School Construction Bonds Bring Bigger Risk Than Benefit
State officials are expressing concern over hundreds of school districts paying for new construction with expensive bonds that could cost five times what they are worth.
The L.A. Times recently investigated the widespread use of what are known as "Capital Appreciation Bonds.”
They charge unusually high interest, and they take years, or even decades, to mature.
State Treasurer Bill Lockyer says these bonds are terribly risky, but he stops short of saying whether they should be outlawed.
“There probably needs to be a discussion about how you finance in the traditional way,” Lockyer says, “and if there are obstacles perhaps get around them by changing the law."
According to the Times, nearly a hundred districts in the Bay Area use Capital Appreciation Bonds, including some in Sonoma, Santa Clara and Contra Costa Counties.