San Diego voters are being asked to authorize $2.8 million in bonds for school repair and construction in this fall’s election via Proposition Z. This initiative should be a straight up or down deal; whether or not to raise property taxes to support this vital part of our infrastructure.
Instead, a coterie of right wing groups with a barely disguised extremist agenda have turned the discussion on Proposition Z into a battlefield, mined with half-truths, pock marked by a barrage of lies and overrun by waves of tea party types convinced that they are stopping an assault on common sense itself.
For those of you interested in what Proposition Z actually proposes to do, go visit this link. I think it’s important in this article to simply focus on exposing the opposition and their campaign of misdirection and deceit.
First, a listing of the players in the No on Z campaign:
The Lincoln Club of San Diego: What used to be a fairly conservative downtown gentlemen’s club has morphed into a right wing powerhouse in the wake of federal Judge Irma Gonzalez suspension of the city’s campaign finance laws back in 2010, following the Supreme Court’sCitizens United decision. Now, the members of the Lincoln Club of San Diego have the power to raise and spend as much as they’d like. And they can do it behind their organization’s banner.
San Diego County Taxpayer’s Association (SDCTA): Grover Norquist’s legacy on our political landscape (as opposed to the financial side of things) is the “Taxpayer’s Association”. Just about every city, county and state now has one. By and large they are nothing more than front groups for the Republican Party, valuable because their image allows conservative analytics to be used by the mainstream media. Rarely (and never in San Diego) is their take on issues portrayed as partisan posturing. In the wake of Citizens United the SDCTA has also become a vessel for campaign dollars unfettered by any substantive oversight.
CA/National Realtors Groups: It’s pretty much a given that any measure that increases property taxes will be opposed by Realtors groups. This is a business decision.
R.B. ‘Buzz’ Wooley, Jr.: Retired venture capital investor, major funder of the Voice of San Diego.
The source of the misinformation being used in the No on Z campaign is SDCTA. Mostly what happens here is that a kernel of truth gets taken out of context and spun into an outrageous misrepresentation of the reality.
Let’s tackle the most egregious of these misrepresentations (which we’ll call spin), taken directly from the SDCTA official summary on Prop Z:
Spin #1. The District has spent less than 25 percent of the $2.1 billion bond program approved by voters in 2008. (Proposition S)
It’s hard to know where to start with this one; either the folks at the Taxpayers Assn. don’t know how school bonds work or they’re flat-out lying. You decide.
Here’s Lani Lutar, CEO of SDCTA, spinning this yarn in a VOSD opinion piece:
The fact is that the school district still has $1.7 billion remaining from Prop. S, approved by voters just four short years ago. The fact is that the district doesn’t have its fiscal house in order.
This assertion makes it sound as if there’s $1.7 billion dollars lying around out there waiting to be spent, and it’s been repeated often enough so that it’s gospel, even with the news media. Here’s the Voice of San Diego’s non-explanation of this claim:
“For some pretty complicated reasons (primarily connected to the dismal real estate market over the last few years) the district admits it has only been able to tap a small fraction of the funds it may eventually borrow under Prop. S.”
Since I don’t think it’s all that complicated, here’s what happened:
Proposition S, drawn up back in 2007 and put before the voters in 2008, was a “no new taxes” bond measure, blessed by the taxpayers association. A “No New Taxes” bond typically continues an existing tax rate. Prop S continued the tax rate left over from Prop MM, an earlier bond measure.
This type of financing is dependent on assessed property values rising. Should property values fail to rise no funding for bonds is available.
Taxes are not based on market value. Under Prop 13, assessed value is set at the purchase price and can only rise 2%/yr; until sold and then it re-sets. So a home bought in the early 1990’s, for instance, is assessed at less than half what it is “worth” today, even in a depressed market.
In the latter part of 2008, the financial house of cards in the US economy, which had been largely driven by increasing real estate values, crashed.
Ego, there was no money available. And the $1.7 billion dollars sitting around unspent story is ‘pants on fire’ false.
It’s going to be five or more years before property values climb back up to where they were in 2007. Add to this the couple of years needed to actually issue and sell the bonds, and San Diego is looking at 2020 or so before any more funding becomes available under Proposition S.
SPIN #2. The District (SDUSD) recently issued a $164 million 40-year maturity Capital Appreciation Bond (CAB). The total (principal and interest) cost to taxpayers for this issuance alone will be over $1 billion, which will not be paid off until 2051. Nothing in Prop Z prevents the school board from taking on additional high interest debt which would triple Proposition Z’s costs for taxpayers.
Sounds horrible, huh? This one is a little complicated. So I’ll just lay out as many facts as I’ve been able to ascertain.
Assessed values in the District had been growing 5% annually for 25 yrs. But in 2010, they flat-lined (and even dropped 1/2 of 1% one year).
At that point, the options available to the school board were:
A) Stop Prop S. Wait until assessed value growth resumes. Stop the Tech program. Stop the construction program.
B) Slow down, but continue Prop S. (Using CABs). Take advantage of historically low interest rates, inflation and construction costs.
Some notes here: It is expensive to stop-and-start a billion dollar plus construction program. By some estimates (putting aside the CAB interest costs), the District “saved” $70 million by not stopping Prop S. Savings came from a combination of cheaper constructions costs (assuming inflation in those costs of 2%/yr) and not having to stop, lay off people, and gear up again in somewhere down the road.
So, SD Unified opted for CABs. (Not as expensive as Poway’s; but CABs nevertheless.) Poway’s “coverage” is about 9-1. SD Unified’s is closer to 6 1/2- 1 (or so).
There was A LOT of very public debate — at the SDUSD Board and on the Independent Citizens Oversight Committee. Eventually the consensus was that CABs were a better option than stopping.
All this discussion was out in the open, and the Taxpayers Association had people in attendance at many if not all of the meetings. So it’s not like any of this is any big secret.
Since Capital Appreciation Bonds have become the new bogeymen in the local media, let me share a few bits of information that seem to have gotten lost in the coverage.
Since 2000, California school districts have issued $19.73 billion of capital appreciation bonds, according to State Treasurer Bill Lockyer.
Here’s how they work:
1. No payments for 20 years. Interest accrues.
2. In year 21, begin p-and-i (principal and interest) payments for the next 20 years, until the bond is paid off.
3. So, you get money today — and pay it off, starting in 20 years, with dollars that are worth much less.
4. Thirty five years ago, it cost about $3-4 million to build an Elementary School. Today, the cost is about $35 million. A house bought in 1978 cost $60,000; today, it’s “worth” more than $450,000. Using the lower of the two appreciations in value here, $60,000 paid back at 7x its face value would still net a $30,000 ‘profit’ over three plus decades.
In sum, the SDUSD many well come out ahead of the deal at 6.5 to 1. Tomorrow’s dollars are “cheaper” and construction costs are more “expensive”.
Here’s the NY Times conclusion on CABs, presented so you can see something else other than the hysteria promoted on the local media:
This kind of borrowing has been going on for years, particularly in California, where the tax revolt that began with Proposition 13 in 1978 has made it harder and harder to finance education or other local government services. Assorted propositions approved by voters have made it very difficult to raise taxes at all.
Should districts issue such bonds? It is not an easy question to answer. Much of this expensive borrowing is a result of local officials searching for a way to meet their responsibilities at a time when opposition to taxes has become a mantra. This generation will not pay for what it needs, so some of its leaders have decided to saddle future generations with the bills.
Oh, and by the way, the need for Capital Appreciation Bonds under Prop Z doesn’t really exist. It’s paid for with a tax increase. No need to borrow money while waiting for property values to increase. Just to make everybody who doesn’t understand how these things work, happy the SDUSD Board passed a resolution prohibiting any CABs under Prop Z.
Spin # 3: The District is proposing to use expensive, long-term financing to pay for technology like iPads and routers that have a useful life of only 7 years. Financing this equipment over 30 or more years is bad fiscal policy.
This program is precisely the kind of effort the voters had in mind in 2000 when, with support from the SD Taxpayers Assn. among many others, California passed Proposition 39 which explicitly provided authorization for school districts to use bond funds for classroom technology.
Classroom level technology was a selling point for Proposition S, and beyond whiteboards, routers and computers, there isn’t very much else that you can actually do when it comes to bringing high tech to the classroom. The Taxpayers’ Assn. also supported Proposition S.
The Prop. S Technology Program was always planned to expire in 2014. The thought (back in 07) was that the District’s General Fund could then pick up the ongoing costs (about $15 Million/yr). But that was before the District’s operations budget was whacked to death by Sacramento budget cuts. So, yes, Prop. Z continues the District’s nationally recognized Tech Program, which would otherwise run out of funds in 2014.
Remember, we live in a Post Proposition 13 era, where breaks on property taxes for corporations replaced funding for education and technology. So, this ‘bad fiscal policy’ wasn’t so bad four years ago. Sounds like a case of ‘you smelled it, you dealt it’ to me.
The kernel of truth here, that paying long term for hardware that that rapidly ages is not a great idea, needs to be placed into context: it was the most direct route towards getting 21st century educational tools into the classroom.
Spin #4: The District has not done adequate planning to ensure that Prop Z projects can be delivered on time and within budget.
Except that they have. As much as humanly possible. See this link. It’s true that they haven’t actually solicited bids or hired contractors for the work proposed. But neither have/did any of the host of bond measures that the Taxpayers Assn has supported.
Spin #5: The District has not adequately maintained its schools and facilities on an annual basis.
And why hasn’t the District maintained its schools? Since the passage of the landmark, tax-limiting Proposition 13 in 1978, most school districts in developed parts of the state have had to wait until desperate classroom overcrowding or gross deterioration convinced the public to raise taxes to pay for school construction or maintenance. That’s why Proposition Z is on the ballot.
Spin # 6. The District will use a Project Labor Agreement (PLA)for construction projects funded by Prop Z. A recent NationalUniversity study shows the agreements increase construction costs to taxpayers by 13 to 15 percent.
Now, we’re getting down to the real reason SDCTA is opposing Proposition Z. After the fact, the newly elected school board in 2009 made a PLA-type deal part of their planning for Proposition S construction. The use of such agreements in public sector construction has become a lightning rod for right-wing activism and SDUSD’s inclusion of a PLA-type requirement provoked a firestorm of criticism.
Groups like the American Legislative Exchange Council (ALEC) that peddle pre-made legislation and causes for right wing groups have actively pursued eliminating PLAs as a means of undermining trade unions. Here’s Wikipedia on PLAs, which is about the best short-take I could find on this complex issue:
There has been much debate over the government-mandated PLAs, particularly for publicly funded projects. The use of project labor agreements is supported by the construction unions and some political figures, who state that PLAs are needed to ensure that large, complex projects are completed on time and on schedule. According to those who support the use of such agreements, PLAs enable project owners to control costs and ensure that there are no disruptions to the construction schedule, for example from strikes. In particular, proponents of PLAs point to the inclusion of clauses in the agreement that agree to establish labor management problem solving committees that deal with scheduling, quality control, health and safety, and productivity problems during the project. They also state that PLAs ensure that the workforce hired has received training and is of high quality. The use of PLAs in large private construction projects such as the building of the New England Patriots’ Gillette Stadium, are given as examples of how PLAs help project owners meet tight deadlines, according to supporters. In addition to the stated benefits to project owners, supporters of PLAs also say that PLA use has a positive impact on local communities, through set goals for local hiring and provision of education
Groups including the Associated General Contractors of America (AGC), Associated Builders and Contractors (ABC), Construction Industry Roundtable (CIRT), National Federation of Independent Business , the National Black Chamber of Commerce, and the U.S. Chamber of Commerce have actively opposed the use of PLAs, particularly for government projects. These groups have challenged the use of such agreements through litigation, lobbying, public relations campaigns. Opponents of PLAs supported the Bush executive order prohibiting government-mandated PLAs, and have argued that between 2001 and 2008, when the executive order was in place, no federal projects suffered significant labor problems, delays or cost overruns attributable to the absence of PLAs. According to those who oppose PLAs, the agreements place restrictions on the hiring and working practices of contractors, and can lead to increased costs for project owners. One of their objections to PLAs is that the agreements require contractors to pay into union benefit plans and obey union work rules. In addition, they oppose the use of PLAs to restrict hiring on projects to construction workers selected by unions through union hiring halls, stating that this does not increase the quality of worker as all those who are licensed in a craft have at least the same level of education and skill, regardless of whether they belong to a union.
Here in San Diego the opposition to the inclusion of PLAs in Prop S projects was led by the Association of General Contractors, who told the District none of their members would ever bid on projects with a PLA.
Interestingly enough, 75% of Prop S construction projects are being managed by AGC members.
According to the District, under Prop S’s PSA, all projects have come in under cost and, despite the so-called boycott, there have been an abundance of bidders. And, most importantly, a provision in the PSA that requires “local hire” (i.e. use locals to do the work), the statistics on employment from within SD Unified (and especially form within depressed areas) are fantastic. The Prop S bond with the PSA would be the single most successful “Jobs Program” for low income areas in SD in recent history.
One final point here: the National University Study cited by the Taxpayer’s Association that claims costs are higher in PLA projects was funded by…drum roll, please… the Associated Builders and Contractors.
Should you support Proposition Z?
In a perfect world, as I said at the beginning of this article, the debate should simply be over whether it’s worth it to raise property taxes to support this vital part of our infrastructure.
Instead, this measure has been turned into a referendum on the SDUSD School Board. It’s my view that, despite their bumbling, they’ve pretty much played the hand that was dealt them. (Much of that hand was dealt to them by the very same people/groups who are now so critical of the Board’s actions.)
So, while I’m not thrilled with all the financial deals that were made, I fail to see what anybody else in their shoes could have actually done that would have not adversely impacted my child’s education.
Viewed through that prism, the answer has to be vote Yes on Proposition Z.
A couple of points – the presentation allocates $2.8 Billion – to float a bond cost money; to allocate $2.8 Billion means the actual bond size is about $3 billion. As far as depreciation, as a rule Wall Street will not secure a 20 year debt with 10 year collateral. So regardless of the approval of voters, the classroom technology monies must be secured by someother means. Now Prop Z actually carries a revenue action of $60 per $100k of assessed value which provides some security. Question is how much because it appears that about $500 million is slated to pay for operations – health, safety and security for instance. Sounds operational. The bond is likely to carry an annual cost of somewhere between $135 million and $175 million for at least 20 years. Can the $60 per $100k cover it? Assessed value, as the 40% of San Diego homeowners are underwater know, does not always increase. I too have problems with more debt – we as a society at every level are saturated with debt. What if you just increased the tax rate by $60 per – all goes to schools, none to Wall Street.
Susan Duerksen says
Thank you, Doug, for this excellent explanation and reality check.
The critics will say anything, block funding for safety improvements in 60-year-old schools, and let class sizes balloon and teachers get fired – all because they hate unions so much. And, as you point out, the district’s PLA has been working extremely well.
This article is a real service to voters.
Frances O'Neill Zimmerman says
School Bond Proposition Z , crafted by political campaign consultant Larry Remer who recently wrote here in its (and his own) defense, will raise your local property taxes AND fund new and existing charter schools to the tune of $350 million, according to a weekend report from Matt Potter at the Reader. Oh, there’s a surprise feature that Doug Porter forgot to mention in his long article.
Prop Z apparently has less to do with safety improvements at 60-year-old school buildings and Project Labor Agreements and NOTHING whatsoever to do with ballooning class size (thank you existing School Board) and teachers getting fired (thanks again existing School Board) and more to do with a crafty boondoggle.
According to the Reader AND the Voice of San Diego, Prop Z contains a special provision that generously funds charter schools — sufficient to get significant financial backing from Irwin Jacobs, a charter school lover and contributor to the Library, and from the state’s official association of charter schools.
It occurs to me that Prop Z proceeds will pay for the unchartered, undesigned and currently unfunded charter school that is scheduled to be built in the Mayor’s Central Schoolbrary — the same edifice for which the School Board anted-up $20 million of previous school bond measure Prop S — under the supervision of Scott Himelstein over at USD’s uber-conservative “Center for Education Policy and Law,” an outfit also backed by Irwin Jacobs.
Prop Z is an enabling instrument, folks, brought to you by the sound of One Hand Washing the Other : Prop Z consultant Larry Remer doing a mitzvah for Mel Katz from the financially-strapped Library Foundation; for Labor which is always looking for big projects to work on; for the Mayor whose Schoobrary edifice chronically has been behind the financial eight-ball and is only now struggling to completion, with special thanks to charter school-loving Irwin Jacobs who is thought to have bailed the Library out anonymously at its eleventh hour.
Doug Porter says
It’ too bad that you’ve become so conspiracy minded that you have to thinks it’s some some of conspiracy on my part that I didn’t cover all the purported benefits of Prop Z. As the headline and the article both state, I was trying to debunk the untruths being spread by SDCTA .
In fact I’m not comfortable with the whole charter school thing. But I had to draw the line somewhere – the article ran long and i was running out time before the election–and I felt that issue was covered pretty well by Scott Lewis. So I was trying to do a story that I felt nobody else had done. Sorry that it didn’t fit into your agenda.
Larry Remer says
Even for your, this notion that inclusion of funding for Charter Schools in Prop. Z represents some kind of hidden conspiracy is laughable.
-The Charter Schools allocation comprises about 11%, (based on a per capita forumula; approximately 11% of SD Unified students attand Charter Schools).
-Every single presentation at the School Board included a clear slide and breakdown of the Charter Schools participation. It was thoroughly discussed and lauded.
-The Charter Schools testified at every single Board hearing. NOBODY testified against including funding for charters.
-Inclusion of Charter funding is mentioned in the first line of the Title and Summary that appears on everyone’s ballot.
-Inclusion of Charter funding is mentioned in the Ballot Arguments in favor (filed with the Registrar in early August).
-Inclusion of Charter funding is mentioned in the Prop. Z campaign literature (flyers and mailers).
-Inclusion of Charter funding was mentioned in an Op-Ed penned by Irwin Jacons in support of Prop. Z that appeared in the UT about 4 weeks ago.
-Inclusion of Charter School funding was major component of the Charter Schools rally in Balboa Park on Oct 13. There was a huge “Vote YES on PROP Z” banner in fornt of the stage; and every TV report (there were several) showed this banner.
Inclusion of Charter Schools in Prop. Z is consistent with the position of this School Board. The same formula was part of Prop. J two years ago that, unfortunately, failed to pass. I would argue, given that key players in the Charter movement have waged a political war against this school board (including Irwin Jacobs and Scott Himelstein), that this is a rather enlightened approach.
Thousands of students attend Charter Schools. These are public schools. They recieve public funding. Their “charters” are reviewed by the School Board. They meet strict state guidelines or their “charters” are rescinded (and this has happened).
Thousands of parents are involved with those schools and care deeply about their children. Some Charter Schools have an excellent track record, as do non-charter schools. Others struggle.
San Diego Unified has a very constructive relationship with the Charter Schools within its boundaries. In many instances, Charters utilize San Diego Unified facilities (and even share some campuses).
There’s nothing “hidden” about the benefits Prop. Z will bring to Charter Schools. In fact, it’s a feature that we’re quite proud of.
micaela shafer porte says
more administration, more construction, less education, is what it seems like to me, and i’m a liberal, teacher family kind of person… every time they want to raise taxes they cry “for our schools”…. there is such waste in every governmental sector, our poor schools included…
Waste in the government sector – could you be specific? Consider who you trust? Who trusts a teacher? A bureaucrat? Anyone? Even someone trying to build a school or a library is a conspirator and not trusted (Fran). And consider what can get done without trust; consider how immobilized we’ve become? Layers of rules to shield against threats of liability. Layers of rules that tell the teachers they are not to be trusted. Touch a crying 7 year old and risk losing your career – or worse. Perhaps our social institutions are broken. I can show you gross inefficiencies – in the private sector, and yes, in the public sector – even the military. So what’s the solution – let’s put a bullet through the head of “every government sector…” but let’s show pity for our poor schools just before we pull that trigger. Diverse, divided, and now bonded to debt like a ball and chain our public schools cannot overcome our transgressions. We indulge, we placate, we judge – Prop Z provides something for each – tackling what it can – ignoring everything else. Prop Z might fix the buildings and buy electronics but it won’t fix the institution. Don’t blame Larry Remer – (blaming has replaced football as America’s favorite pasttime) – no, our failure to fix the educational institution is evidence of another broken institution – our political system.
Frances O'Neill Zimmerman says
I don’t have an agenda, Doug. I am just trying to find my way through the labyrinth of special interest money that is contaminating our electoral process and to understand the idealogues who flak for issues and special interests while omitting key facts and running on at great length.
You knew about charter schools benefitting from local Prop Z but never connected the dots to the charter boondoggle at the Central Library? Never mentioned either one?
I’m shocked, shocked.
doug porter says
thank you for your comment. and have a nice day.
Frances O'Neill Zimmerman says
Remer, call me old-fashioned, but when I vote for school bond measures, I expect my tax money to go to existing or new public schools.
Not to help the Mayor and his friends from the Library Foundation build an underfinanced new Central Library with $20 million in proceeds from the last bond issue Prop S. Not to fund an unneeded charter high school inside the Library that was never requested, and is still not designed , but will be — by people who don’t like regular public schools or elected boards of education or teachers’ unions. Like Scott Himelstein from USD’s conservative Center for Education Policy and Law.
I am not the one repeatedly using the pejorative label, “conspiracy.” That would be you and Doug Porter. I am just working my way through the political labyrinth that you artfully design.
I don’t read the U-T and I don’t go to charter school rallies. I do know something about charter schools “being” public schools: they all claim public funds; many struggle; some are financial and academic busts; the best ones are heavily financed by private donors like the Jacobs Family. Even now, after a dozen years of this experiment, none measure up to the breadth and range offered by traditional public schools or to their academic accomplishments either.
That this School Board okayed bond measure Prop Z to include charters to this extent is a measure of how politically craven and/or self-interested they are. But you and they have been rewarded with nice campaign contributions from Irwin Jacobs and the CA association of charter schools. Just another quid pro quo. As I’ve said, it’s the sound of one hand washing the other.
Almost everybody gets something out of the deal. Except for the San Diego tax payer who is looking to vote for something more straightforward and honest than this Prop Z boondoggle.
Julie Black says
My child goes to a local Charter school where the middle school AND the elementary school both increased their API scores to be the TOP in the San Diego City School District… It’s called Albert Einstein Academies. We have had a struggle with the school district in getting recognized and supported but along the way we grew and increased our test scores and all the while educated our kids. I really feel that as a Charter school we already have to make up for 25% of our budget every year… where the districts are fully funded 100% and I don’t see this stress change much with any of the propositions. So I’m voting against all… they are all too mired in tie ins… like funding Police protection and infrastructure… I see nothing about supporting our teachers… putting them back to work… so many GREAT teachers are threaten yearly with their jobs. It’s got to stop but there is no such solution here with any of these proposals. The value of education isn’t in the buildings and protection that surrounds the children… it’s the teachers and the enrichment our kids can access. I’ll vote when it’s about the teachers and the value of education without all the strings and building projects these propositions promote. I’m a daughter of a teacher and my sister was a teacher for 30 years… I’ll vote when it’s about the teachers and enriching the kids. NOT the economic boondoggle that these propositions ( 30,38 and Z) are all about.
Frances O'Neill Zimmerman says
For families looking for an excellent charter school that exceeds the standards of regular public schools, Einstein is a great place and has been from its inception. Plus the kids there learn a second language, German. It is also easily accessible in the neighborhood of Golden Hill/South Park.
Just a footnote: there used to be a regular public middle school in Clairemont that carried the distinguished name of Einstein, but the District changed its name to Ray Kroc.