The Peralta Community College District, which entered into an irresponsible borrowing scheme to cover the cost of workers’ retirement health benefits, now faces decades of rising loan payments that will eat up education funds.
This in the four-campus northern Alameda County district that has consistently shown it cannot prudently manage public funds. Until trustees fix this mess, voters should not entrust them to borrow more money.
Click here for a complete list of our election recommendations.
Voters in Albany, Berkeley, Emeryville, Oakland, Piedmont and Alameda should:
• Boot out two incumbents who have contributed to the district’s mismanagement for the past two decades: Linda Handy in Trustee Area 3, who is seeking her fifth term, and Bill Riley in Area 5, who is seeking his sixth.
• Elect Corean Todd in Area 3, which covers part of Oakland, and Cindi Reiss in Area 5, which includes Piedmont and a swath of Oakland.
• Reject Measure G, which would further increase property taxes so the district could borrow an additional $800 million for school construction.
• Approve Measure E, which would extend the current $48 annual parcel tax for another eight years to supplement funding for core academic programs.
Stunningly irresponsible
Handy and Riley, the two incumbents seeking re-election, still don’t understand, or choose to mislead the public about, Peralta’s extraordinary debt that was created when the board launched a risky, complex borrowing scheme two years before the Great Recession.
Rather than make responsible annual payments to shore up the district’s underfunded retiree health plan, trustees approved borrowing $217 million by issuing bonds starting in 2005 to fund the workers’ benefits.
It was stunningly irresponsible. But it gets worse. They backloaded the payments, kicking the proverbial can down the road. In an extreme example described euphemistically in the district’s annual financial report as a “unique financing structure,” the district refinanced the payments due in 2006-8 until 2049.
Because of the backloading, the debt has grown and the interest costs are ridiculously expensive. Today, the district owes $235 million in principal payments, more than originally borrowed, and will end up, with interest, spending $592 million to pay off the bonds by 2050.
Piling on debt
It’s insane. More than a half billion dollars of bond payments remain for an obligation that should have already been paid. It’s the worst public agency borrowing scheme we’ve seen.
Yet Handy and Riley claim that everything is under control. Handy, in an email, said that the health care retirement plan “is fully funded and all of our liabilities are fully covered due to sound fiscal oversight.”
It’s true the health care retirement plan is fully funded. But that’s only because it’s funded with the money from the outrageous bond borrowing, which now must be repaid. Essentially, the district shuffled the debt from one credit card to another, and Handy conveniently fails to mention the second obligation, the bonds.
That’s not sound fiscal oversight. That’s undermining future generations’ educational services by loading the district with debt. And that’s why Handy and Riley must go.
Elect Todd and Reiss
To be sure, we have some concerns about their respective opponents. Todd is a former union leader. Reiss is a community college instructor in another district.
It’s unfortunate that no truly independent candidate is running. But both challengers do seem sincerely interested in fixing the district’s finances. And both are far superior alternatives to the incumbents.
Todd, an affordable housing coordinator, has taken classes in the Peralta district, as have her two kids. She wants a completely independent outside audit of the district’s finances. That would be a smart move.
Reiss, who holds a doctorate in art history from UC Irvine, teaches at West Valley College in Saratoga. She’s also a commissioner for the Accrediting Commission for Community and Junior Colleges, so she should provide keen insight for Peralta, which has had its own accreditation issues.
Yes on Measure E parcel tax
As for the ballot measures, Measure E would extend for eight years the district’s current parcel tax, a flat $48 annual fee on each property in the district, to supplement core class instruction.
The current tax, approved by voters in 2012, provides about $8 million in revenue for the district. It is scheduled to expire in 2020. And it has been controversial because the language of the measure was unfortunately somewhat ambiguous.
While district officials cite an audit that concludes the money was spent in accordance with the legal requirements, records show the district did not adhere to the spirit of the measure. In some years much of the money did not go to the classroom as the ballot measure wording suggested it would.
However, the legal language in Measure E has been greatly improved and tightened to ensure the money goes to augment funds for instruction in core academic programs. With that change, voters should support it.
No on Measure G bonds
Measure G, the property tax increase for the $800 million of construction bonds, is much more troubling. The size of the borrowing and the resulting tax increase dwarf the parcel tax.
Measure G bonds would add to about $450 million of school construction debt the district must still repay from a similar bond measure voters approved in 2006.
The older construction bonds will cost property owners about $29 extra for every $100,000 of assessed value in 2020. If voters pass Measure G, that rate would increase the following year to about $53 per $100,000 to cover payments on new bonds.
Put another way, the owner of a home assessed at $500,000 would face an increase from $145 a year to $265.
And none of that accounts for outstanding bonds the district must pay off from its existing revenue sources because of its irresponsible retirement debt funding scheme.
Until trustees address the retirement debt, voters should not let them borrow more.
