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Cash-out refinancing practices get first PUSD review

Original post made on Jun 24, 2011

Pleasanton school board members got an earful Tuesday night about cash-out refinancings done by the district, as a consultant walked them through a 20-page document showing the costs and savings to taxpayers. Government Financial Services head Lori Raineri refused to be pinned down by the board on whether the cash-outs were illegal.

Read the full story here Web Link posted Thursday, June 23, 2011, 9:17 PM

Comments (40)

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Posted by Anne
a resident of Another Pleasanton neighborhood
on Jun 24, 2011 at 6:35 am

It's time for some straight answers, and all we are getting is the usual soft shoe dance.


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Posted by Me
a resident of Another Pleasanton neighborhood
on Jun 24, 2011 at 8:35 am

So the math is they still saved taxpayers a few bucks by refinancing, right? It is not like they spent money on corvettes for teachers it went to the schools! Not sure what the big deal is since many schools did it and now they won't do it again. Why don't we focus on how they are funded now not what happened so many years ago?


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Posted by Public school parent
a resident of Another Pleasanton neighborhood
on Jun 24, 2011 at 8:39 am

This opaque and questionable action by the school board could be why the parcel tax didn't pass this year. Voters don't trust the board to spend money responsibly, so they're not going to give the district any more. It's such a shame: our students will suffer the consequences with cut programs and increased class sizes.

PUSD, you need to earn voters' trust back! Help get to the bottom of this so we can move on.


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Posted by Brian
a resident of Another Pleasanton neighborhood
on Jun 24, 2011 at 9:39 am

I looked at the GFS report and as I understand it, over the term of the loans, refinancing will save taxpayers $9.87 million. Had the district not taken cash out, they would have saved taxpayers over $19 million. Some would argue that keeping 1/2 the savings and giving the other 1/2 of the savings back to the taxpayers, although now determined to be illegal, doesn't sound that bad and could even be considered appropriate given the fact that the school district has responsibility to both the taxpayers and the students.

However, it is true that at least part of the savings was achieved by shortening the term of the loans relative to the term of the bonds i.e. they are being paid off faster. This has resulted in a net increase in tax levies that will continue to increase until 2013, followed by a sharp drop and reduced tax levies starting 2015 when several of those loans are paid off years before the original bonds would have been.

Some will argue that the school district should not be allowed to increase tax levies for a short period of time, even if it's more than offset by reductions in the future. I would agree. Besides saving taxpayer money, one of the other tenants of refinancing should be that the principle + interest payments not be any higher than the original bond or loan it replaces.

As a final comment, now that it has been definitely determined that the school district can not benefit from refinancing debt and must give 100% of the savings back to the taxpayer, I propose that the responsibility of debt management be taken away from the school district and give to an entity who only answers to the taxpayer.


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Posted by Kathleen Ruegsegger
a resident of Vintage Hills Elementary School
on Jun 24, 2011 at 10:00 am

Also important to note, had there been no refinancings at all (cash-out or not), the impact to taxpayers would have been a relatively long and steady payback rate. With a lousy economy, that would have been a relief in and of itself. I realize no one could have known how bad things would be just as the peak payback period hit taxpayers. Also important, as people move in and out of homes, they have been paying through the peak rates between 2002 and 2015. There isn't going to be a savings if you move out of Pleasanton before 2015ish, and some could be here only through the highest rates of payback.

Until we know where the money was spent, we can only assume this benefitted students. The problem is even if it was spent where needed, it was for facilities only. I believe there is a tolerance threshold for taxes, and with rates escalating, many already felt the pinch and maybe didn't vote for the parcel tax. It could be when we see the facility modernizations or additions, we won't feel it was worth the possible trade off for programs and support like counselors.

Getting this on record does start to clear a path for renewed trust. It was important for this board and staff to see the pitfalls of these actions. I appreciate their taking the first step.


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Posted by Anne
a resident of Another Pleasanton neighborhood
on Jun 24, 2011 at 10:59 am

More now, less later is a lousy deal for many. Shame on you PUSD!


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Posted by Stacey
a resident of Amberwood/Wood Meadows
on Jun 24, 2011 at 11:24 am

Stacey is a registered user.

Brian,
I think you wrote a good summary.

It probably isn't useful to debate about the legality. Experts have already weighed in and use the words "questionable legality" and "unconstitutional". So everyone understands the message: "Don't do that again." The matter would have to be tried in court to say "illegal" and that's a waste of time, money, and not in our best interests. Lawsuit to recover the tax money? That's essentially suing ourselves (in some recursive manner we pay taxes to pay the lawsuit and settlement to pay out the tax money?), which is why, I think, this issue has been handled so far by grand juries and attorney general opinions.

It is enough to audit and then move forward with best practices. Brian suggests someone else to handle debt management. I think that's supposed to be part of the role Luz Cazares was hired for and she wasn't here during the time of that practice. I hear though that county tax treasurers have been urging districts to work with them when issuing bonds. Maybe that's an option.

Web Link
"Adams said treasurers must be a part of the process to make sure general bond issuances benefit both school districts and taxpayers. She said it's important to reach out to school superintendents — who she said she doesn't blame — to make sure they know that treasurers want to help with the issuance process."


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Posted by Debby
a resident of Birdland
on Jun 24, 2011 at 2:19 pm

Perhaps those who want an additional property tax (parcel tax) would like to pay the difference that PUSD has cost all of us. Where is the accountability? What will prevent PUSD to do this again. Perhaps the people who signed off should take a personal hit to help pay back the Pleasanton tax payers.


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Posted by John
a resident of Another Pleasanton neighborhood
on Jun 24, 2011 at 2:37 pm

Debby,

Many of us who supported Measure E have already donated to the schools to support things like CSR and reading specialists. The money from the bond measure was meant to support facilities. The bond measure was approved long before I moved to Pleasanton. The people who voted for the bond measure voted for additional taxes. What they didn't vote for was the "cash out" refinancing. There is no way to sue the individuals who did the refinancing to get any money from them.


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Posted by Brian
a resident of Another Pleasanton neighborhood
on Jun 24, 2011 at 5:19 pm

The comments by Anne and Debby are precisely the reason why we should take away the responsibility of debt management from the school district.

The school district has nothing to gain from debt management and everything to loose.


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Posted by Arnold
a resident of Another Pleasanton neighborhood
on Jun 26, 2011 at 6:48 am

Column from Daniel Borenstein: Pleasanton residents must pay for illegal bond deal

Web Link


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Posted by Confirmed
a resident of Castlewood
on Jun 26, 2011 at 7:30 am

Yep, 65% of folks voting for measure E confirms that there continues to be an enormous lack of trust of PUSD in the community.

Subtract from the equation people who are cheap but who rationalize it with things like 'unclear language' or 'not progressive enough', subtract from the equation people who are anti- public education (just another socialist payoff to minority entitlement groups), subtract the ten year-old mentalities who think it is patriotic to vote against collective agendas, and there it is: It is the distrust that was at the base of 65% of citizens voting for measure E.

The reasoning of those arguing distrust and regaining trust is flawless. It amounts to much ado about nothing, but has been taken to an expensive witchhunting extreme. Sad for the community that we have so many mean-spirited geese in our midst.


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Posted by Kathleen Ruegsegger
a resident of Vintage Hills Elementary School
on Jun 26, 2011 at 8:32 am

This bell was being rung long before Measue E or even G for that matter. 65% of those who chose to vote, yes; not 65% of all the registered voters. No way to know what those who didn't vote were thinking. This was the right step for this leadership team. Transparency not only rebuilds community confidence and clears even mere suspicion, but also will separate this team from the actions of the former with a clear bright line. How can getting to the truth ever be a bad thing?


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Posted by John
a resident of Another Pleasanton neighborhood
on Jun 26, 2011 at 10:19 am

"This bell was being rung long before Measue E or even G for that matter. 65% of those who chose to vote, yes; not 65% of all the registered voters."

The people who choose to vote are the people who care about the issue. The people who don't even bother to vote don't care.

"No way to know what those who didn't vote were thinking."

Their opinions aren't important because they don't know enough to even vote.

"How can getting to the truth ever be a bad thing?"

Because it takes away time and attention from things that really matter.


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Posted by Kathleen Ruegsegger
a resident of Vintage Hills Elementary School
on Jun 26, 2011 at 10:56 am

The first two comments, maybe. Maybe, too, some clarity would have gotten the votes for either measure to pass. If we don't learn from the past, there is the potential to repeat it.


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Posted by Stacey
a resident of Amberwood/Wood Meadows
on Jun 26, 2011 at 11:39 am

Stacey is a registered user.

Think it doesn't really matter? Look long. The housing cap is off. I can't imagine continuing to crowd the current schools, can you? PUSD will need new schools. They were supposed to get Neal elementary built. They still own the land for it and will probably still need to build it. Where will the money come from for building new schools? PUSD will probably need new bonds for this. Can you imagine a new bond election with this bad past practice left unresolved?

I'm glad the district isn't listening to those who think this is a witch hunt and getting some resolution on this issue. Why put a future bond election needlessly at risk because a small group in the community just doesn't like anything said by another small group? It is in this community's best interest to get resolution on this issue and put forward best practices. The district can say, "Here's what happened, here's how we handled the situation, here's how it won't happen again."


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Posted by financially worried
a resident of Another Pleasanton neighborhood
on Jun 26, 2011 at 2:00 pm

I just read the Daniel Borenstein article and am quite worried (but maybe I mis-read it).

Is the school bond part of our property tax going to go higher in the next couple of years even though we didn't vote for the extra bond debt? We're paying a ton for these bonds right now and seriously can't afford an escalation in taxes at this time, no way can we afford more right now.

For those of you who know more about this - please can you tell me if our taxes are going up in the next few years to pay for these bonds and if so, by how much??


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Posted by Diana
a resident of Vineyard Hills
on Jun 26, 2011 at 2:41 pm

Yes, property taxes will go up. They will hit a peak at the same time that taxpayers would have also been paying for Measure E, if it had passed.

Trustee Jeff Bowser is still justifying this illegal action. Any Board member who can justify this practice is a risk of being a party to future abuses. The current board does not seem to see this as a wake up call to their responsibility of fiscal stewardship. They can not blindly accept what staff puts in front of them.


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Posted by financially worried
a resident of Another Pleasanton neighborhood
on Jun 26, 2011 at 3:14 pm

Do you know by how much? They're not going to double are they? Below is the part of the article that I'm concerned about (but probably just not understanding):

"What's clear is that, because of the refinancing and new borrowing, tax payments will be substantially more than they would have been. The deal boosted payments for the bonds by 5 percent in 2005-6 and 33 percent this fiscal year. By 2013-14, the scheme will drive up bond payments by 72 percent" . . . "the accelerated payment schedule bears no resemblance to what voters were promised when they approved the original bonds."


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Posted by Diana
a resident of Vineyard Hills
on Jun 26, 2011 at 3:52 pm

No they will not double. PUSD bonds are only a piece of the property tax burden. The bond debt is then share among other Pleasanton taxpayers. Your increase will probably not be significant. If the district had obeyed the law and only refinanced to pay down the debt, we would all be paying less.
Email your question to PUSD and share your concern.


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Posted by To Diana
a resident of Another Pleasanton neighborhood
on Jun 26, 2011 at 9:29 pm

I think "Financially Worried" was asking if the BOND PAYMENT was going to double, while your response was that the property tax wouldn't double. Two separate questions if I'm understanding this correctly. I think FW was asking an excellent question, what was the agreed on amount of the Bond Payment (adjusted for refinancing at a lower interest rate (as opposed to 4x the normal rate) and how does that compare to what has/will show up on past/current/future property tax bills).

I would like to know the answer to that question?


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Posted by Kathleen Ruegsegger
a resident of Vintage Hills Elementary School
on Jun 27, 2011 at 5:31 am

I think you can find answers in the GFS materials to be found on the home page of the school district web site at www.pleasanton.k12.ca.us


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Posted by Nathaniel
a resident of another community
on Jun 27, 2011 at 6:48 am

@"How can getting to the truth ever be a bad thing?"

My sentiments exactly. How would Salem have really known the extent of the witches in their midst unless they spent the time they did stalking them and interrogating them?

I was about to go back to my reading of Wittgenstein on truth, but I decided there are far greater truths -- like cash-out financing of 8 years ago. Now, you may think I'm just a narcissistic bluster machine who has a real nose for witchhunts and other matters of dirt, but I've got to tell you, well, my self-identity is bound up with these kind of things. And I'm not a cheapskate either....

Oh, yeah, and we really can't say with certainty that Obama is our president because well over 40% of the voter-eligibles didn't vote. Anything else you want to know smart guys?


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Posted by financially worried
a resident of Another Pleasanton neighborhood
on Jun 27, 2011 at 10:37 am

Yes, my concern is about whether the amount we pay on the bond is going to go up a lot, not the whole property tax amount.

Kathleen, I checked the PUSD website briefly and may have missed the info you refer too, but since you were at the meetings, can you tell me what the bond amount per $100,000 will be in the next 2-3 years?

I see on page 6 of the most recent report that it was 89.10 for 2010 and it had been pretty consistant before then, but what concerns me is slide 9 where they show what is owed in the next few years where there is a huge spike that would not have occured if you look at the line on the graph that shows debt service without re-financing.

So does anyone know the answer to what amount are we going to owe per $100,000 property value in 2011, 2012, 2013, 2014 - will this be going dramatically up or not?

Thanks!


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Posted by Kathleen Ruegsegger
a resident of Vintage Hills Elementary School
on Jun 27, 2011 at 1:57 pm

I don't have the formulas. I imagine there are variables. GFS has expertise, and Ms. Cazares likely knows as well.


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Posted by Tax Expert
a resident of Foothill Farms
on Jun 28, 2011 at 6:22 am

@financially worried

Be worried. Be very worried. I've heard the union has the formulas and the variables. They're not good. I've heard people talking about moving away because their worry is so intense. That and the fact that our home values are being hurt by the corrupt unions who insist that the teachers be paid a fair living wage. Be aware. All this is probably the worst news you could ever want to hear. Witches to the left of us, witches to the right, and here we stand caught in the middle of extreme tax anxiety as the tsunami gathers strength. It's all so awful, isn't it? There's no way to sustain this!!!


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Posted by Blossom
a resident of Stoneridge Orchards
on Jun 28, 2011 at 6:50 am

Say what you want to about these fiscil conservatives. They may not have the facts, but they're reasoning powers are impeckable.


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Posted by Pleasanton
a resident of Another Pleasanton neighborhood
on Jun 28, 2011 at 8:15 am

The new union strategy by public employees appears to be to paint responsible citizens that ask direct questions and demand a complete answer as fanatic lunatics. Meanwhile irresponsible management at PUSD and other entities has managed to divert billions from service budgets into unsustainable pay, benefit, and pension packages. And the costs of those actions are significantly affecting the services we all expect for our tax dollars.

PUSD illegally refinanced our bond debt and increased the taxpayer burden. And they can't even tell you where the money went. ------------------------------------ Response from the "educators" posting here? You are all lunatics on a witch hunt.

PUSD administrators have negotiated "met too" contracts with the unions that now make the payroll unsustainable so services must be cut. The "educators" have been claiming poverty for years, but when the actual figures were released through the freedom of information act the story proved false.

Search PUSD and other public payroll records here: Web Link=

If you take the time to look, you will discover that you have to dig 29 pages into the report to find a teacher or administrator earning under $100K in total compensation. I believe that teachers deserve a decent wage, but more than $100K to teach first grade for less than 180 days a year is a lot of scratch in my book. And there are PAGES upon PAGES of teachers and administrators earning a great deal more at PUSD.

Response from the education community? Witches. Lunatic fringe irrational and possibly a little jealous witch hunters who have nothing better to do that persecute the poor slaving employee that has sacrificed sooooo deeply for the sake of "the children".

OK -------------- I get it. No one likes to go backwards. No one likes to give up their seat on the gravy train. And the longer one is seated, the more entitled one feels to the free ride. But at some point this train is going to derail if allowed to continue down the tracks at this pace. And no one wants to see that happen.

Get your house in order PUSD.

Get your financial tracking straightened out. Make your expenditures open to the public. Become accountable for your actions.

Get your contracts under control. Your per employee payroll expenses have spiraled to an unsustainable level. Your revenue will not increase for the foreseeable future, and will likely decrease by significant amounts soon. Negotiate pay concessions (real ones) now or prepare to take the necessary steps to break the tenure system.

Do these things now or the public will eventually become impatient and do them for you.


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Posted by Blossom
a resident of Stoneridge Orchards
on Jun 28, 2011 at 10:38 am

Attaboy, Pleasanton, good paste job and you tell them like it is. They don't understand the fiscil mess we've made becuase of the ensalving teachers and their mooranic unions. They's all witches that deserve presecution at the hands of the law.


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Posted by financially worried
a resident of Another Pleasanton neighborhood
on Jun 28, 2011 at 10:42 am

The reason I am worried has nothing to do with political leanings. It has to do with our family income being a lot less than before. Much of our property tax is coming out of savings now, which is diminishing rapidly. I am very worried and we will have to change our family budget if there is to be a spike in this. So does anyone know what is going on?


 +   Like this comment
Posted by Mitzi
a resident of Foxborough Estates
on Jun 28, 2011 at 10:53 am

Yes, the corrupt and greedy union teachers want to steal the food right off your table. Wages/salaries are down since Ronald Reagan ... with the exception of the top 1% whose annual income has jumped by 60%. But keep blaming that cash-out from 2003; that oughta keep your kids in string beans for the time being. \

Look, as Kathy R so eloquently stated, we have to make sure the cash-out that occurred in 2003 and was stopped across all of California after Brown's 2009 declaration will never ever ever happen again. Its all about trust. And reason. See, with trust, Measure E would've passed. All the anti-socialists and anti-teachers and cheapskates and fiscal conservatives would've suddenly acquired trust and supported to Measure. This is what clear thinking is all about. And what about the people who didn't vote. Once we find out about what occurred in 2003, they'll come back to the polls in droves. You can put money on it.


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Posted by financially worried
a resident of Another Pleasanton neighborhood
on Jun 28, 2011 at 11:28 am

Can anyone just give me a number for the bond part of our taxes per $100,000 for the next couple of years?


 +   Like this comment
Posted by Wow!
a resident of Danbury Park
on Jun 28, 2011 at 12:06 pm

Pleasanton,

thank you for sharing that link. i was able to type in anyones salary with city worker or teacher and can see how much they make. the amount the teachers make for 8 months work is amazing and now it is obvious why we are in dire straights. thanks for sharing and everyone please look up and develop your own opinion.


 +   Like this comment
Posted by Brian
a resident of Another Pleasanton neighborhood
on Jun 28, 2011 at 12:52 pm

Fiscally worried

From the GFS reports, I estimate that every $1 million of debt service adds roughly $2 per $100,000 in AV.

As being debt service is going to increase at an annual rate of roughly $1 million per year until 2013, you can expect roughly $2 per $100,000 in AV annual increase until 2013 followed by more than a $4 decrease in 2014 and drop of roughly $12 in 2015 as a result of refinancing the bonds.

Relative to the original bonds, the debt service peak in 2013 will be roughly $6 million higher, amounting to about $12 per $100,000 in AV higher than what would have been the case had the bonds not been refinanced. Of course, starting in 2015 and continuing until 2024, debt service will be $3 to $5 million lower than the original bonds, amounting to an annual savings of $6 to $10 per $100,000 in AV.

As Diana pointed out, school district debt service is only a portion of total tax levies. The above will only be the increase and decrease caused by refinancing measure A and B bonds relative to not refinancing them.


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Posted by Arnold
a resident of Another Pleasanton neighborhood
on Jun 28, 2011 at 2:52 pm

"The new union strategy by public employees appears to be to paint responsible citizens that ask direct questions and demand a complete answer as fanatic lunatics. Meanwhile irresponsible management at PUSD and other entities has managed to divert billions from service budgets into unsustainable pay, benefit, and pension packages. And the costs of those actions are significantly affecting the services we all expect for our tax dollars."

That is a nice observation but it isn't new - it has just gone mainstream because the criticism of public employee unions has only recently gone mainstream. Thankfully, people, taxpayers, are awakening from hibernation. And, of course, the internet has had much to do with the awakening. It is only very recently that the people that foot the bill have had access to the kind of compensation information that is available with the click of a mouse. It is only very recently that taxpayers have been provided the tools that allow us to access information, view recordings of council meetings on-line, access employee contracts, and view actual compensation databases that allow us to compare compensation city vs. city. We are learning more, every day, about the concept of total compensation and how that compares to the private sector wages that support it all.

If you think the new union strategy by public employees is to paint responsible citizens that ask direct questions and demand a complete answer as fanatic lunatics, can you imagine the demands they put on the democrats that they help get elected. They endorse, fund, and campaign for the elected officials that approve their contracts.

Public Employee Unions have been getting their way in this state for two decades and that's one of the reasons that CA has the highest paid public employees in the nation. I understand that CA can be an expensive place to live but the evidence is out there that we pay public employees more than private sector employees for the same work. How do you support the highest wages in the nation? Apparently it is with the second highest tax burden of the 50 states, and New York is determined to pass the torch of highest taxed state to CA - we seem happy to accept. For those of you that have been following the pension issue you know that even if wages are frozen, employee costs (pension & health care) are continuing to escalate.


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Posted by financially worried
a resident of Another Pleasanton neighborhood
on Jun 28, 2011 at 7:31 pm

Thanks for the info Brian, that's not a huge % increase to what we're used to paying so I'm not so worried now!


 +   Like this comment
Posted by Einstein
a resident of Mohr Elementary School
on Jun 28, 2011 at 8:37 pm

Einstein is a registered user.

Arnold,

You know what they say? At some point the music stops playing and then it is over.


 +   Like this comment
Posted by Bob
a resident of Pheasant Ridge
on Jun 29, 2011 at 6:37 am

Like Arnold tells us, private sector workers make far less than public sector workers doing comparable work. He didn't present evidence for his claim, but one doesn't need it really. See, it's easy to compare them.

We see equivalents of public school teachers in the private sector. Like dog trainers. I've been teaching dogs how to poop outside instead of inside people's nicely carpetted homes for almost 15 years, yet with all my experience I don't make nearly as much as the public school teachers. I'm a teacher too! What gives? When does the music stop?


 +   Like this comment
Posted by Mary
a resident of Country Fair
on Jun 29, 2011 at 7:31 am

Bob,

The music is already slowing down, just listen and open your ears, it is obvious.


 +   Like this comment
Posted by Bob
a resident of Pheasant Ridge
on Jun 29, 2011 at 10:59 am

Yep, the music of the tea party fife and drummer corps, made up of former John Birchers and KKKers, is certainly 'slowing down'. See, for example, poll numbers for the great intellect Bachmann and the courageous one Palin.


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