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Broke California cities are in desperate need of cash and they're willing to take loans with huge re payments way down the road in order to get the money now.
Elizabeth MacDonald has this story and she's here what is now go.
Force school districts in the San Diego area -- had basically -- up -- Say about a 105 million dollars they're gonna hold nearly a billion dollars down the road that's true for the San Diego County -- hallway county Stuart.
That's we've got the map a legal for school districts Southern California all near San Diego on know quite well as a matter of fact a half of one it's just just for us -- moment -- way the -- -- school system.
That's right now they borrowed a 105.
Million direct the money now correct.
But in total that have to repay 981.
That's right and basically to have to start paying repaying.
-- twenty years and up but then the deal is they don't have to pay any interest nor any principle they cannot refi the loan and they cannot pay its early.
And essentially this is a kick the can move because they set up and -- -- saw.
You know sluggish tax revenues coming in effect they say wait a second look are now not paying anything that -- -- anything for decades we'll pay it later on.
So they get the money now that's right no payments interest or principal I think is twenty years until -- way now but Iraq once and also San Diego did the same thing but nothing for twenty years spell trouble -- -- you got the money you -- -- -- then.
Massive payments yes that's -- -- every single year battle.
The taxpayers and Michigan and these bonds so dangerous they said to themselves.
Wait a second we're gonna outlaw them and by the way this -- school autistic is sitting on cookie jar reserves of nearly 35 million dollars I don't know why they're -- -- the money.
The money's going toward modernizing the school the borrowings going -- monetize -- school for things like recyclable green building materials now you are dining areas now.
You've got a little getting used to and the this bill and anyone speaking against this against this man.
No because they don't know about it I think they don't know the details have been drilling intimate details of their filings and that deal is the securities exchange commission just last week Stewart said.
Look at -- -- states and cities you gonna do better disclosure but that's not enough.
Disclosures not enough to protect taxpayers we've got really -- real corruption.
At the school board level selling our products and -- did vote for this on again I'm coming back to the public school system they -- they pass this that's right accepted that the right would they told fully.
-- -- -- -- -- Did somebody sit down -- say hey you attacks by us you get the money now.
No payments for twenty years but -- saddling your grandchildren -- nearly a billion dollars of -- you know let me say it.
Like and nobody set up like that and the disclosures that I've seen they may have -- that deal is is that Wall Street's make it out like bandits.
Stifel -- for example unit at that firm is getting -- suite a multimillion dollar deal.
I think because they're underwriting and also the attorneys and that the eleven where who provides the 105 million dollars the public they lend at the wall -- terms let's treatment and also Citigroup Bank of America Goldman Sachs is on the San Diego -- deal that would it.
Bed taking a huge risk.
That somebody at some point in the future will tunis and this is ridiculous plus numbers well hello pain and -- early and little risk because municipalities rarely default rarely I -- that with a caveat being usually hit taxpayers that property tax increases later on.
So that's the deal and other words the other issue to a California stories we've been reporting a third of the upper brackets have people in the upper bracket.
Have left the state between O seven and 09.
California relies heavily on individual taxpayers to fund their school budgets.
And their state budgets so that's an issue across that.
Across at the state you're seeing -- -- You're seeing cookie jar reserves the right at that it could be used and instead of sitting on his coherent jurors -- -- turning to Wall Street guys in this.
And in -- defense immediately tonight almost Ponzi scheme that's going on here.
While I don't.
Night on dangerous ground -- maybe but I think the point but do you juicy deals the logic to the argument I should've done desperate for cash now I don't think the Ponzi scheme.
But OK but it the borrowing -- at the kick the can move and it's sort of a bait and switch on taxpayer that's just gonna repeat the moments you get a 105 million dollars now right.
I and -- eventually.
You pay back 981.
Million dollars -- threat taxpayers have to they're on the hook for that that's right nothing for twenty years and then you hit with almost all interest I believe.
In the public school district.
I believe it's about fifty million -- yeah yeah -- twenty years don't know that's a million a week.
-- is also is worth pointing out and this is it San Diego County area school administrators earn on average 227000.
A year 85% of the -- school district.
Budget goes toward salaries so and compensation so that's an issue to.
Cookie jar reserves very high compensation.
And taxpayers not knowing what their vote and as I said Ponzi scheme he'd have to.
That's that's a great story here thank you very much a -- broke it down nice and sweetly and simply for him.
Saw -- -- the low full list definitely you know I like simplicity and you gave it to us I did that myself list -- --
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