County Rejects School Bonds Due to District’s Finances

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As Garden Grove school officials stare down a major structural budget deficit, the Orange County Board of Supervisors Tuesday rejected their request to issue $120 million in bonds for infrastructure repairs.

The district is “not in a good financial position, so how do we feel comfortable with this deal?” asked Supervisor John Moorlach.

“Right now you don’t have a comfortable Board of Supervisors,” said Supervisor Janet Nguyen, whose district includes Garden Grove.

The reason why Garden Grove needs approval from the supervisors before issuing the bonds is it is facing a significant budget deficit and is at risk of not meeting “its financial obligations for current fiscal year or two subsequent fiscal years.”

The district’s most recent budget had a massive $76-million deficit with $430 million in total expenses.

The proposed budget for this fiscal year again shows a deficit, this time $60 million.

To pay its bills this year, the district has been planning to drain its fund balance from $87 million to $27 million, according to the budget.

It was for these reasons that no supervisor would agree even to vote on a motion.

Lynn Paquin of bond underwriter George K. Baum & Co. sought to reassure supervisors that the district was in good enough financial shape.

“In my experience, I do not think that this is a district that is in financial trouble or will have trouble paying back this bond debt service,” said Paquin.

A district representative agreed.

“When we take our budget to the [school] board in a week, we’re going to be positively certified,” said Nancy Medford, the district’s executive director for business services.

If that’s the case, supervisors might not be needed to issue the bonds after all, since they participation would come from the district’s precarious financial situation.

The bonds stem from Measure A, known as the Garden Grove USD [Unified School District] Safety and Repair Measure, which was approved by 64 percent of voters in June 2010.

The measure allowed up to $250 million in bonds for “infrastructure modernization projects for aging schools in the Garden Grove Unified School District,” district spokesman Alan Trudell explained ahead of the vote. The first $130 million of those bonds were issued in 2010.

At the time, the district had told residents it would cost them between $35 and $100 per year for about 30 years.

The current round of bonds for $120 million comes with hefty interest payments. To pay off the bonds, taxpayers will ultimately pay $244 million, more than twice the bond amount. It’s set to be paid through property taxes.

Garden Grove Unified serves around 50,000 kindergarten through 12th-grade students and 16,000 adult education students in Garden Grove and parts of Santa Ana, Westminster, Fountain Valley, Cypress, Stanton and Anaheim. It has more than 5,000 employees.

You can reach Nick Gerda at ngerda@gmail.com, and follow him on Twitter: @nicholasgerda.

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