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By Alex Horvath / The Californian
BY COURTENAY EDELHART Californian staff writer firstname.lastname@example.org
In order to have more time to explore other options for paying down its debt, the Lakeside Union School District Tuesday night tabled a vote on a controversial bond issue.
The district has more than $10 million in debt coming due in June 2014 and no way to pay it. As a result, it is considering borrowing still more money, including a capital appreciation bond that could cause property taxes in the district to rise.
Capital appreciation bonds, or CABs, are long-term, extremely high-interest bonds that have led to exorbitant debt obligations across the state, typically $6 for every dollar borrowed, but often much more.
On Tuesday, a consultant presented the board with strategies to get the ratio of debt service to principal down to 4.96 to 1, but a group of agricultural land owners, whose property taxes would rise the most, urged the board to wait.
"There's not a huge rush to issue this bond. There's no fire burning," said dairyman George Borba.
Financial advisor Lori Raineri of Government Financial Strategies Inc. warned the board that interest rates have been rising, but the board opted to hold off, anyway.
"The people who want us to postpone, if interest rates do go up, they're the ones who will be affected," said board member Mario Buoni.
Both houses of the California legislature have unanimously approved a bill that the governor is expected to sign that would put a host of restrictions on the use of CABs. The bill contains an exception for CABs issued to pay off bond anticipation notes, however, and that's precisely the kind of debt bearing down on Lakeside.
Landowners would like to see the board explore options such as selling off land and dipping further into reserve funds to reduce the amount the district has to borrow.
The board decided to take up the issue again at its Oct. 8 meeting.