Despite opposition from several education organizations, the Assembly Education Committee on Wednesday voted 6-0 for a bill that would severely restrict school districts’ ability to float construction bonds that would saddle future taxpayers with huge balloon payments.
These financial instruments are known as capital appreciation bonds, or CABs, and they have become common over the past decade. By deferring payments on the bonds for sometimes decades and extending the term of the bonds to 30 or 40 years, districts can end up paying interest amounting to 10 times the principal or more, instead of twice the principal as is common for a standard 25-year school bond.
via Ed Committee backs crackdown on interest-deferred bonds – by John Fensterwald.