Supervisors Reject Garden Grove School Bonds Amid District’s Financial Woes

By By NICK GERDA
Courtesy of the Associated Press

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 because 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, out of a $430 million in total expenses.

The proposed budget for this fiscal year again shows a deficit – this time of $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 supervisors would even agree to make a motion.

Lynn Paquin of bond underwriter George K. Baum & Company 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 that requirement comes from the district’s precarious financial situation.

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

The measure allowed up to $250 million to 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 $120 million in bonds comes with hefty interest payments. Taxpayers will ultimately pay $244 million – more than twice the bond amount – to pay it off. It’s set to be paid through property taxes.

Garden Grove Unified serves around 50,000 K-12 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.