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Hart district numbers just don’t add up

Myers' Musings

Posted: September 27, 2008 7:59 p.m.
Updated: November 29, 2008 5:00 a.m.
 

A small lesson in political code speak: When an elected official states, “We must come together in a bipartisan way to solve this problem rather than dwelling on the causes,” that individual really mean, “Please pretend my political party did not screw things up so badly.”

More political code speak: “My opponent seeks to take advantage of a difficult situation to stoke partisan fears.” This means, “Make that person stop talking about how badly my dogmatic embrace of a failed policy resulted in the current difficulties.”

Hank Paulson and Ben Bernanke try heroically to shore up the world economy while George Bush looks bewildered, John McCain acts confused, first stating the soundness of the economy, then something incoherent about the soundness of the American worker, then AIG should fail, then AIG should not fail, then fire Christopher Cox.

Meanwhile, the worst-case scenario of the slow-motion subprime mortgage meltdown that began some 14 months ago reaches finally into the corners of the SCV.

How so? Someone else other than SunCal will eventually develop the NorthLake and Bermite properties, sometime in the future, and no developer will build a Castaic high school within the next 10 years. The federal government now stands behind the promise of an AIG insurance division to clean up the Bermite property, part of a private company nationalization that would make Hugo Chavez proud.

One restaurant meal
And what about the William S. Hart Union High School District’s Bond Measure SA on the November ballot?

I predict right now that despite a complete mishandling of the original bonds of Measure V, the lack of a coherent plan for the Measure SA fund, and the first time a coherent opposition against a local bond has reared its head, the bond will pass easily with about 60 percent of the vote. Slap the word “education” on anything and one will poll near 70 percent in the tracts built and populated within the last 15 years in the SCV.

This effectively cancels out any low approval rates in other areas, putting the votes above the required 55 percent threshold. Despite this fact, I do wish to relate how the numbers the Hart district uses to now market Measure SA seem to not add up.

Let us go back to Measure V. The Hart district sold that bond issue under the assumption the typical residential property owner would give up one modest restaurant meal a year ($28) per $100,000 of assessed valuation to raise the money to pay the principle and interest on the bonds.

Assuming a 30-year bond term with constant amortization of the principle and a 4 percent interest rate, then the bond tax would need to raise just over $8.8 million per year.

This equates to a total assessed real estate value at the time of the bond passage in 2001 of approximately $31.5 billion (you read that right). Fair enough. The assessment does currently stand at approximately $28 per $100,000 assessed, and the bonds do not currently stand in default.

Now let us move on to Measure SA. District materials state (shockingly, in my mind) that under Measure SA — with twice the principle and in a (dysfunctional) credit market certain to carry much more interest — property owners will only need to pony up $10 per $100,000 valuation, almost one-third the amount related to Measure V.

If one assumes the Hart district miraculously receives an interest rate of around 4 percent, and assuming a 30-year bond term with constant amortization, the bond tax will need to raise about $17.7 million annually.

Nearly usurious
For the $10 per $100,000 valuation to work, this means the value of property subject to assessment in the Hart district increased 560 percent to $170 billion in the ensuing seven years!

The assumptions get much worse if the interest rate rolls up to the nearly usurious rate of 12 percent authorized in the Hart board resolutions.

For the $10 per $100,000 to hold to raise the $37.4 million annually needed to service this debt, one must assume a 1200 percent appreciation in assessed property from 2001 to an eye-popping $374 billion.

More than likely, even assuming charitably that assessed values doubled in the last seven years and the Hart district can obtain a reasonable rate of interest on the bonds, the amount of the true assessment per $100,000 probably rests somewhere north of $50, or five times the Hart district asks in its campaign materials.

So should we hand over this kind of authority to an institution that can’t even get simple calculations straight?

Tim Myers is executive vice president and chief financial officer of Landscape Development Inc. in Valencia. His column represents his own views, not necessarily those of The Signal.

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