Sunday, September 16, 2012

This Is The Crap You Can Get Away With When People Don't Understand Math

I wrote earlier today about the city I live in and its claim that a measure on the November ballot will raise taxes only 1.75%--but the increase from 2.5% to 4.25% is a 70% tax increase.

Let's also not forget about a lack of raw number sense; how else could California, with fewer than 40 million people, pass bond measures such as $6 billion for stem cell research and $10 billion for a bullet train from nowhere to nowhere that is now projected to cost at least $90 billion?  The math issue is totally separate from the issue of whether or not the purposes of the bond are "good" or if they are legitimate functions of government.

The latest math issue I'm seeing is in school bonds:
A 38-year loan with no payments for 26 years that will eventually cost $12 for every $1 borrowed.

This isn't a subprime mortgage sold during the housing boom – it's a bond issued last year by a Sacramento-area community college district...

Because property values have fallen, those spending limits mean districts can't get as much from a general obligation bond as they would have during the boom years. Capital appreciation bonds allow districts to delay payment until a time in the future when, presumably, property values would be higher. The risk is in the higher costs, incorrect projections and the possibility of default.

In short, some districts can't take any more from today's taxpayers, but future taxpayers are fair game.

This practice received national scrutiny after Poway Unified School District near San Diego sold about $100 million in bonds at a cost of almost $1 billion over 40 years.
Something that cannot continue, won't.  The question is not how or even if these bonds will be repaid, the question is how bad the consequences will be when they aren't.

Californians, it seems, will vote for anything that sounds "progressive", cost and consequences be damned.

2 comments:

Jean said...

They sure will. It's amazing how anyone who objects to a 'good' project on the grounds of it costing way more than the state can afford is simply dismissed as evil or not compassionate. If it's 'good,' we should have it and anyone who thinks otherwise is just a hater.

This is how my city council screwed my neighborhood over last year...

Peter Reilly said...

Check out the tax letter that PWC prepared for the Romney campaign.