Lockyer seeks legal opinion on school construction bond campaigns
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California Treasurer Bill Lockyer sought a legal opinion Monday to determine if some local education officials and the municipal finance firms they employ are violating state law by campaigning to get school construction bonds passed.
In a letter to California Atty. Gen. Kamala Harris, Lockyer said the opinion was necessary because some arrangements between school districts and bonding firms “raise substantive questions” about whether the officials are using public money to conduct such political campaigns — an action banned by law.
In recent months, Lockyer has been examining the way schools handle bonds, in part because of alleged abuses that arose from the issuance of risky and expensive instruments know as capital appreciation bonds.
Based on figures developed by his office, The Times reported last November that 200 school and community college systems — a fifth of all districts statewide — had issued billions of dollars in such debt, often when pressed for construction money during the recession. Unlike conventional bonds that require repayments to start immediately, these allowed districts to put them off for decades. The delays, however, often result in staggeringly high compounded interest charges that make the total debt even larger.
According to a spokesman, Lockyer is asking the Legislature to limit the number of high-cost bonds that a school district can pursue. But his letter to Harris was aimed more at the way voters are encouraged to support all bond measures.
The treasurer said that some school districts have given underwriting firms “an exclusive, sole-source contract” to sell bonds “in return for obtaining pre-bond election campaign services” from the firms.
Under some agreements, he continued, underwriters who stand to profit from selling bonds conduct voter opinion surveys or help prepare ballot arguments. Other agreements “specify [that] the underwriting fees paid in connection with any subsequent bond sale will reimburse the underwriter for pre-election campaign services provided.”
Among other things, Lockyer wants to know if Harris sees that kind of conduct as a violation of law.
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-- William Nottingham
