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Manteca board going for costly bond option?

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POSTED July 29, 2014 1:46 a.m.

Need new carpet?

OK, how will you pay for it?

Would you pay cash or charge it so that $1,000 purchase ends up costing $1,800 and takes 30 years to pay off.

It’s a question most of us ask ourselves these days on most purchases – even for home maintenance – especially given the Great Recession is still fresh in our minds and its aftermath still denting our pocketbooks.

Apparently it is a question the Manteca Unified School District hasn’t given much thought to and its board even less.

Tonight the board is expected to place a $159 million bond issue on the November ballot. It is important to note the district hasn’t exactly been very public about $500 million in needed repairs and upgrades. Since the school district belongs to – and is financed – by the public one would have thought there would have been monthly reports for the past five or so years detailing the dire need since a half a billion dollars of repairs just don’t pop up overnight.

Let’s assume all $500 million repairs are needed or the equivalent of building Manteca High, Weston Ranch, Lathrop High, Sierra High, and East Union High from scratch based on the district’s $80 million price tag for a new high school campus plus 3.5 elementary campuses.

The district hired a consultant to poll 400 Manteca Unified voters with one option in mind – a school bond. So in reality the district never gave much thought if any to a viable option that costs less. That option is a parcel tax.

Of course they wouldn’t. A parcel tax leveled for a special purpose such as school facilities requires a two-thirds majority. A bond issued for school facilities requires a 55 percent majority.

Obviously if you want something passed, the politically expedient way is to go for the lower threshold.

But for a school board – and district brass – that prides itself on preparing students to make sound decisions once they leave the confines of the Manteca Unified School District’s campuses they are certainly giving short sift to making sure they pursue the most economic option.

Of course, in a world where we want it now prompts people to charge a $60 dinner at Applebee’s they can’t afford and then take seven years to pay it off at a cost of $400 plus why should the school district practice what they preach?

Every day coaches and teachers press the concept of delayed gratification to students. But that’s not the word from the top.

There is currently a series of bonds with an initial value of $66 million Manteca Unified property tax owners are still paying on. It translates into roughly $80 a year for a home assessed at $200,000. For most folks it isn’t breaking the bank. And since it is for new construction or buildings that the district didn’t have, it is akin to mortgaging a home for 30 years since that is often the only way any of us could afford to have our own home.

But would we make home improvements and repairs and finance them for 30 years? Let’s put it this way: Banks wouldn’t allow it since long before the debt is paid off the improvements will need to be replaced again.

The bond would give the district $159 million up front. Based on the California Legislative Analyst’s office, a $159 million bond will actually cost around $280 million in current dollars when it is finally paid off. That assumes a 4.4 percent interest rate, an average 3 percent annual inflation and a 30-year payback period.

So property owners would end up paying enough money over 30 years to wipeout more than half of the district’s identified maintenance needs but will get less than a third of the work actually done.

The comeback, of course, is that inflation eats into the value of the dollar and the cost of construction goes up. However, after emerging from the Great Recession we know that is far from an absolute.

Besides, if $500 million in upgrades and repairs are needed now, how in earth is the district going to cover the remaining $350 million plus bill to build new schools they need that will cost by Manteca Unified estimate $188 million?

The answer is simple. We are not talking about pressing needs.

After buying my current home, I spent $17,000 to replace an aging roof, fencing that had fallen down and to replace a 1950s-era electrical service panel. I also spent $23,000 modernizing the floors, replacing outside doors, putting in a new water heater along with appliances and updating the kitchen and bathroom.

I still owe money on my mortgage for another 20 plus years. All of the repair work and upgrades have been paid off.

I know over the course of the next 30 years I will have to paint, replace the roof, perhaps change out electrical wiring, replace the fence, replace appliances, and probably address other items. It could easily cost well over $60,000.

When I need to start doing the work I am not going to run out and borrow the entire amount at one time but try to pay as I go. It’s called trying to be prudent.

The question is just how prudent is Manteca Unified and the school board being?

Yes, a parcel tax requires securing a higher percentage of “yes” votes and therefore requires more effort to get it passed. The payoff for not taking the easy way out is the money goes to actual projects and less to bondholders who get richer off the district’s “I got-to-have-it-now” mentality underscored by the fact a parcel tax never got serious consideration if any at all.

 

This column is the opinion of executive editor, Dennis Wyatt, and does not necessarily represent the opinion of The Bulletin or Morris Newspaper Corp. of CA.  He can be contacted at dwyatt@mantecabulletin.com or 209.249.3519.

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