Kick the Can

“Kick the can down the road” – slang…Developing a temporary, inadequate solution to a problem in hopes that it will go away or be addressed by someone else.

Four public school districts in San Diego, California have recently sold huge long-term bonds to avoid making tough decisions today.  Payments on the Poway Unified district’s $105 million bond will not begin for 20 years.  At that time, payments totaling $982 million will be made over the following 20 years!  That equates to almost $50 million per year or $1 million per week in payments!  That’s about 20% of the district’s total current budget.  In addition, the bond is reportedly not callable (meaning it cannot be repaid early or refinanced).

How will the money be spent?  Updates include new computers, wireless data systems, alarm systems, recyclable building materials, landscaping, permanent outside eating areas, etc.  Hopefully all the updates are enjoyable and create a better learning environment since those students who remain in the district after graduation will pay dearly for it.  At the current pace, however, there may not be any upper income taxpayers in the district 20 years from now.  The Fox Business article references the following California Taxpayers Association data:  the number of California tax returns with $500,000 or more of adjusted gross income dropped from 146,221 in 2007 to 98,610 in 2009.

The full Fox Business article can be viewed here:  http://www.foxbusiness.com/investing/2012/08/08/california-school-districts-spend-1-billion-to-borrow-100-million/

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The information in this material is only as current as the date indicated, and may be superseded by subsequent market events or for other reasons. While all information prepared in this document is believed to be accurate, any statements of opinion constitute only current opinions of Payne Wealth Partners, Inc., which are subject to change and which Payne Wealth Partners, Inc. does not undertake to update. Accordingly, you should not put undue reliance on these statements. The information does not attempt to examine all the facts and circumstances that may be relevant to an individual’s financial needs. Payne Wealth Partners, Inc. is not soliciting any action based on these statements.

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