PATTERSON — Bonds sold in 2009 to raise $16 million for Patterson Joint Unified School District building projects will cost property owners $120 million by the time they're paid off in 2049. That's 7½ times the amount borrowed.
But dive deeper and a bad deal for taxpayers gets even worse. A tiny piece of the total Patterson package, $77,500 the last issue to be paid off in March of 2049 will cost taxpayers $8.16 million. That's $1.05 for every penny borrowed, more than a 100-to-1 cost ratio.
The high-cost Patterson bonds caught the eye of state bond reform advocates. Alicia Minyen, a certified public accountant and member of the board of directors of the California League of Bond Oversight Committees, said the Patterson package has elements that fall among the worst of the worst in school bonds.
She said such problems exist because of a system that largely skirts meaningful oversight. She wants to see reforms like one being debated in Sacramento.
Assembly Bill 182 would limit school bonds such as the Patterson issue that delay payment, dramatically escalating costs. It would prohibit so-called capital appreciation bonds from costing more than four times the principal borrowed or stretching longer than 25 years. The bill is waiting to be heard by the state Senate Education Committee.
And what bang did Patterson parcel owners get for all those bucks? Not as much as one might expect from $16 million, because only a third of it went to building projects.
The bulk of it, $10.9 million, went to pay off prior loans the district took to build Walnut Grove school, according to documents for both sets of loans.
The 2007 loans, raised by issuing certificates of participation to investors, were for $12.1 million. Their total cost of $22.6 million was an obligation of the district general fund. But under the 2009 refinancing, the total cost increased from $22.6 million to $69 million, and property owners will pick up the tab, none of which can be refinanced.
Patterson Unified Superintendent Phil Alfano said he was not involved with the 2009 bond dealings he was head of human resources at the time but defended the purchase as necessary during a period of explosive growth in the district.
Alfano said state regulations and delays drove up the costs of building the school, while imposing deadlines that pushed the district to finish projects quickly.
His district chose a high payback over a high yearly cost, Alfano told The Bee this month. "The commitment was made to the community to keep their payments down. It's just like any payments you make over time. You stretch out your payments, your payments go down."