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HMG-CN INVESTIGATION: ‘Megataxers’ Hang $94 Million in Bonds on Tiny Bassett


 

 

July 16, 2021

 

From 2004 to 2018, $94 million in bonds was authorized and issued, costing taxpayers tens of millions.

This is part one of two on Bassett.

Editor’s Note: This is the second story in the exposé. Click here to read the first story.

By Brian Hews and Jonesy Smith

Bassett Unified School District (Bassett) was established in 1898. The district serves the communities of La Puente and Baldwin Park, encompassing around 8 square miles.  The area is absent of hills and valleys; residents call it “Pancakes” or the “Flatlands.”  The Eastside 13 did not Walkout in this neck of the woods and face 66 years in prison.  They marched for better conditions in schools and spearheaded a movement.  Just ask Moctesuma Esparza. 

 

Bassett Unified District boundaries.

 

In the early 2000s, under Basset’s Board and Superintendent Robert Watanabe, someone placed a call to George Pla of Cordoba Corporation.  He delivers. At the time, Bassett served approximately 6,000 students at 4 elementary schools, one magnet school, one academy, one high school, one continuation high school, and an adult school.

Cordoba supported Bassett and took the lead in developing a needs assessment study, otherwise known as a Facilities Master Plan, a common tool used by districts and companies to sell bond measures, kind of like nation-building;  brick by brick, lined with mortar,  Cordoba leaves something to show for its work,  they are a nationally recognized infrastructure firm much like Telacu.     

In November 2004, the first wave in the set hit Bassett; residents of Bassett Unified voted to authorize the issuance of $23 million in public school bonds.

The Megataxers had a big hand in the passage of the measure.

Types of Bonds

Principle and interest of Current Interest Bonds (CIB’s) are paid quarterly or semi-annually over the term of the bond, can be refinanced after 10 years, cost is usually 2:1, term is usually 10 to 25 years, and repayment begins the first year.

A Term bond (Term) refers to a bond that matures on a single, specific date in the future. At the time, the bond’s face value, the principal amount, must be repaid.

On the other hand, principle and compounded interest are paid at maturity with Capital Appreciation Bonds (CAB). They are the worst of the worst: they cannot be refinanced, the bond term can be as long as 40 years, and repayment is deferred for several years. The cost ratio varies from 4:1 up to as much as 16:1; a $1 million bond cost taxpayers up to $4 million at maturity.

In 2004, Basset sold over $12 million in CIB’s maturing between 2006 and 2027 and  $773,000 in CAB’s due between 2016 and 2018. For the $773,000, Bassett paid $1.5 million just in costs; the accreted value to taxpayers will be close to $2.5 million.

Paul Solano was president of the Board of Education at the time.

Cordoba became the service firm for Bassett, supervising the improvement of existing facilities that included exterior plumbing and restrooms, commercial doors and related hardware, and fire alarm systems at multiple locations.  The firm employs experts in federal, state, and local infrastructure, with unfathomable and unimaginable experience in construction management.  Just ask Leon Panetta.       

In July of 2006, the Board sold $6.6 million in Term and CIB’s due between 2009 and 2030; a $614,000 CAB was sold, the accreted value to taxpayers would be over $2.1 million, four times the price.

Another CAB, due between 2032 and 2043, valued at $4.021 million, was sold, which will stick taxpayers with an accreted value of $25.6 million, over five times the price.

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$614K million bond documents from George K. Baum showing the bond’s accreted value of $2.190 million.

 

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$4 million bond documents from George K. Baum showing the bond’s accreted value of $25.6 million.

 

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Paul Solano was still President of the Board of Education, while James Ballard was Assistant Superintendent of Business Services.   

On November 7, 2006, the Megataxers worked their network and convinced residents to authorize the Board to issue another $20 million in bonds; the total was now $43 million.

In July of 2007, the Board sold Term and CIB’s totaling nearly $19.4 million due between 2008 and 2027. Another $1.2 million in CAB’s was sold and due between 2032.

Cost to the taxpayers would be over $5.7 million for the CAB’s.

The authorization came on the heels of a Bassett Unified study projecting declining enrollment, losing nearly 1,000 students over a decade.

In 2008, the Board sold $1.5 million in CIB’s…



Read More: HMG-CN INVESTIGATION: ‘Megataxers’ Hang $94 Million in Bonds on Tiny Bassett

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