Texas districts criticized for use of bonds with high payback costs

April 1, 2013
Capital appreciation bonds delay repayment for years, but district may amount to 10 times the amount borrowed.

Arguing that they’ve been backed into a corner by Texas law, many rapidly growing school districts in the state have turned to a pay-later method of borrowing to provide classroom space for their increasing student population. The Austin American-Statesman says the Leander district, which has nearly doubled in size in the past decade, is among those relying on capital appreciation bonds that delay repayment for decades as interest grows to as much as 10 times the amount borrowed. The districts say the bonds enable them to meet growth demands, even as they bump up against state-mandated debt limits. But critics have questioned the wisdom of sticking future generations with those escalating costs.

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