more years. I would expect that a group that is so devoted to taxpayer concerns would have questioned those "wildly optimistic" assessed valuation projections, but SDCTA didn't. SDCTA seems to frown upon spending taxpayer money on frivoulous things like teacher salaries or pensions, but they are pretty gung- ho about spending tax dollars on school construction projects. SDCTA gave PUSD an award for using that bridge loans scenario with Prop U. They endorsed Prop C, knowing that PUSD was going to use bridge loans and the riskier CAB bonds. What were they thinking? Perhaps of lining their pockets.

Here is where more irony comes in. Steve Vaus received the endorsement of the Lincoln Club of San Diego County and he got  $500 in cash and $300 in video services from them. They are a very conservative group, nominally non-partisan, and pro-development. There are several key members who are on both the SDCTA and the Lincoln Club. One name in particular pops out. April Boling.  Boling is an accountant who is often the treasurer for Republican campaign candidates and issues. April Boling was Vaus's campaign treasurer for the recall campaign against Betty Rexford. And April Boling was  the "contact person" (treasurer?) for the 527 campaign organizations ("citizen groups") who pushed for passage of both Prop U and Prop C.

So, yeah, Mangum may "lit the fuse" that led to the billion dollar bond deal, but there are quite a few members of Vaus's posse who were instrumental in pushing to get Prop C passed. Prop C was actually the rope to the sticks of billion dollar dynamite. Once that thing was lit, we were stuck.

There is a silver lining to the bond fiasco. PUSD had plans to get us voters to approve a parcel tax. Prop U and Prop C money can only be used for school buildings and some technology improvements. A parcel tax could be used to pay teacher's salaries. I'm not opposed to paying teachers a salary or  pensions. I am opposed to parcel taxes, in particular, to flat parcel taxes that charge each property the same amount. It seems unfairly burdensome that a small house on a tiny lot would pay the same parcel tax as an $8 million estate. Wikipedia has a list of parcel tax measures that have been on the ballot in other California cities.  They vary considerably, but some are for $300/yr and $400/yr per parcel.  They can be for a set number of years or they can continue indefinitely. Some parcel taxes are based on
square footage of the property or lot sizes. That seems much fairer and would be the only parcel tax I would consider voting for.

The billion dollar bond measure put the kabosh on talk about a PUSD parcel tax. But it may be back after things simmer down. I plan to vote for Prop 30, Governor Brown's sales tax + income tax measure to raise funds for schools. That measure is limited to a set number of years, and it is not an excessive amount of money for the purpose. If it doesn't pass, school funding will be cut, and you can bet that somebody will revive talk of a parcel tax. So, even if you are not inclined to vote for tax measures, you might consider this one a preventive measure and vote Yes on Prop 30.

Sometimes I really do not understand the thinking of the PUSD Board members. They don't seem too excited about Prop 30 or the end of redevelopment. I guess they figure the state owes them money and they have no concerns as to how the state is supposed to get that money. The board members seem pretty satisfied with saddling PUSD taxpayers with a billion dollars of debt that won't be paid off for generations, and they would have added a parcel tax on top of that, if they could have. So I found it kind of odd when I saw Brian Maienschein's campaign literature and on the front,  Linda Vanderveen, PUSD board member, claimed that the entire PUSD board "unanimously endorsed Brian." Do they know that Brian Maienschein signed a "no new taxes" pledge? Most of the funding for schools comes from state money.  I realize that Maienschein went to PUSD schools, and he is probably a nice guy and all, but, geez, what kind of message does it send when the Board unanimously endorses someone who signed a "no new taxes" pledge.

The "no new taxes" pledge is part of Grover Norquist's campaign to shrink government spending to the same level it was around the turn of the century (from 19th to 20th). In the early 1900s, most people did not finish grade school, much less graduate from high school or go to college. Is that what we want for our kids? For our country? For the generation that is going to have to pay off the school bonds? What is the PUSD Board thinking?

Fortunately, there is a challenger running for the PUSD Board. I am going to vote for Kimberley Beatty.  I've been impressed by her understanding of the bonds and support for school funding. Paying taxes to support the schools is not the problem. Paying a billion dollars to borrow a little over $100 million is a problem, but in order to avoid that situation, you have to at least ponder different possibilities when a deal is proposed. That takes critical thinking and sound reasoning, not an anti-tax pledge.

October 15, 2012

Water Rate Increase on the Agenda in Poway

It's that time of the year again. On Tuesday, the Poway City Council is poised to raise both the fixed water fees and water rates. Last year, the council voted to abandon their tiered conservation water for a more uniform rate, thereby increasing rates significantly for lower volume water users. This year's little surprise is that the council intends to relieve the folks in High Valley, Old Coach, the Industrial Park and other high places from having to pay those pesky pumping fees. The City will fold the pumping fees into the regular water fees of ALL the water users.

The new water rates for single family residential customers will be $3.96/ unit. That is up 13 cents a unit. The fixed water service charge will go up almost a buck, from $28.00 to $28.98 for each 2-month billing period.

These increases aren't the most severe we've had, but the pattern of dumping any and every possible charge, fee and rate increase disproportionately onto those who use less of something or onto those who don't even use something (e.g. pumping) is onerous.

In addition to getting stung for somebody else's pumping charges, Poway water customers are also paying for the costs to administer a backflow device inspection service. Only people with wells or on reclaimed water require the yearly inspection, yet the costs to administer this service is dumped on all of us. Is that fair?  Remember, this is the City that charges higher sewer rates to people who use less water. This City is all about who is being advantaged.

If you want to formally protest the increase of rates, and in particular, getting stung with all future pumping fees of the high landers, you need to submit a written notification to the City Clerk containing your address or assessor's parcel number and your signature by 4 pm Tuesday, October 16th. You can also drop it off before the 7pm meeting in the Council chambers. If a majority of Poway water customers sent an official protest, the new water rates won't take effect.  That is a very high bar to reach, and not likely to happen even when a lot of people are upset with the rates. If you want to unofficially complain, but don't have time to drop off a letter at City Hall, you can send an email to the council before Tuesday's meeting. If you send an email it won't count in the official protest numbers but it will put the City on notice that you are paying attention, which is the first step toward any change.

October 2, 2012

Poway's 47%

Dear Poway Homeowners,
You are getting screwed. Bigtime. And no, I am no referring to the PUSD bond fiasco. It's your sewer bills.

OK, you are not ALL getting screwed. Around 47- 50% of you are are paying substantially higher sewer rates than other Poway sewer users pay. It's been that way for more than 30 years. Maybe 40.

It is kind of a well kept secret. If you were to search The City of Poway's website, you would find a link to the City's water/sewer rates and fees , but you won't be able to find the real sewer rates for single family residential listed anywhere on the City's webpage.

Poway water/sewer customers have 4 line items on their bills: 1) water basic service, 2) water consumption, 3) sewer basic service and 4) sewer consumption.  The basic service fees are a fixed fee, based on the size of your water pipe and/or your type of service (residential, commercial, industrial, etc). The water consumption charge is based on how many units of water you consume. The sewer consumption charge is much more complex. And convoluted.

Most properties in Poway don't have sewer meters. The sewer consumption is calculated a bit differently for each category of user ( residential, multi-family, commercial, etc.) For example, multi-family housing are pegged for sewer flow equal to 85% of their water use for that period. Commercial properties sewer consumption is figured at 90% of their water consumption. Single family residential properties sewer use is calculated at 85% of the average from the lowest use during the 3 previous winter periods.

In the charts below you can see that the sewer rate is $3.16/unit  for apartment houses, churches and schools. It varies from $3.16 to $6.40/ unit  for commercial and industrial customers.

For single family residential customers, the City actually uses a tiered charge pricing format instead of a rate. The charges increase as use increases, sortof. Look at Tier 2. The house that uses 6 units, and the house that uses 12 units both are charged $40.98. There was twice as much flushing and showering going on in the house that used 12 units, but they paid the same fee as the house poured half as much water down the drain.

For some reason, the city calculates everyone's sewer commodity fee as a rate, except for the single family residential category. The true rates you pay are hidden in the City's chart. I've calculated the actual rates in the chart below. The results are a bit surprising.

The rates in the chart vary from $1.76/unit to $23.23/unit. If someone uses more than 57 units, their rates are even lower. If someone uses 0 units of water, they still have to pay a sewer charge of $23.23.
My sewer use is calculated at about 10 units.  I pay $40.98, which comes to about $4.00/unit. The person who uses 51 units pays just under $2.00/unit. How can it be fair to charge higher rates to those who use less? What a nice break for those who consume a lot of water!

How did it happen that almost half of the residential single family homes are subsidizing the other half? Originally, everybody paid the same fixed sewer charge. Then, the fixed sewer charge was tiered to make it more fair. Then, a fixed charge was separated from the tiered charge. So now, we pay a fixed charge (basic service fee) and a tiered charge (consumption fee). As sewer charges increased, people who used very little winter water, got hit with large, disproportionate bills. In 2006, the City paid a consultant to study the sewer rates. The consultant (RFC) found that if the City used a uniform rate, ratepayers in Tiers 1, 2 and 3 would enjoy a savings of 22% to 44%. Those in Tiers 4 through 7 would pay 2% to 51% more. Guess who complained and convinced the council not to charge a uniform rate for the sewer?

Funny thing,  those very same folks went apoplectic about 2 years ago when the city imposed a multi-tiered  conservation water rate. The difference between that water rate structure and the current sewer charge structure is that with the conservation water rate structure, everyone paid the same rate for their first x number of units of water, and the same rate for their next y units of water, etc. People were only charged higher rates for the water usage beyond each tier.  The people who used a lot of water said it was unfair. The council heard them, and changed the water rates back to a uniform rate. Well, almost uniform. Now, everybody pays the same rate for their first 199 units and more for their next z units. I never really got why everyone screamed that it was unfair  if we did not all pay the same rate, but then they were OK with charging people more for their 200th unit and beyond. Was it about fairness or advantage?

Speaking of advantage, at a council meting and at the recent candidate's forum, Councilmember Cunningham proposed that the excess money in the sewer fund be used to lower water rates. Really? First the City overcharges the low water user on their sewer bills and then the City wants to take the extra money to lower the water bills of the big water users who are no longer paying conservation rates. Freaking unbelievable.

I have been complaining about the unfair sewer rates for years. Every councilmember is aware that the low water users are being screwed. All of the councilmembers are OK with it, including the one who puts a quote from Ghandi on her emails. Not one councilmember has made any effort to change the way Poway charges for the sewer.  It certainly says something about the way "they serve the community" to me.  I have no respect for those who would charge the low water users more per unit just because they can, and because it pleases their more advantaged friends.  The situation will not change until enough of the low water users become more aware and make enough of a ruckus to demand the change. Will you help make a ruckus?

September 6, 2012

Wildly Optimistic Projections

2002 SFID : The black areas in the map are the areas in PUSD that are not in a Mello Roos district. Poway boundaries and RB and PQ designations have been added to the original map.
Click on map to enlarge.

It was the campaign to pass Prop C that first got me blogging back in January, 2008.

It was all so very incredulous. We had passed Prop U just a few years earlier. Prop U was a $198 million measure that was supposed to be sufficient to renovate 24 schools. It wasn't. Five years later, PUSD asked us for $179 million more to finish the job. That's almost twice as much as we were first told would be enough. Then, the district and the Yes on C committee told us that there would be no new taxes to pay off Prop C, it would just extend the tax rate from Prop U for 11 extra years. Wrong again. It is going to cost us almost a billion dollars just to pay off a little over a hundred million of the Prop C bonds.

In 2008, I did not know PUSD intended to use CAB bonds to pay off the debt. Heck, I had not really heard about CAB bonds until last month. Back in 2008,  PUSD said that the expected cost to pay back the entire $179 million of Prop C bonds was expected to be $497 million. They were wrong. It is going to cost about $1.25 billion.

PUSD said that the tax rate won't rise and that Prop C will only take 11-14 extra years to pay off.  Wrong again. The tax rate will rise and Prop C won't be paid off until 2051, 49 years after we first passed Prop U. 

If I were a kind and forgiving, and somewhat gullible soul,  I might shrug it off and say, "How were these highly paid district officials and the myriad of highly paid consultants supposed to be not so far off in their projections?" Ok, so maybe, just maybe, they really didn't know that the cost of building materials would skyrocket as China set out on an expansive building frenzy. And who could imagine that the bond market would collapse when the housing bubble burst? 

The one wild-arsed projection I cannot forgive, is that the assessed valuation in the SFID (school facilities improvement district) would grow between 5-8% per year between 2008 and 2015. These are the projections that PUSD gave to SDCTA(San Diego County Taxpayer's Assoc) who should have known better than to accept them. 
I was concerned enough about these projections to ask Todd Gutschow about them in 2008. Here is my question and Todd's answer (in blue).
There are some issues I still do not understand. According to the graphs on this document, assessed valuation is expected to grow by 7-8% during the next 3 yrs. That seems to me to be an overly optimestic  projection.  
Actually, 7% – 8% is reasonable based on the increases that we have seen the pass two years. According to the County Assessor, the 2007-08 assessed value for San Diego County grew by a little over 9%. I cannot find the growth for PUSD; however, generally, PUSD is a bit higher than the County in general. Even with market values falling, there remains a significant gap between the current assessed value and market value. As homes are sold or remodeled, the assessed value is up dated. I believe this will continue even with the current real estate situation.  
The assessed valuation in the SFID did not grow as expected.  In 2008-2009, the assessed valuation in SFID 2002 grew by less than 3%,  in 2009-2010, it grew by less than 1%, in 2010-2011, the assessed value dropped almost 1%, in 2011-2012, the assessed valuation increased a bit over 1%, but dropped by almost 1/2 % the following year. The assessed valuation for the SFID for 2012-2013 is $20.4 billion for the 2002 SFID and $20.2 billion for the 2007 SFID. PUSD projected that assessed valuation in the SFID would be $25.7 billion this year. The district's projection was off by over $5 billion.

(Note: The boundaries of the 2002 SFID and the 2007 SFID are slightly different. The 2002 SFID pays for Prop U and the 2007 SFID pays for Prop C)

Assessed valuation (AV) will grow under certain conditions. If new construction occurs, the AV will increase to reflect the value of the new buildings or improvements. If a house or business is sold, the AV is based on the purchase price. Homes and businesses that are not sold can increase in value 2% each year, as allowed by Prop 13. Most of the SFID area is in the older parts of RB, PQ and almost all of Poway. How did the district project a 5-8% growth rate in assessed valuation in an area that was pretty much built out?  Were the assessed valuations really increasing by 8-9% previous to 2008? I decided to find out. I got the figures from the county.

Indeed, Todd was correct. The 2 previous years, 2007/08 and 2006/07 showed increases in AV of 7.7% and 10.7% respectively. Here is what it looks like in graph form:

The only problem with looking at the growth in AV for a few years preceding the new bond measure is that the small slice of time may not really be indicative of future growth. It is far better to look at a longer period of time and to take into account events that might skew the data. Here is a graph of assessed valuation from 1991 to 2010 in San Diego County. From the graph we can see that assessed valuation increased from around 1998 until 2008, and then they began to decrease. The rise in assessed valuations in San Diego is similar to the growth in PUSD's SFID. From 2004- 2005, San Diego county's assessed valuation increased 13%.  How were we to know the good times would not last forever?
People should have known. Look at the graph. From 1991 until 1997, there is very little growth in assessed valuation. In the early 90s, we were in a recession. Housing prices dipped and business growth slowed dramatically. If I remember correctly, Poway was in default on some bonds in the business park. I remember then city manager James Bowersox saying, "Who knew we would have a recession?" Well, maybe we don't knew when we will have a recession, but we know we will have them. We've always had them. For PUSD to plan on that housing bubble to grow for 7 or 8 more years was wildly optimistic.

When I first saw PUSD's projection for 8% growth in AV for 2008, I knew I had seen that same 8% figure before, in another wild-arsed, overly optimistic projection. It was another Proposition C campaign. Not PUSD's Prop C, but the City of San Diego's 1998 measure to get the voters support for public financing of a new downtown ballpark. Susan Golding, then mayor of San Diego, promised that the ballpark would be paid for by new TOT (taxes on hotel guests) that were expected to grow by 8% a year. In his report, "Welcome to PETCO Park: Home of Your Enron-by-the-Sea Padres", Mark Hitchcock explains why reasonable people should have been disturbed by Mayor Golding's projection:

The 8% a year projection was based on realized growth in the previous few years, a time when the economy was expanding rapidly. Because a new publicly funded ballpark would tie the City’s hands to the extent that a large portion of the TOT revenue would be committed to paying off the bonds for many years to come, if the TOT did not in fact meet the projected 8% annual increase, cuts would have to be made elsewhere. Apparently, arts and culture representatives failed to consider the fact that tourism and thus TOT revenue drops in recession years, and history shows that recessions are inevitable.
Yes. Recessions are inevitable.

The 8% annual increase in TOT taxes did not materialize. Despite Mayor Golding's promises, arts and cultural groups that had previously been funded with TOT monies lost their funding. And, there was that huge big mess because San Diego tried to hide their financial straights when the ballpark bonds were sold. Nevertheless, the San Diego County Taxpayer's Association supported this Prop C too. Reasonable people should know better, especially reasonable people who purport to be a "watchdog organization".

From Welcome to PETCO Park: Home of Your Enron-by-the-Sea Padres":
Given that San Diego is a Republican town, it may seem surprising that there never was any real pre-Proposition C grass-roots effort to block a ballpark deal that involved such a significant outlay of government funds. The logical leader of any tax-related opposition to the new stadium would have been the San Diego County Taxpayer’s Association (SDCTA), which according to their website is a “non-profit, non-partisan organization, dedicated to promoting accountable, cost-effective and efficient government and opposing unnecessary taxes and fees.” The front page of the SDCTA’s website also notes that the organization “takes a leadership role in fiscal oversight of local government and aggressively resists...ill-advised public expenditures.” In a Republican city like San Diego, a tax group like the SDCTA would have had a receptive audience had it come out strongly in opposition to the use of public funds for a new sports stadium, and it is possible that such a stand could have had a significant effect on the debate. Although the SDCTA disputed claims by the Padres and the City Council that the ballpark plan would be tax-neutral on residents, the SDCTA never seemed to take the position that the cost of the ballpark was a major concern. Before voters went to the ballots to judge the stadium deal, the SDCTA estimated that the deal would cost the City $17.7 million per year even after taking into account expected revenue increases from the TOT tax. Apparently the SDCTA decided that this did not represent the sort of “ill-advised public expenditure” that should be opposed: the SDCTA actually publicly endorsed Proposition C after a vote by its board. According to at least one newspaper report, the SDCTA’s position was hardly surprising given that “[a] large number of the people who pay heavy dues to the group, and serve on its board, were in a position to benefit from the project, directly or indirectly.” According to Peter DiRenza, foreman of the civil grand jury that issues the damning reports about the MOU and the conduct of the City Council, “Some pretty wealthy people keep the organization afloat, and a lot of those people were involved with the ballpark... The board voted knowing it was a subsidy to the private sector.” Thus, it seems possible that the organization that advertises itself as the public watchdog for unnecessary government spending never made a thorough assessment of the stadium deal.
 The next time you find yourself gently jostled by one of the City of San Diego's many potholes, let it serve as a mental reminder, recessions happen. 8% growth just doesn't happen over long periods of time.  Don't let someone trying to convince you to vote for a bond measure tell you otherwise.

Edited to Add: Poway School Board Members have defended their expectations that the AV in the SFID would rise 5-8% from 2008- 2015 based on the data for 2007-2008 in the SFID and the overall data for AV growth in all of PUSD.  Their projections fell short, but it wasn't just because the housing bubble burst and the financial meltdown. From 2000-2008,  some of the increase in AV was due to new construction in the Poway Industrial Park and Old Coach, and Kentfield Estates. By 2008, those projects were, for the most part, complete. There is only one large parcel still undeveloped in the Industrial Park. There are no new housing developments planned in Poway or RB or PQ that I know of. Looking at past data in the SFID, or in the entire district, when new construction was happening, and applying those growth projections to a period when no new construction was expected was a grievous error on the part of the Board and district officials,  who should have known better.

August 25, 2012

Poway's School Bonds By The Numbers

Will Carless's revelation in the Voice of San Diego, Where Borrowing $105 Million Will Cost 1 Billion: Poway Schools broke on August 6, 2012. Carless wasn't actually the first to write about the Poway bonds. A retired  reporter and current blogger from Michigan, Joe Thurtell, wrote about Poway's bonds back in May, 2012 (here, here and here). In a May 12th piece titled "CAB scam in Poway", Thurell had this to say about PUSD's ballot disclosure for Prop C:
The nicest thing I can write about the language used by Poway schools in San Diego is that it was shrewdly phrased. But when framed with the ‘no new taxes” promises flung out by bond supporters, the bond proposal amounts to a brazen lie.
Whether they put down “yes” or “no” on the 2008 ballot proposal, voters in the Poway school district in San Diego could not have known that the “legal interest rate” on some of the bonds they approved would amount to an eye-popping, wallet-ripping 2200 percent.
Nowhere in the ballot language was it spelled out to voters that the majority of the debt that was approved would be in the form of Capital Appreciation Bonds with interest rates so usurious that CABs were banned in one state — Michigan — when the monstrosity was exposed.
Neither promised “mandatory audits” nor “independent citizens’ oversight” captured the reality for citizens — that these pernicious instruments of debt could only fulfill the promise of “no new taxes” if property values increase by hundreds of percent.
 Nor were voters made aware that there is no escape from this hall of financial horror. A term of the bond official statement states that they may not be re-financed to better terms.

Last Monday, August 20th, the PUSD Board of Education carved some time out of their regular monthly meeting to respond to the furor over the Prop C school bonds. The district prepared a powerpoint presentation and later posted it on their website. All of the current board members (Andy Patapow, Linda Vanderveen, Marc Davis, Todd Gutshow and Penny Ranftle), former board member Jeff Mangum and Superintendent John Collins stand by the decisions to borrow $105 million that will cost almost a billion dollars to repay and won't be repaid until 2052, and cannot be refinanced.

The district's position, as I surmise it, from the powerpoint file:  The schools in the newer areas of the district that are paying Mello-Roos fees are much nicer. They wanted to get some equity in the buildings in the district, so they put all of the non-Mello-Roos properties into a School Facilities Improvement District (SFID).  (SFID= a Mello-Roos for-the-rest-of-us.) Twice the voters in the SFID  failed to approve  bond measures.   After a statewide voter measure (Prop 39)passed,  lowering the percent needed to pass a school bond measure from 67% to 55%, PUSD was finally successful in getting a bond passed in the SFID. Prop U ($198 million) was approved in November, 2002. It was supposed to provide enough funds to renovate all 24 schools within the SFID, but unprecedented and unforeseen increases in building materials made it necessary for PUSD to ask the voters in the SFID to approve another bond measure, Prop C ($179 million), in February, 2008.

Oh wait, let me change that. According to former PUSD trustee Jeff Mangum, it was the voters, not the school board that passed Prop C. Well, yes it was, but it was the school board that worded the ballot measure, and promised not to raise taxes. The ballot statement said that the estimated cost of Prop C would be $16 per $100,000 of assessed valuation (av)  bringing the total cost for Prop U plus Prop C to $55/$100,000 av. Yes, that is what the bond measure said. At the board meeting, Supt. Collins also pointed out that there was some small print in the measure that said the final maturity of the Prop C bonds might be either 25 yrs or 40 yrs after the last issuance of bonds and that the maximum interest rate could not exceed 12%. I did read that back in 2008, and as a result, I questioned PUSD trustee Todd Gutshow about it (see below). My concerns were strong enough to keep me from voting Yes on Prop C in 2008.

In their powerpoint presentation, the district also pointed out that the total cost of borrowing the $376,998,406 will come to $1.6 billion, which is  $4.2611 for every dollar borrowed.  Passing the bond measures allowed the district to capture $92,523,994 in state building funds, which is a pretty cool thing.  So, the district added the state funds and $73,556,321 in "other district capital facilities funds (creative use of mello roos funds? redevelopment money?) to the principal amount of the bonds, for an amended payment ratio of 2.9579, which is really, really not a cool way to frame this. First of all, the state funds were not "free", they were paid for by us, the taxpayers. Secondly, neither the state funds nor the other district funds were borrowed money, so to throw those figures in and then to recompute the return on borrowed money is completely misleading, in my opinion.

There was one page in the powerpoint presentation that had some new (to me) information. Apparently PUSD told the San Diego County Taxpayer Association (SDCTA) that they planned to use capital appreciation bonds (CAB) for Prop C. The president of SDCTA, Lani Lutar,  confirmed this in a tweet, but she added that the estimated total cost was to be under 500 million.  In a  comment on Carless's article, Lutar said that SDCTA will soon be issuing a policy brief on CABs, but that they oppose them for bond terms greater than 25 years.

It is important to note that under certain market conditions, limited use of shorter term CABs may result in a lower cost to taxpayers in comparison to other financing mechanism, so CABs should not be written off under all circumstances. Will Carless was incorrect in his response post. We regularly ask for financing and debt cost information as part of our review process. Our analysis included the total debt cost that was provided to us by Poway in 2008. SDCTA's current policy on CABs is as follows: SDCTA opposes the use of Capital Appreciation Bonds (CABs) with maturities greater than 25 years as a financing mechanism for General Obligation bonds because of the increased debt burden on taxpayers. CABs with maturities of 25 years or less should only be pursued if it can be demonstrated that its use will result in less debt service than other financing instruments. Other financing options that should be compared to the potential use of CABs include voter approved bond reauthorization or additional voter approved tax increases. Defensible assumptions for growth in assessed value shall be used for development of any proposed financing method.

Apparently Lutar's group missed the small print that said the Poway bonds might be issued for a 40 year term.

PUSD may have let SDCTA in on their expected use of  CAB bonds, but SDCTA did not share that information in their report recommending approval of the Prop C bonds. I saw nothing in the ballot statement about these CAB bonds, nor anything in the literature from the Yes On C committee.  Nor did Todd Gutshow mention it in the email conversation we had prior to the bonds passing (see below).  Why not? Why was the CAB financing such a secret?

In fact, PUSD had already issued a  CAB bond in October, 2006, several years before Prop C was even on the ballot.  The bond was issued for $3,080,766.  It was part of the series B bonds for Prop U. The payback (final accreted value) amount will be $19,050,000. That is almost a 6-to-1 payback. This bond can not be redeemed prior to maturity in 2013. But who knew?

In addition to underestimating the true cost of renovating 24 schools, PUSD grossly overestimated the growth of assessed valuation in the SFID. These are the figures that SDCTA included in their report, but the figures likely came from PUSD:

Poway, PQ and RB make up the SFID. Most of those areas are already "built out". There would be minor growth in the Poway Industrial Park, but even that was mostly built out. In fact, the census bureau found that the City of Poway lost population between 2000 and 2010. Where was the 5-8% growth from 2008 to 2015 going to come from?  Back in 2008, I asked Todd Gutschow about this and some of the other details in Prop C (my questions are in black. Mr. Gutshow's responses are in blue):
Date: Thu, 17 Jan 2008
1. What EXACTLY is planned for Valley School?  Are there 2 plans for Valley- one if Prop C passes and one if it doesn't?   Newly constructed classrooms? More portables? Newer portables?  
There are two plans for Valley. Much of the planned renovations for Valley will take place using funds from Prop U. If Prop C passes, additional work will be done. I do not know exactly what is included in either plan. As soon as I have that information, I will get it to you.  
2. How old are the portables at Valley? 
3. Are the new portables that have recently been brought over for the preschool NEW or are they old?      In other words, how old are they? 
4. Have they been moved from other campuses that were renovated?    I suppose this sounds like I am asking if Valley is getting north Poway hand-me-downs.
 It is my understanding that these portables were used at Poway High School. I do not know how old they are, but will find out.  
5. Can Prop C money be used for district buildings (lease or remodel?).That is, can it legally be used for these purposes?  
It is my understanding that Prop C money cannot be used for building, leasing, or renovating the district office or other district administrative sites. Further, there has never been any discussion of using Prop U or Prop C funds for district offices. However, I need to verify what the language of the proposition allows from a legal standpoint (which I understand is the nature of your question).  
6. According to SDCTA info, Prop C will cost the taxpayers $497 million. If I had seen that earlier, I might have blogged about how a $40 million shortfall snowballed into a $500 million tax measure.  http://www.sdcta.org/Uploads/Documents/PropC.Poway_1.pdf  
I am a little surprised by your statement about the cost of repaying Prop C bonds. Any long-term borrowing (like a mortgage) always results in interest payments that are significantly more than the principal borrowed. The exact amount of interest will not be known until the bonds are issued. Also, I am not sure where the $40M shortfall number comes from. I realize that there have been several shortfall numbers floating around in the newspapers and various district materials, but the shortfall for the originally planned Prop U work is about $90M to $100M.    
There are some issues I still do not understand. According to the graphs on this document, assessed valuation is expected to grow by 7-8% during the next 3 yrs. That seems to me to be an overly optimestic  projection.  
Actually, 7% – 8% is reasonable based on the increases that we have seen the pass two years. According to the County Assessor, the 2007-08 assessed value for San Diego County grew by a little over 9%. I cannot find the growth for PUSD; however, generally, PUSD is a bit higher than the County in general. Even with market values falling, there remains a significant gap between the current assessed value and market value. As homes are sold or remodeled, the assessed value is up dated. I believe this will continue even with the current real estate situation.  
7. If Prop C did pass, and assessed valuation did not grow by 7-8% - if, in fact, it grow by 2% or less for the next 3 yrs, how does that affect the taxes the taxpayers will have to pay to pay off the bonds?  
If the assessed value base does not grow according to the estimates, then the district will not issue bonds. The district will only issue bonds when the assessed value base grows sufficiently to allow the combined payment for Prop U and Prop C to remain below $55 per $100,000 of assessed value. The district is 100% committed to keeping the combined tax for Prop U and Prop C below the $55 per $100,000 rate. By managing the timing of the bond issuances, the district controls the tax rate needed to repay the bonds. The district expects that Prop C bonds will be issued over the next 10 to 12 years, but that time could be extended if the assessed value base does not increase as expected. In the mean time, the district will borrow money using a bridge financing arrangement. The proceeds of the future bond issuances will be used to pay back this bridge loan. This mechanism allows the district to perform the work now (keeping the cost lower) while keeping its commitment to the taxpayers to maintain the tax rate at or below $55 per $100,000.  
8. Could taxpayers have to pay more than $55/$100,000 av?  
Legally, the tax rate under Prop 39 cannot exceed $60 per $100,000 AV. The district would not be able to issue bonds that would require a larger tax rate.  Prop U and Prop C are separate Prop 39 ballot propositions. Thus, it would be legal to increase the tax rate to $60 per $100,000 AV for each of them. This would make it possible to have a tax rate of $120 per $100,000.  Even though the maximum rate is much higher, the district’s plan for bond issuance, as I stated above, will keep the combined tax rate for both Prop U and Prop C at or below $55 per $100,000. The district will not issue bonds that would require the combined tax rate for both Prop U and Prop C to go above $55 per $100,000.  
9. More than $60/$100,000 av?Legally is there a limit? I know the limit for a bond proposition is an $60/$100,000 of estimated assessed valuation. But if the estimates are way off, what happens?  
As I stated above, under Prop 39, bonds cannot be issued until the actual assessed value base is sufficiently large to keep the tax rate at or below legal limit.  
10. If Prop C passes, and the district borrows money now- eventually they will have to pay back the loan. The assessed valuations may not be anywhere near projections, and 11-14 yrs from now the interest on the bonds could rise substanially. So, legally, even though PUSD said it is not their intent- is it still possible that taxpayers will be paying off both Prop U and Prop C bonds simultaneously- and for way more than $60/$100,000 av?  
The first part of your statement is correct. Prop U and Prop C bonds will be paid off simultaneously at some point. Right now, almost all of the Prop U bonds have been issued and the tax rate is approximately $44 per $100,000. Thus, it would be possible to use the remaining $11 per $100,000 to issue and pay for a portion of the Prop C bonds. As the Prop U bonds are paid off and/or the assessed value base increases, additional Prop C bonds will be issued. Interest rates on bonds are fixed. They cannot rise once the bonds are issued. Thus, bond repayment amounts are fixed once the bonds are issued. This sets the amount of tax that must be collected each year to fund the bond payments. This allows the district to issue bonds only if a tax rate of $55 per $100,000  or less generates enough tax revenue to fund the new issuance plus any other outstanding bond issuances.  
11. From SDCTA:The interest rate on any bond, which is established at the time of the bond issuance, cannot exceed 12% per annum.  The total debt service of this bond proposal is estimated to be $497.4 million; $179 million principle plus $318.4 million in interest. What is the projected interest rate on the bonds  that went in to the projected $497 million payback? What is the possible payback amount if the bonds were issued at 12 % ?  
I do not know the exact model used to estimate the bond repayment. I will have to check on this for you. 

So, as it turns out, PUSD did issue bonds that will cost the taxpayers more than $55/ $100,000 of av. We are currently paying $55/$100,000 right now and we haven't even paid off all of the Prop U bonds yet.  Just how much will it cost you? I haven't seen an all-in-one debt chart that includes both Prop U and Prop C debt service.  I had to improvise a bit, and I may need to revise later if I find more bonds that need to be paid. My figures are pretty consistent with the projection that Supt Collins used.

Debt Service Payments
2012    about    $11 million.
2021    almost   $22 million
2027    approx. $33 million.
2031    over      $45 million
2051    almost   $55 million

Assuming that the assessed value of your home and the other homes in the SFID, have the same relative value in the future as they do today, you would pay about twice what you are paying now in 2021, three times as much in 2027, 4 times as much in 2031 and 5 times as much in 2051. The owner of a house assessed for $300,000 currently pays  $165. that would creep up each year. By 2021 it would be $330, by 2027 it would be $495, by 2031 it would be $660 and by 2051 it would be $825.

My assumption is unlikely. In fact, it is absurd. All of our assessed valuations won't stay the same, relative to each other as they are today. Houses that sell will be reassessed upward. Properties that are not sold can be reassessed 2% (from Prop 13) yearly unless the purchase price exceeds the resale price- then they can be reassessed downwards. Periods of inflation would also drive up the assessed value and it would make the school tax payments less onerous because the dollars would be worth less. We bought our house in Poway 36 years ago. It was a new house and it cost $36,450. There were periods of inflation and there were a few recessions since then, although none so steep or so severely affecting housing prices as the period we just went through. Nevertheless, I think it is likely that the total assessed valuation in the SFID will increase and that inflation will make that $55 million payment not seem as huge as it seems today.  

The people who will be hit quite severely with the increased school tax payments will be new homeowners and businesses who purchase property in the district in a future time of rising prices. They will pay higher property taxes because of Prop 13 and they will pay a larger proportionate share of the school tax because the Prop 13 assessed valuation is based on the purchase price of their homes. It will be a double whammy. 

I am grateful that Todd Gutshow even responded to my request for information back in 2008. Todd and I plan to get together soon and talk about how things have turned out. One of the things I am concerned about is what is going to happen when the portables at Valley school crap out. And what the district intends to do to make sure the building stay in tip top shape for as long as it takes to pay for them. 

I also wanted to know why the district moved forward to buy a new headquarters with some money they had in another fund AFTER they issued a CAB bond in 2006 for $3 million.  We have to pay back $19 million, in 2031 for that bond. That is more than 6 times the amount borrowed. And it is not re-financeable. It seems like we had already dug ourselves in a hole in 2006, and we just kept digging. Why was the school board so optimistic that Prop C would not raise the tax rate on the bonds?

I will keep you posted.

August 15, 2012

PUSD's Prop C: The Naysayers Were Right

Last week, Voice of San Diego investigative reporter, Will Carless, published a piece on on a creatively financed PUSD school bond: "Where Borrowing &105 Million Will Cost $1 Billion: Poway Schools".  Carless lays out the details of the last bond sale authorized under Prop C, a school bond approved by the voters in 2008. PUSD financed $105 million through a capital appreciation bond (CAB) that will be paid off in 2051. The payments do not start for 20 yrs, although interest continues to accrue. The bond payments will eventually be about $50 million/yr., which is almost half the amount being financed. Unless we have massive inflation or massive new construction in the older areas of the district, we're screwed.  And not just us. Our kids and grandkids, and great grandkids are going to end up paying almost a billion dollars for this bond.

Carless' article created a lot of buzz. The article was reprinted in the Chieftain, as was a followup article by Carless. Poway Patch ran a blurb and an editorial piece (here and here).  PUSD released a statement in response to Carless' article.  I have some things to say about the bond sale, but I am not going to rehash everything that was in Carless' article or other articles. I am going to focus on some issues and nitty gritty details that are part of what I like to call "the bigger picture".

Mello-Roos, SFID, Prop Y, Prop U and Prop C
Many years ago, a developer in California could not build a housing development if the local schools were overcrowded. Then, the  California legislature allowed developers to form Mello-Roos districts to pay for the new schools. Home purchasers in Mello Roos districts pay yearly fees to pay for the bonds that built the schools in their areas.  PUSD has 14 Community Facility Districts (CFD, aka "Mello-Roos" districts) that were formed between 1987 and 2006. (There are possibly more formed between 2006-2012).  There are no Mello-Roos districts in the City of Poway. In 2000, PUSD decided the older schools in the district needed some upgrades. PUSD formed a School Facilities Improvement District (SFID), a type of CFD, from the older developments in Poway and PQ and RB that were not in a Mello-Roos district. PUSD put a school bond, Prop Y, a $156 million bond on the ballot. Prop Y got 62.93% yes votes, but it needed 67% to pass.

In Nov, 2000, California voters passed Prop 39, which allowed school bonds to pass with 55% voter approval. These bonds were capped at an amount that could be paid for by a tax rate of $60/ $100,000 of assessed valuation.  And, uh, there had to be a citizen's oversight committee.

PUSD could not get a $156 million school bond measure passed in 2000 because it required a 2/3 majority to pass, but in 2002, a $198 million bond measure passed with 57.4% of the voters approval. PUSD promised not to exceed a tax rate of $55/ $100,000 of assessed valuation. Prop U was supposed to pay for expanding and renovating 24 schools, but in Feb, 2008, PUSD asked SFID voters for $179 million more to finish the job.  Great job by the oversight committee, eh? Prop C passed with 63.9% approval.

Prop C misinformation
Personally, I think PUSD planned 2 bonds all along. I am sure there were cost overruns, and for some reason PUSD decided to improve every school in the district during a time of high labor and high materials costs.  Prop U + Prop C allowed the district to sell  a total of $372 million in bonds. A $372 million bond would still have required a 2/3 majority to pass, but by breaking the amount into 2 smaller bonds, PUSD could get them passed with 55% approval.

Another reason I believe they planned 2 bonds all along is because PUSD claimed that they were renovating the oldest schools first, but, in fact,  they didn't. For example, Valley School was one of the schools that did not get renovated until after Prop C passed, even though it was older than some of the schools that were renovated first. Why? Perhaps because voter approval of school bonds was more iffy in the Valley school boundaries, so Valley renovations became contingent on passing a second bond.

It is just my opinion that PUSD planned 2 bonds from the get go, but it is a fact, not an opinion that PUSD and the citizen group, "Yes on C" headed by Sabrina Butler, misrepresented Prop C to the voters. The Yes on C group  repeatedly presented Prop C as an "extension" of Prop U, instead of a separate bond measure.  They also said that it would extend Prop U "for 11 yrs". People were led to believe that if they extended the first bond measure for a few years, we could finish the job. It is kind of scary to to imagine why the well educated people of Poway didn't realize that borrowing $179 million a few years after borrowing $193 million was going to be like extending the first bond for a few years.

The San Diego County Taxpayers Association is not a citizen watchdog group. Far from it. Back in 2008, I blogged about the SDCTA board of directors and their vested interests in Poway School bonds. As it turned out, I missed a few connections.  April Boling is currently on the SDCTA executive committee. In the past, she has been president and held other board positions. Boling is hardly nonpartisan. She has served as campaign treasurer for several local Republican candidates and PACs She was also campaign treasurer for Steve Vaus' successful Recall Rexford committee. Apparently she was also the "contact person" for the "Friends of Poway Unified School District", a 527 political organization advocating for school bonds in Poway in 2002 (Prop U) and in Nov 2007 (Prop C).

SDCTA supported both Prop U and Prop C. Here is how SDCTA summarized the fiscal impact of Prop C:

Fiscal Impact:
Passage of this bond proposal will generate revenue from five issuances over an 11-year period between 2008 and 2019, totaling $179 million. Poway residents would continue to pay $55 per $100,000 of assessed property for an extended period, through 2044, under this proposal. The average assessed value of a home in Poway in 2000 was $200,000. The District has experienced an average assessed value increase of 9.36 percent annually over the last four years. As of March of 2006, the average assessed value of a home in the District is $337,401; therefore a homeowner can expect to pay an additional $185 a year in property taxes.
Table 1 outlines the projected increase in assessed value during the life of the bond. 

The interest rate on any bond, which is established at the time of the bond issuance, cannot exceed 12% per annum. The total debt service of this bond proposal is estimated to be $497.4 million; $179 million principle plus $318.4 million in interest.
The SDCTA projections are irresponsible. Housing bubbles don't last forever. Maybe they were planning on revamping Poway Rd with 5 story buildings or something, but the outrageous growth rates from 2008 to 2012  turned out to be way off. And it throws off all the calculations for the rest of the bond payback period. Currently, assessed valuation in the PFID is closer to $20 billion than to the projected $25 billion.  That shortfall ripples through the entire payback period, making it impossible to payback the loans at the promised tax rate.

Will Carless' article pointed out that PUSD won't even start paying back the $105 million bond until 20 yrs from now. Here is the chart that shows the payments from the audit report on PUSD's website:

From 2034 to 2052, the yearly payments on this bond will be about $50 million/yr. Currently, taxpayers in the PFID are paying about $11 million per year.  That means the assessed valuation of properties in the PFID need to more than quadruple in the next 20 yrs. Either that, or the tax rate will have to quadruple.

So why did PUSD structure a bond so that we don't start paying it off until 20 yrs into the future? Because, we will be paying off other bonds until 2034. The $105 million bond was the last bond sale of Prop C, but it wasn't the first. PUSD issued $74 million Prop C bonds in 2009. They are also CAP bonds.  According to the Jan 2012 audit report, PUSD does not plan to pay back those bonds until 2018.

Look at the period between 2028-2032. The repayment amount is over $107, million, or about $21 million/yr. Assessed valuation would have to almost double in the next 16 yrs to meet those payments. That will be difficult, because of the slowed economy, because most of Poway and the PFID is "built-out" and because Prop 13 limits increases in assessed valuation to 2%/yr. for properties that are not resold. We might be in trouble, paying off the bonds well before 20 yrs from now.

From the chart, you can see that the payments for the Series A Prop C bonds don't begin until 2018. I think that is because we will still be paying off Prop U bonds until then. One series of Prop U bonds will be paid off in 2017, another in 2027, and the last Prop U series will be paid off in 2032. The last Prop U audit report on PUSD's website, dated June 30, 2007, shows Prop U bond payments through 2032.
The chart for the Prop U bonds is slightly different than the one for the Prop C bonds in that it lists the years as fiscal years. Therefore 2012- 2017 is a span of 5 yrs in the Prop U audit, whereas it would be 6 yrs in the Prop C audit. I am hoping that some of these Prop U bonds were refunded, because I don't think we will be able to manage both the Prop U and Prop C bond payments between 2018-2033.

The bottom line is that the voters approved the sale of $377 million in bonds that were to be paid back over an almost 50 year period. It doesn't seem unreasonable that $377 million would generate over a billion dollars in interest over 50 yrs. While it doesn't seem unreasonable, it does seems stupid to have agreed to finance the bonds over such a lengthy period of time.

The Citizen's Oversight Committee
I'm not sure exactly what they are overseeing. The Prop C oversight committee members are Andrew Berg, Ramon Ruelas, Chrissa Corday, Bill Bonner, Lee Dulgeroff, Kathy Frost, Jerry Ricks, Roger Moyers, and John Strula II. They had meetings. Here are the minutes of their last meeting. It appears the committee and the district spent their time congratulating each other on what a successful job they have done. There is not a single word from anyone on the committee as to how this impossible financing becomes possible.

What Really Sucks
Prop U and Prop C paid for some new schools, some new buildings and modernizing of some portables. I know that Valley School got some old portables from Poway High. The district also spent money on technology equipment. There is no way in hell that those portables, refurbished or not will last until 2051. Technology is pretty much outdated the minute it is bought. Certainly, computers and other tech stuff won't last until 2051. So what will happen when the portables rot and the computers are dinosaurs? The fact that the tax rate on the current bonds may double or quadruple in future years is not going to endear the voters to another bond to replace aging portable classrooms.

The Contractor
Echo Pacific Construction did most of the contract work for Prop C. The district used a lease/leaseback agreement to avoid public bidding. New projects that came along, like astroturfing the sports fields were considered amendments to existing contracts. Echo Pacific Construction figures into an ongoing investigation of bidding issues at several other school districts. They know how to play the game to get the contracts. I am not insinuating that anything illegal was done in the PUSD contracts. I am just saying that they are involved in an investigation. And that they have close ties with several influential people in the community.

The Politics
There was opposition to Prop C.  A few libertarians (from outside of Poway) organized the  ballot statement in opposition to Prop C. The issues were pretty much related to the government-is-too-big theme. A local, grassroots group,  South Poway Residents Association (SPRA) studied the issue, polled their members and voted against endorsing Prop C.  They issued a press release with their reasons for opposing Prop C. I think one of the biggest issues is that they worried that their taxes would double in order to pay for the 2 separate propositions. Unfortunately, SPRA was belittled for their position and they were told that they didn't care about "the kids".

I blogged about Prop C here, here and here in 2008.  I received a phone call from a woman who was on the "Yes on C" committee and who happened to be a lawyer. She accused me of putting up illegal signs in Rancho Penasquitos and she also threatened to sue me over my blog. I put up no signs regarding Prop C anywhere. I should have reported her to the county bar association. I have no idea how she even got my phone number. Imagine what might have happened if we had had a sane and reasonable discussion of how we would pay back these bonds?

The point is, people did bring up issues. There were other voices that demeaned and disallowed our concerns. The Poway City Council members all endorsed Prop C, according to news accounts. When there was an empty seat on the council, Merrilee Boyack proposed that it be filled by Sabrina Butler, whose main credential was that she was the leader of the  "Yes on C" group. Now Merrilee Boyack is apparently very upset about the bond issue and is posting on facebook about it and sent out  "scathing emails". Where was Boyack when Prop C was proposed back in 2008? It is all too obvious that those who are currently making the most noise about the Prop C CAB bonds are people who support Steve Vaus for council, and see the opportunity to hang this mess around the neck of Jeff Mangum, a former school board member who is also running for council. Neither Boyack nor Vaus complained about the bonds back in 2008 or paid any heed to the voices that expressed concerns. I would not be surprised if Boyack and Vaus and Vaus supporters show up at the next school board meeting for a little kabuki theatre. It worked so well before. Remember the Rexford firetruck story? Color me jaded, but I have doubts about the genuineness of those who are just now complaining about the school bonds.

In retrospect, there are probably many lessons to learn from the whole bond mess. Maybe if the political process in Poway was more inclusive, we would be able to make better decisions. But I don't see that happening anytime soon.

March 30, 2012

Wading Through The Scams

I help manage the financial affairs of an elderly family member. Last week, I looked through her bank statement and noticed a recurring $29.99 charge around the middle of each month. What are you buying from something called "Amk*pth Healthy"?, I asked. She didn't have a clue.

Apparently, my relative purchased a Christmas present from one of the Amerimark catalog companies (Anthony Richards, Beauty Boutique, Complements, Essentials, Healthy Living, Time for Me, FeelGood Store, and Windsor Collection) and without realizing how, ended up enrolled in something called Passport to Health, which does nothing for her, except deduct $29.99 from her account each month. A quick googled search of "Amk*pth Healthy 866-345-4401" let me know I had everything to fear.

I guess she was lucky. Some people have been scammed at more premium levels and didn't catch it for a longer period of time. I can see that the scam has been ongoing since at least 2008, and nobody has yet put a stop to it. I called Amerimark and got them to unenroll my relative and to promise to pay back the 3 monthly payments she made. So far, they have not done that. Now I have the unenviable task of checking and rechecking her checking account to see if the charges were deducted, as promised, and if no new charges appear. And I have to try to convince my relative to quit buying crap from catalogs owned by Amerimark companies.

I hate these scams. I know many people actually agreed to the memberships, without even knowing that they did. Mostly, that is because of the cunning way they slip in the membership during the check out process for another legitimate purchase. Last week, I signed my granddaughter up for a swimming class at the Poway Community Pool. The city's online page about swim lessons says "online registration is highly recommended". They don't mention on this page that there is a $1.50 additional charge for signing up for the swim class online. I didn't find that out until I went through the hassle of signing up for an account and trying to pay for the lesson.

So, I was a bit miffed already when I went through the check out process and attempted to pay for the swimming lesson. I put the lessons in my "cart" and then indicated that I wanted to check out and pay for them. I loaded in my credit card number, and prepared to hit "next, next, next" to finalize the transaction. And then, unexpectedly, in the middle of the payment process, an offer to buy magazines was on my screen. Not on a pop up window, where I could avoid it, but on the screen where I was paying for the swim lessons. WTF? Why do I have to chose not to get some magazines when I am signing up for swim lessons? I hope I hit the "No thanks" button. Why was the city letting someone sell magazines to people trying to sign up for swim lessons?

It wasn't over yet. The next screen was not a receipt for the swim lessons. Nope. I was offered a membership to something or other. It might have even been "Passport for Health". They would charge my credit card monthly for I don't know what. Was I in a video game trying to make it through a field of scammy landmines? I hit, "No, thanks" again. At least I think I did. I hope I did. I was just trying to pay for a swim class, damn it. Stop it!

I'll be spending a lot of time in the coming weeks taking my granddaughter to her swim lessons. And checking my credit card bills for unanticipated charges. Next time I sign her up for a class, I am going to save the $1.50 processing charge and a whole lot of headaches and sign up in person. I recommend it for everyone else, too.

Update: Ugh! I am starting to get spam in my email folder. This has prompted me to take another look at the company that processed the swim class registration for Poway. The registration is on a site called "activenet". When I registered, I signed an agreement with activenet. Part of that agreement said this:

4. Links; Third Party Services; Promotional Messages

As a convenience to our members, we may provide links to third-party web sites. The linked sites are not under our control, and we make no representations as to the quality, suitability, functionality or legality of any sites to which we may provide links. You hereby waive any claim you might have against Active with respect to such sites.

In addition, you may order services or merchandise through the Active Sites from other persons not affiliated with Active ("Seller"). For example, you may choose to register for a sporting event and purchase event-related merchandise on the Active Sites. All matters concerning the merchandise and services desired from a Seller, including but not limited to purchase terms, payment terms, warranties, guarantees, maintenance and delivery, are solely between you and the Seller. Active makes no warranties or representations whatsoever with regard to any goods or services provided by Sellers. You will not consider Active, nor will Active be construed as, a party to such transactions, whether or not Active may have received some form of revenue or other remuneration in connection with the transaction. You agree that Active will not be liable for any costs or damages arising out of such transactions, either directly or indirectly.

Active and/or third parties may, from time to time, send email messages to you containing advertisements, promotions, etc. Active makes no representation or warranty with respect to the content of any such email messages or any goods or services which may be obtained from such third parties, and you agree that neither Active nor such third party shall have any liability with respect thereto. You further agree to receive certain periodic communications from Active such as newsletters, content, messages, and announcements, and that these communications are considered part of your access of the Active Sites and services and that you may not be able to opt out of receiving such communications in every instance.

Ugh! Ugh! Ugh! Sign up in person and avoid the hassles.