Breaking News

IBM No Longer Sees Delivering 'at Least $20 Operating EPS' in 2015
Tweet TWEET

California Treasurer Backs Law to Ban Costly Long-Term Bo

California Treasurer Bill Lockyer will push for limits on bonds that have saddled school districts with debt payments as much as 10 times the principal and seek to ban those maturing more than 25 years in the future, a spokesman said.

Lockyer, a 71-year-old Democrat, will work with lawmakers next year on a bill to ban such capital-appreciation bonds, Tom Dresslar said yesterday in a telephone interview.

Fifty-five California school districts issued such bonds last year, data compiled by Bloomberg show. The Poway Unified School District in San Diego County deferred all payments on $105 million in bonds until 2033. By the time they mature in 2051, the district will have paid $1 billion in interest.

“The capital-appreciation bonds need more transparency and better protections for taxpayers,” Dresslar said. “The goal is not to take away this tool for school districts. The goal is to make sure they wear protective gear when they use it.”

School districts across California have used the late- maturing bonds, many with balloon payments, to build and modernize facilities as declining property values reduce their capital. The zero-coupon notes yield more than coupon bonds to compensate investors for the longer holding period before they receive any income.

Since 2000, California school districts have issued $19.73 billion of capital-appreciation bonds, of which $5.4 billion had maturities beyond 25 years, according to data from the California Debt and Investment Advisory Commission provided by Dresslar.

Dresslar said the office could not quantify the total debt service on the long-term securities.

To contact the reporter on this story: James Nash in Los Angeles at jnash24@bloomberg.net

To contact the editor responsible for this story: Stephen Merelman at smerelman@bloomberg.net

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.