Dan Walters

Dan Walters
By Dan Walters
May 15, 2016 – 6:00 PM

  • Developers push $9 billion bond issue despite governor’s criticism
  • Contractors seek to keep payments for illegal contracts
  • Schools, county treasurers joust over control of bond funds

The seemingly mundane matter of issuing bonds to build and fix schools has suddenly morphed into a bubbling stew of highly contentious politics.

The reason: School bonds and the projects they finance are a multibillion-dollar industry, and high-dollar issues often spawn conflicts.

The most obvious example is a ballot measure that would authorize $9 billion in state bonds to help school districts finance construction.

Over the last four decades, ever since Jerry Brown’s first stint as governor, the state has issued about $45 billion in school bonds, and Brown, now in his second stint, says enough is enough.

The state is paying about $2 billion a year to service past school bond issues, Brown points out, and the process for allocating the money is inefficient and unfair. The $9 billion bond proposal “makes no changes … and it would add an additional $500 million a year” to the state’s obligations.

However, a potent coalition of school contractors, housing developers and education groups is forging ahead. One factor is that the existing pool of school bond money is virtually exhausted, and when it’s gone, local governments would be free to sharply increase development fees to finance school construction.

Meanwhile, there’s a squabble over how local districts have spent previous bonds. The state Supreme Court has upheld a lower court decision saying Fresno Unified School District’s use of no-bid contracts for bond-financed construction, using a loophole designed for long-term “lease-leaseback” projects, is illegal.

Lawyers who won that case contend that billions of dollars in no-bid contracts in Fresno and other districts should be returned by contractors under state “disgorgement” laws.

To read expanded column, click here.