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By Alex Horvath / The Californian
BY COURTENAY EDELHART Californian staff writer firstname.lastname@example.org
The Lakeside Union School District has been forced to reschedule a vote on a controversial bond issue in order to avoid triggering the first step in the process of losing control of the district.
The vote had been scheduled for consideration on Oct. 8, but now will be taken up at a special board meeting on Sept. 24.
Lakeside has $10.1 million in bond anticipation note debt coming due in June 2014, but it has no way to pay it. As a result, it is considering borrowing still more money, including a capital appreciation bond, or CAB, that could cause property taxes in the district to rise.
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.
The board had planned to vote on the bond issuance Tuesday, but owners of area agricultural land asked for more time to explore ideas for cutting the amount of the bond. Dairies and farms would see the biggest tax hikes if the bond is issued, so they want the district to pay down the debt as much as possible before borrowing again.
Although Lakeside's bond anticipation note isn't due until June, the board is racing against two clocks. First, it would like to sell the bonds at today's interest rates because rates have risen in recent months.
Second, all Kern County school districts have to submit their budgets to the Kern County Superintendent of Schools office by Sept. 22. The county then reviews the budgets and has until Oct. 8 to report to the state whether they are approved or disapproved.
If Lakeside doesn't make a decision before then, the county would have to tell the state that it has not approved the district's budget.
That triggers the first step in a long process by which the state can take control of a failing district.
Currently, eight California school districts are operating under state control.
The Lakeside board already had a special board meeting scheduled for Sept. 24 because it has to fill a board vacancy with an appointment. In addition to considering the bond, the board will choose either Sam Aguirre or Scott Dewar to join it on that date.
Landowners would like to see the board explore options such as selling off land and dipping into reserve funds to reduce the amount the district has to borrow.
The board is nervous about dipping too far into reserves because of the district's aging infrastructure, but is open to other strategies, including setting aside $550,000 in developer fees to help reduce the size of the new bond to $10.3 million.
The debt is related to a $7.5 million bond anticipation note the district took out in 2009. It borrowed the money anticipating increased enrollment and property tax revenue, but that growth failed to materialize after the housing market crashed and falling milk prices decreased the value of dairy land.
Because of the district's financial position and future revenue prospects, it's likely not eligible to borrow in a more traditional way. A CAB is probably its only option.
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.