The Treasurer also issued a Fact Sheet that says:
The School Bond Scam: How It Works
The school bond scam works like this:
STEP 1: Companies contribute to ballot measure campaigns, likely anticipating rewards later in the form of school district contracts. (Companies can consider these donations to be “investments.”)
STEP 2: Well-funded campaigns persuade voters to support new school bond measures.
STEP 3: New bond measures increase property taxes.
STEP 4: Lucrative construction contracts can be awarded to campaign donors, regardless of price.
STEP 5: Higher property taxes pay for contracts funded by school bonds.
STEP 6: The cycle repeats itself every few years (regardless of who’s the district superintendent or who sits on the school board).
Election Year 2016: A $67.6 Billion Banner Year for New School Taxes
On November 8, 2016 over 100 school districts in California are asking voters to impose over $50 billion in NEW taxes on property owners in their districts. ( See: School Bond Clearing House Website ). In addition, voters will decide on Proposition 51, a state school bond costing Californians $17.6 billion (placed on the ballot by developers and the schoolfacilities construction industry).
State and local school bond campaign records reveal most donations are made by those who stand to profit, including Wall Street firms, school contractors, architects and consultants. The correlation between campaign contributions and contract awards is well-documented.
As long as school districts give contracts to favored companies -- without regard to price or use of traditional sealed competitive bidding procedures – this “pay to play” pattern will continue. As a result, school construction dollars are wasted and students are short changed, while Wall Street and others get rich.
Growing Awareness of Problem
Last July California State Treasurer John Chiang issued the following statement:
"A four-month Voice of San Diego investigation into local school bond campaigns, including public records gathered by NBC 7 San Diego, revealed a pervasive pattern: In 13 of the 17 local school districts that have issued bonds since 2006, a significant correlation exists between the major donors to the district’s bond campaign, and the companies that won work on the bond program."
"WALL STREET FIRMS PREY ON SCHOOL DISTRICTS EAGER TO WIN VOTER APPROVAL FOR BOND ELECTIONS - Municipal finance firms, such as underwriters, bond counsels and financial advisors, front money for bond election campaigns with wink-and-a-nod understanding that they will win lucrative contracts to issue the bonds, once approved by voters . . . [These pay to play arrangements increase school bond expenses] "by as much as 900%."
“There are unscrupulous Wall Street firms offering to fund local bond campaigns in exchange for lucrative contracts . . . [These] ‘pay-to-play arrangements’ rip-off taxpayers and endanger the integrity of school bonds, which are vital tools for building classrooms and meeting the educational needs of our communities.”
The school bond scam is where those who stand to profit most contribute to ballot campaigns to convince voters to increase property taxes to fund the lucrative contracts they hope to receive from school boards in return for helping pass their school bond ballot measures.
Since 2001, California voters have approved $146 billion in state and local bonds to fix schools. Every election, voters approve new local school bonds and trust they’re getting good value. This isn’t always the case.
Most people think school bond funded contracts are awarded based on price, using competitive bidding. It’s generally assumed that schools are frugal and aim to get the best deal possible with their few precious school bond tax dollars.
You know what they say about making assumptions.
Let’s Make A [Raw] Deal
In reality, school districts don't have to award bond funded contracts based on price. Investigations reveal growing numbers of school districts award contracts to those who donate to bond campaigns. When it comes to school construction, getting a good deal doesn’t always factor into the district’s decision!
This practice betrays the public trust and cruelly exploits community goodwill. In time, this type of favoritism and corruption undermines public support for public schools and other government institutions.
A 2013 Voice of San Diego investigation stated:
Examples Galore: Pay-to-Play School Abuses
Here are links to articles that detail specific examples of California school bond abuses:
"Bankers Push School Bonds for C.A.S.H."Orange County Register, February 22, 2013
"California Treasurer Chiang calls out pay to play in school bond elections." California Forward, July 27, 2016
"Construction firms bankrolling Centinela Valley school board campaigns, receiving millions in contracts." Daily Breeze, February 19, 2014
"Where Borrowing $105 Million Will Cost $1 Billion: Poway Schools" Voice of San Diego August 6, 2012
"Another deceitful California school bond plan."East Bay Times April 28, 2016
"From bond measure to federal probe: How Fresno Unified caught the eye of investigators.”Fresno Bee, October 17, 2015
"Private Emails Reveal How ‘Pay to Play’ Scheme Began in Fresno Unified." The Arax File, June 27, 2016
"Fast Times at Rancho Santiago: Official's Passion for Golf Pays Dividends for Contractors." Voice of OC, December 2, 2015
"Building California schools now big business, big money and big politics.” Sacramento Bee, August 1, 2016
"CUSD 'Billion Dollar Bond' Campaign Funding Coming From Firms Which Stand To Benefit from Passage." OC Daily, September 20, 2016
"Monterey school bond deal mirrors a Fresno scheme under FBI investigation." Monterey Bay Partisan June 29, 2016
"The $50 Million Henhouse." The North Coast Journal August 27, 2015
"Audit: Bond blunders led to shortfall." San Mateo Daily Journal July 2, 2015
"Taxpayer group accuses rival group of too cozy relationship with developers" San Diego Union Tribune November 2, 2012
"Corruption In Your Own Back Yard" Howard Jarvis Taxpayers Association July 3, 2013
"Poway Unified Might Re-Hire Controversial Bond Consultants" Voice of San Diego September 15, 2015
Copyright 2016 All rights reserved
This website is for public education by California Taxpayers Action Network an all volunteer statewide non-profit non-partisan organization that promotes fiscal responsibility in state and local government.