Feb. 6 (Bloomberg) -- A California school district’s decision to pay almost $1 billion in interest obligations for borrowing $105 million to build and modernize schools was upheld by a district-funded examination.
The Poway Unified School District in San Diego County kept its promise to voters and taxpayers when it deferred all payments on bonds sold to raise the money until 2033, according to the review by ESI International Inc., released yesterday. Subsequent debt service will rise from about $30.5 million in 2033 to more than $300 million in both 2046 and 2051, bond documents show.
Publicity over the amount of interest drew complaints from local taxpayers and led state Treasurer Bill Lockyer and schools Superintendent Tom Torlakson to call for a moratorium on similar sales of long-term capital-appreciation bonds.
Poway officials put off the largest payments from the 2011 debt issue to limit the short-term interest burden, thereby abiding by a 2008 election authorizing them to borrow the money without pushing property taxes higher, according the ESI report.
“The use of premium in this manner did increase the total amount that taxpayers will repay, although the estimated tax rate was unaffected and remained the same as represented to the electors in the bond measures,” investigator Robert Price said in the report. ESI is based in San Diego, according to its website.