This insanity from California expresses perfectly why any system allowing politicians to spend money today borrowed from tomorrow presages the fiscal end of the world:
"We'd be foolish not to take advantage of getting $25 million" when the district had to spend just $2.5 million to get it, [president of the school board] Ramsey says. "The only way we could do it was with a [capital appreciation bond]."But why should Charles Ramsey worry? He's not going to be around in 5-10 years when the CAB payments start to kick in. He's not personally liable for the school's debts. What rational risk is there to him? He gets to build a new elementary school, accumulate the resulting kudos (and, who knows, maybe move on to a non-executive director position with the construction firms benefiting from the new build). Some other poor schmuck is going to be in the hot seat when the school has to start paying back the $34 million at $200K per month over 15 years, or whatever. It's Somebody Else's Problem.
In the West Contra Costa Schools' case, that $2.5 million bond will cost the district a whopping $34 million to repay.
I do note, however, that if a regular Joe borrows £50,000 in order to get a 25% deposit and preferential interest rates on a £200,000 mortgage then a charge of mortgage fraud is likely to find him in short order.
Any resemblance to today's public sector pensions crisis and deficit spending behaviour is purely intentional.
[Hat tip: ZeroHedge]