Daniel Borenstein: Disclose full bond costs

By Daniel Borenstein
Staff columnist

4/26/2009

http://www.contracostatimes.com/columns/ci_12201916?source=email

"Put another way, for a $500,000 home, the tax levy to pay for school construction bonds
will increase in two years from about $615 to $832 annually."

RELATED
PDF: West Contra Costa Unified School District Facilities Bond Costs

WEST CONTRA COSTA property owners, already hit by a weakening housing market, are about to see their tax rates for school construction bonds soar by about 33 percent over the next two years ­ and they probably never knew it was coming.

Four times since 1998, school officials have asked voters in the West Contra Costa Unified School District for permission to issue bonds. Each time, the ballot analysis sent to voters treated the bond proposal in isolation, ignoring the cost of the others that had already been approved.

It's like having four different credit cards but revealing the payments for only one of them. The district never told voters about the cumulative charges they were running up. Indeed, since the last measure was approved in 2005, district officials had apparently never added up the total tax rate. Until I asked this month.

Here's the bad news: District property owners are now starting to feel the full impact of having to pay off all four bond issues simultaneously ­ and will be doing so for the next 16 years. Property owners in the current 2008-09 tax year were charged about $123 for every $100,000 of assessed valuation. That will go to about $153 next year and $166 the year after. It won't return to the $123 rate until about 2025.

Put another way, for a $500,000 home, the tax levy to pay for school construction bonds will increase in two years from about $615 to $832 annually.

On top of that, district homeowners pay a $72 per year parcel tax for maintenance and improvements to school grounds and recreation facilities. Finally, they pay a second parcel tax of 7.2 cents per square foot ­ or $108 for a 1,500-square-foot home ­ for educational programs; teacher and counselor salaries; supporting libraries, computer training and athletic programs; and maintaining reduced class size.

In other words, many West Contra Costa taxpayers will soon be facing an extra $1,000 annual bill for schools ­ on top of their regular property tax assessment. That's $1,000 more than they were paying a decade ago. The rate is tops in Contra Costa, and probably one of the highest in the state.

No other K-12 district in the state except San Diego and Los Angeles has issued as many school construction bonds in the past decade as West Contra Costa. (Oakland is close behind.) It might very well be money well-spent. There's no question that the school district struggles to educate a low-income, high-needs student population. It's a tough job.

But school officials need to be transparent about what they're doing ­ and about the bill they're running up, and newspapers need to be diligent about reporting them. That hasn't been the case.

For example, when voters passed Measure J in 2005, they were told that bond program would authorize the sale of up to $400 million in bonds. What they weren't told is that the three prior voter-approved measures ­ Measure E in 1998, Measure M in 2000 and Measure D in 2002 ­ had authorized another $490 million. Measure J would bring the total to $890 million.

That's only for the principal. Voters weren't told that when the interest payments were added in, the cost would rise to about $2.2 billion. It's the sort of information that any mortgage company would have to disclose to a borrower. Why not provide the borrowers ­ in this case, the voters ­ the same details?

Moreover, when voters passed Measure J in 2005, they were told that the "best estimate" of the highest yearly tax rate they would be levied for that bond measure would be $60 per $100,000 assessed valuation. Again, they weren't told the effect of the other bond measures that voters had already passed. The annual $60 rate is only one of the four parts of the $166 rate owners will soon face.

They also weren't told that all those projections assumed that the tax base for the district would continue to rise at an average 6 percent annually. That's a huge assumption ­ one that was not borne out last year and probably won't be again for at least a few years because of the struggling housing market. The lower the tax base, the higher the rate each homeowner is charged. In other words, if the housing market continues to stall, district homeowners will be paying an even higher tax rate in coming years.

(How that affects each property depends on when the house was last sold. Generally speaking, the downturn in the housing market means that longtime property owners will see an increase in the total amount they pay for school bonds each year, while owners of recently purchased homes could experience a decrease.)

Suffice it to say, it's unlikely most homeowners understood what they were committing to when they approved the four bond measures. If ever there was a case for the state to require more ballot disclosure, this is it.

Borenstein is a staff columnist and editorial writer. Reach him at 925-943-8248 or dborenstein@bayareanewsgroup.com.