Capital Appreciation Bonds – how could ANYBODY not see this is a SCAM? How much money does Greg Isom make off the sale of these bonds?

17 Apr

The school district is contemplating selling “Capital Appreciation Bonds.” These bonds are a disaster – they just did a story on the news the other night, explaining how one local school district borrowed $6 million but will pay back about $80 million.  The district superintendent in that case defended himself saying they’d never be able to get the money to do anything if they didn’t borrow it at these outrageous rates and then just leave it for the grandchildren of their students to pay later, with interest on the interest.

That guy should be driven out of town in tar and feathers, and so should Kelly Staley, who is proposing the same deal for Chico Unified. In this case, they claim the  “emergency” project is the replacement of a gym floor, but we all know, they’re under pressure from California State Teachers Retirement System to make whopping pension payments for their crazy pensions.   

And don’t forget, Staley just led the campaign to extend the taking from ill-fated scam Measure A. She said she wanted $78 million out of that. Geez, where will it end? 

They give us all this crap about “projects” – excuse me, Kelly Staley (and I got this from her long-lost foster brother Norm) is a (bleeping) LIAR! They want this money to make their CalSTRS payments.

I got one of those 99 cent subscriptions to the ER so I could copy the salary charts. I’ve been looking over the CUSD  payroll.  Do you realize, there’s something like 2400 employees in the Chico Unified School District? And they’re management heavy – three “assistant” principals at each high school? Starting at about $70,000/year and ending up at about $100,000/year. And then the principals make around $110,000 or more. I saw a couple of principals at $120,000/year. One charter school has not only a principal at $120,000, but a “CEO” making same. 

Teachers get plenty – those salaries run from around $60,000 to over $100,000 too. We’ve got elementary school teachers making in excess of $80,000, and then paying LITTLE OR NOTHING toward their own benefits, as seems standard in the public sector. They get 70 percent of those salaries in retirement, plus an additional salary if they substitute teach, like our mayor, Mary Goloff.  And we still pay for their health insurance. (And don’t forget, we pay for a $21,000 a year policy for Mary as mayor too!)

And then there’s the weird little bits of money they give people without any explanation – $6,000 to a woman I knew several years back, and I’m wondering – for WHAT?  How do I get in on that? 

This district is AWASH IN MONEY. They spend so much money they could qualify as a small country. With no accounting, none. They tear up some stuff at one or another school, they “fix it” – where’s the bills? When do we get to see some accounting for this money?  How much goes out the door on salaries and benefits and pensions? 

And now these Capital Appreciation Bonds. Here’s how they work, from http://smallbusiness.chron.com/capital-appreciation-bond-work-39357.html

Capital appreciation bonds offer an opportunity for a non-profit or small business to gain working capital to assist in starting or expanding the business. To the small business owner, the bonds work effectively like a loan that must be repaid with accrued interest. Unlike a traditional loan, the principle and interest are paid in one lump sum on the bond’s maturity date instead of making a series of regular payments. This lack of periodic coupon payments classifies a capital appreciation bond as a zero-coupon bond.

But then, oh no! You have to pay it back! Annual compound interest is accrued on a capital appreciation bond up until the maturity date. The principle plus this accrued interest exactly equals the par value of the bond. Therefore, the annual interest rate paid fluctuates with the investor’s original purchase price. Small businesses can calculate the interest rate they are paying by reversing the compound interest formula. Dividing the par value by the purchase price gives you the overall multiplier. Taking the nth root of this overall multiplier — where n is the number of years until maturity — gives you the annual multiplier. Subtracting 1 from this annual multiplier gives you the interest rate in decimal format. As an example, for a $5,000, 10-year bond purchased at $3,000, divide 5,000 by 3,000 to get 1.667. Take the 10th root of 1.667 to get 1.0524. Subtract 1 to get the annual interest rate of 0.0524, or 5.24 percent.

Greg Isom, as you saw in an earlier post, is the guy who sells the school district these bonds. How much commission does he make, I have to wonder. 

I tried to e-mail this question to Staley and the school board but the e-mail links on the district website do not work. I’ve never been able to find direct contact information for these people. They don’t want to hear from the public. When I  tried to call, I got a machine with a message from the superintendent’s secretary. I guess you have to go to one of their insane meetings. They do everything they can to keep the public out. 

I can’t make the meeting tonight, so I will have to send my questions via snail mail – that’s  1163 E. 7th Street, Chico, CA 95928. I’ll keep you posted. 

 

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