It was a dog-and-pony moment for San Diego School District Superintendent Alan Bersin at the Aug. 6 school board meeting. Despite board member John deBeck's grumbling that they just move on with agenda, Bersin insisted on parading out two slightly uncomfortable financial advisors, who stood front and center as he announced that the district had been given the highest credit rating of any major urban school district in the country-a declaration that, in effect, rolled out the red carpet for the sale of $275 million of Prop MM bonds in the coming weeks. The money generated by the bond sale will go towards rehabbing school facilities.
Board member Fran Zimmerman, an ardent foe of Bersin, burst the triple-A bond rating bubble with a question.
“I want to know,” she said, “if a citizen buys these bonds, what rate of return can they expect?”
Dave Johnson of Banc of America, the securities firm that's underwriting the bonds, tepped up to the microphone. “The average interest rate will be around 4 percent,” he said. “If you buy some of the earlier maturities, you'll only make, however, about 1 or 2 percent. The longest maturity is right around 5 percent.”
“At how many years?” asked Zimmerman.
“Twenty-five years,” replied Johnson.
“Oh my,” said Zimmerman, “I won't be buying those.”
Johnson, however, didn't miss a beat: “Can I give you Banc of America's number?”