Paso Robles, Cayucos school districts shoulder huge bond debts

December 4, 2012

Two San Luis Obispo County school districts have borrowed millions of dollars using a risky form of financing saddling them with huge debt.

Both Cayucos Elementary School District and Paso Robles Joint Unified School District turned to capital appreciation bonds (CABs) as a way to raise money during the economic downturn. These bonds, illegal in one state, allow school districts to postpone the start of repayments to decades after the bonds are secured while the balance balloons in size.

The Paso Robles district is faced with a massive CAB debt repayment. In 2010, it issued a $3,700,127 CAB. With principal and interest the debt has swelled 6.9 times to $25,830,814, which is currently under a maturity warning.

That brings the North County district’s total bond debt, which also includes a 2007 CAB issued at $889,871, to more than $30 million.

The Cayucos Elementary School District was issued a $2,633,543 CAB in 2007. Also currently under a maturity warning, the debt has more than tripled in size to $8,785,000.

California Treasurer Bill Lockyer is warning school districts to avoid the bonds. Lockyer compares CABs to the sort of creative Wall Street financing that contributed to the housing bubble, the subsequent debt crisis, and the nation’s lingering economic malaise. [LATimes]

In the long run, property owners — not the school system — are likely to be on the hook for bigger tax bills if the agency’s revenues can’t cover future bond payments, Lockyer told the LA Times.

In California, 200 school districts have borrowed more than $2.8 billion since 2007, using CABs with some maturities longer than 25 years. Ultimately, they will have to pay back about $16.3 billion in principal and interest.


Mr. Holly

No school teacher and/or educator should ever be trusted with our money. They have been trained to educate and not manage a business let alone any large sums of money. Almost all school districts are a financial failure because of this. People who have the authority to manage money within a school district should be required to have a least a Masters Degree in Economics with or without a teaching degree. Until then we will be asked for more and more and will receive less. It will be business as usual.


Um…the last time I checked, my kids’ teachers weren’t the ones managing the school district; the lady in charge is superintendent Kathy McNamara, her assistant superintendents and the school board. McNamara should’ve been fired loooong ago, especially after that $1.5 million dollar “accounting error” surfaced earlier this year.

I do agree w/you, Mr. Holly that school districts should only hire competent money managers. But guess what McNamara majored in:.HOME EC.

Mr. Holly

It’s not the classroom teachers that are causing this although Union activities surely add to the problem. What I was getting at is that most Administrators start their careers in the classroom as teachers and somehow move up thru the ranks, sometimes within the Good Old Boy network (Atascadero) and get to these positions that they are not qualified for.

The Gimlet Eye

Why stop there? Government is not qualified to “rule” over us.

The Gimlet Eye

Government can’t calculate.


The folks that made the decision to borrow the money are the same one’s responsible for guiding the education of our children. We’ll be fine.

Just goes to show that a few harmless flakes working together can unleash an avalanche of destruction.


Cayucos has a population is 2,592 and their debt listed above is $8.785.000 for the district’s 203 students.

Paso population is 30,065 and their debt listed is $25,830,000. Their district has 13 campus, 324 teachers for 6,837 students.




dial your caps way back if you please, no need to shout.





(I keed, I keed :-)


As a property owner in Paso I am F–ing pissed!!! I have voted against the bonds they keep wanting to pass. Now through no fault of my own, I may now have to pay for others stupidity!?? Amazing. People will never learn with bonds or ANY Gov. spending. I have asked many a people over the years who pays for it? They say the Gov. I say who is the Gov.? They say the Gov. HEY MORONS WAKE UP!!! You are the Gov. You are the payers!!!!! ARRRG.


And the people of the state just gave the idiot administrators more money (six billion) that I will tell you now, they will say in about a year, is NOT ENOUGH!! It never is.

The Gimlet Eye

If they were privatized, then you wouldn’t have to worry about it. You wouldn’t be responsible for how they handle their money. If you were a customer, you could vote with your feet.

What do you think?


Not sure you comment. Leave with kids? Leave city with self?


Why should the adminstrations care, it’s not their money, they won’t be held accountable, risk their jobs or their “real” money, and they will be retired sitting on their bloated pensions before the sh!t hits the fan. Until they are help accountable and fired nothing will change

The Gimlet Eye

If these schools were privatized, then those administrators WOULD have to worry big time about this. That’s why you CANNOT trust these public school types to handle your money rationally.

When will the taxpayers ever learn?


I see people making changes, often with tremendous sacrifices, to enroll their children in so-called alternative forms of education, such as charter home schooling and charter schools.

The Gimlet Eye

Of course they do. Markets are dynamic, fluid, changing, morphing. In any market not totally sabotaged or short circuited by government interventionism, there’s always somebody coming along who can satisfy their customers better. Isn’t that the way it should be?




California and the ever spending idiots – California School District Will Spend $1 Billion to Borrow $100 Million

Read more:

Owning property in Calif is a very risky option, the future brings debt that will either be satisfied with raising sales, income or property taxes or all three if the spendoholics get their way. Bye bye Cali….


There are bonds and then there are these rip off the tax payer bonds. Not all bonds are created equal, and not all bonds are bad.


Bonds are debt. A bond that you happen to support must be the “good bonds”. We have a priority and spending crisis. Right now all debt is bad.


The bond market is being abused just like the home mortgage market was and there is a correction coming, saying that I still believe muni bonds used to build sewer-water infrastructure are good bonds as long as the entity that issues them does so in a responsible manner. If there had never been bonds this country would have not been built, period.


Check into cash


Oh, but it was “for the kids!”

I maintain my challenge to any IDIOT that votes for BONDS:

What is the difference between issuing a BOND and PRINTING MONEY?

Answer: printing money is cheaper and does less damage to the economy.

Why are we so poorly educated on matters of economics? Conditioned to allow the theft of our future for the promise to help “the kids” – how have those kids been helped since those bonds were issued? We doing better now than back then? No, we’re not. Our schools are worse off now than then. Funny how that is always the case.

Please, PLEASE, PLEASE people: NEVER vote for a bond or tax increase – if you’re too financially IGNORANT to figure out why, then just trust me on this one.


Disagree on the printing money. Printing money cause everyones money to be worth less. That is basic economics. Debt financing is not a problem unless you have no way of paying it back.( I agree never to vote for bonds unless there is a clear path to repayment ortherwise it is just a tax in waiting). If you take risks there are consequences. In this case the local taxpayers will end up paying. Some might say its the taxpayers fault for voting to put these people in charge. Cali is reaping what it sows. Just FYI the state and local governments cannot print money anyway. Only the feds can do that, and they are which is hurting not only the people but the state and local governments because there budgets are buying less. I don’t believe the governments inflation numbers I know prices are increasing everytime I go grocery shopping or buy gas. Oh wait the feds don’t count that in there estimates of inflation.

The Gimlet Eye

“the local taxpayers will end up paying”?

Not necessarily.

Are you talking about ALL the taxpayers, or about the majority, half of them, less than half, or what?

How about considering the taxpayers as INDIVIDUALS, one at a time. That’s the only way of treating them that makes sense to me.

Proceeding on the assumption that human action is carried out by INDIVIDUALS, and not abstract “groups,” I might ask the following question:

What if an individual taxpayer moves away?

What if he walks away from his mortgage?

Will the bank which forecloses pay the taxes?

In another vein, what if your money isn’t worth anything?

In other words, if inflation keeps eroding buying power at the present rate, won’t that make SLO County government, public schools, etc., unable to function at some point? I believe so.

Conversely, won’t a major rollback in government, taxpayer-based “services,” combined with the cessation of the use of government fiat money and the closure of the FED bring back that lost buying power? I believe that they would, especially if we returned to the Gold Standard (but again, without government control over that gold).


EXACTLY TRUE, FineWine, printing money DOES cause everyone’s money to be worth less.

Guess what happens when a BOND is issued? That’s RIGHT! Money is printed / created out of thin air on the promise to repay MORE than the printed amount! Huzzah!

But wait, you might be now thinking, where does that EXTRA money come from? (remember, a $100 bond may have a $200 maturity value after a number of years; so the $100 is printed/created, and $200 is expected “back in” to the system). That extra money comes from FAILURES. LOSSES. Bankruptcies, etc. Someone, somewhere gives that money and loses it. Of course, one can play ping-pong/pinball and bounce investments into other investments and stay ahead of that DEBT MONSTER, but that monster WILL consume all. It has to. This is our “fiscal cliff” – the head of the monster.

Our money is created out of DEBT. You promise to repay it (with interest you cannot create) and the central bank creates the cash. Voila! Sweet deal! Thanks progressives!


how then do you propose currency be created? if not the ancient and accepted rights of royal decree (fiat) ?