☆ Mark Burns: Prop 5’s defeat shields communities from high-interest loans that cost twice as much to pay back (1/2)
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Bonds can double repayment costs, burdening property owners for decades, especially in today's higher interest rate environment. So says Silicon Valley realtor Mark Burns, who sat on two school bond oversight committees. Prop 5 and RM4 promised similar oversight bodies, but Burns says they’d only pay “lip service” to the idea of accountability. Prevailing wage requirements, for example, force districts to pay astronomically inflated prices. An Opp Now exclusive Q&A.
Opportunity Now: Prop 5 would have made it much easier for local governments to borrow money. Is it a good thing it lost?
Mark Burns: I was really happy. I'm not a big fan of continuing to add bonds. They roll those out forever, and they have to be paid back. We're not in a low-interest rate environment anymore. So whenever they have to pay to sell the bonds for interest, they're going to be paid back at about 72% or 100% above the original bond measure. So if it’s a $300 million bond measure, it's probably going to be five or $600 million paid back by property owners over 30 or 40 years.
Obviously, communities have to do a lot of infrastructure. Schools have to do new computer systems, they have to retrofit earthquake safety…
ON: Prop 5 would have gone around Prop 13, and made it easier to raise money for local infrastructure bonds by taxing property owners on special assessments.
MB: It's not like Prop 13 has choked local governments on taxes. The revenue from Prop 13 property taxes has gone up about 6% every year since 1978 on average. So they're not having a problem staying ahead of inflation. They're not having a problem with having a little bit extra revenue. It's managing it. It's being careful with their money. In the case of schools, there’s an internal spending and poor management issue, as well.
ON: Prop 5 promised oversight and transparency. You participated on oversight committees for the High School and Elementary School Districts within the six cities surrounding Cupertino. How confident are you that those committees provide transparency, accountability, and oversight?
MB: Well, I'm going to sound like a very jaded person, but oversight is lip service. They’re nice, well-meaning people, but their hands are tied.
They would have monthly meetings where they assemble 10 or 12 people in a room for presentations about where the bond money was going. But they’re stuck with county and state and federal regulations, layers of bureaucracy and prevailing union wages that make all the projects cost more.
I think they had 500 classrooms at the Fremont High School District that they needed to renovate. I can't remember the exact numbers, but I think HVAC for each individual classroom required somewhere in the neighborhood of $40,000. You know, I've got a pretty efficient air conditioner and furnace in my house that I replaced four years ago. It was about $13,000.
I hate to say it, but the oversight committee is basically saying, "Yeah, it looks like you're doing a really good job checking everything out. That sounds great."
ON: Who’s on these committees?
MB: It’s made of representatives of the public. There are parents, businesspeople, and taxpayer association and Chamber of Commerce members. They have to have a wide spectrum of people within the district to be on the committee.
I qualified because I was on the board of directors for the Chamber of Commerce. Or, I was a member of the Silicon Valley Association realtors, as a businessperson. But they didn't have anybody from any taxpayer association. So eventually they rotated me over to being a member of a taxpayer association. They got that box checked off.
Oh, it's brutal. They’ll have five or six concerned parents in there, and they're like, "We’re not balanced and missing some key categories. We need somebody to go join a taxpayer association so they can have that category covered in our mix."
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