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Bonds used by some school districts come with a big cost

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From The Bay Citizen: At least 1,350 school districts and government agencies across the nation that have turned to a controversial form of borrowing called capital appreciation bonds to finance major projects, a California Watch analysis shows. Relying on these bonds has allowed districts to borrow billions of dollars while postponing payments in some cases for decades. Typical school bonds require borrowers to begin making payments within six months and cost two to three times the principal amount to repay. But with deferred payments, districts have ended up paying as much as 23 times the amount borrowed. The decision to issue these bonds instead of traditional bonds typically is made by district officials after voters have approved bond measures, and the public usually has no knowledge of how much they will cost to repay. Earlier this month, California Treasurer Bill Lockyer and Tom Torlakson, the state superintendent of public instruction, called for a statewide moratorium on capital appreciation bonds.

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