“The bond also had considerable cachet, thanks to a coveted endorsement from the San Diego County Taxpayers Association. Indeed, association President Lani Lutar’s name was first on a list of five local dignitaries named on the ballot as supporting the bond.
Lutar said had she known the full implications of the bond, she would not have recommended the association support it.
The taxpayers association recently started studying capital appreciation bonds to fully understand their impact. Its main case study: Poway Unified.
Last month, the association changed its criteria for endorsing school bonds. In the future, it will ask districts how, exactly, they will finance their bonds. If a district plans on using expensive long-term capital appreciation bonds like Poway’s, it won’t get the association’s backing.”
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The most frightening thing about this quote is the fact that these are the people who are supposed to understand how bonds work.
It reminds me of a conversation with a relative where she was in the middle of ranting about unions and the irresponsible way the govt spent our money. I agreed that money was indeed spent unwisely but asked her why she thought so many voters kept voting for more bonds (~$54 BILLION since 2006 in California alone). She said that was different because taxpayers weren’t paying for those…bondholders were. When I asked her who was going to be paying the principal and interest payments to those bondholders, her face went blank. Mind you, this is someone who is more knowledgeable about finances than most Americans.
How many other people don’t realize that when the government spends money, it has to take in money in order to pay for it? At least “tax and spend” politicians understand that one requires the other, vs. the “spend, but don’t tax” types who have been in charge for much of the past decade.
