In a true example of fiscal irresponsibility and the immorality of originating debt that has to be paid back by people not even born yet, we have this:
A California school district is shouldering $1 billion in interest on a $105 million bond in a deal intended to defer most of the payments for 35 to 40 years.
The Poway Unified School District, in San Diego County, structured its 2011 sale of capital-appreciation bonds to avoid debt service until 2033, with the largest sums — more than $300 million each — due in 2046 and in 2051, according to data compiled by Bloomberg.
Other issuers in California may pursue similar deals to raise money for construction at a time when revenue from property taxes is stagnant, said Marilyn Cohen, founder of Envision Capital Management Inc. in Los Angeles, who has $195 million of munis under management.
“I’m sure California is the worst offender,” Cohen said in a telephone interview. “Property taxes have gone to hell in a handbasket in California.”
Last year, Los Angeles County Treasurer Mark Saladino advised school business officials there against long-term capital-appreciation bonds, saying they would result in a “significantly higher debt burden.”
Poway, a district of 33,000 students about 20 miles (35 kilometers) northeast of San Diego, issued the debt to modernize schools in July 2011. It was part of as much as $179 million in borrowing approved in a 2008 referendum that passed with 64 percent of the vote. The San Diego County Taxpayers Association now regrets that it endorsed the proposal.
To owe $1 billion to get $105 million is more than immoral, it is criminal.
You just have to question the sanity of people who are willing to execute this “I’ll pay you on Tuesday for a hamburger today” strategy. The team at CNBC seems to think that the only reason that they are doing it is that they made a pledge not to raise taxes - but it appears to me to be simple fiscal irresponsibility – more of the “don’t want to pay more taxes – well, we’ll show you” attitude of governing entities.
According to the 2010 Census, Poway is a city of 47,811 people.