RICHMOND -- The Securities and Exchange Commission has subpoenaed records from the West Contra Costa school district and Contra Costa County Treasurer regarding general obligation bonds issued by the district and other records that pertain to recent refinancing of district debt.
The SEC did not reveal the nature, scope or subject of the investigation, which requested documents for bonds issued from 2009 to 2013, and SEC spokeswoman Judith Burns declined to comment. But a letter received by district officials with the subpoena on August 1 described the reason for the request as "a nonpublic, fact-finding inquiry."
"We are trying to determine whether there have been any violations of the federal securities laws," the letter from the SEC stated. "The investigation and the subpoena do not mean that we have concluded that you or anyone else has broken the law. Also the investigation does not mean that we have a negative opinion of any person, entity or security."
Since 1998, voters have approved six bonds worth $1.6 billion to finance the third largest school construction program in the state, behind San Diego and Los Angeles. The district has issued about $1 billion, with nearly $600 million remaining.
But growing opposition to the bond program, with watchdog groups calling for greater financial accountability, contributed to the failure of a seventh bond -- for $270 million -- in June.
On July 9, the school board directed its financial underwriters and advisers to refinance about $52 million in previously issued bonds to get a lower rate. However, the underwriters, on staff direction, subsequently sold $77 million, after they realized they could stay under the legal tax rate threshold of $60 per $100,000 in assessed valuation per bond measure over three years, said board President Charles Ramsey.
Language informing potential bond buyers about the subpoena was added to the official bond offering documents on August 7. The bonds were sold Wednesday.
The sale saved taxpayers $10 million over the life of the bonds, Ramsey said. Superintendent Bruce Harter said the district did not know the reason for the inquiry.
"The subpoena requests many documents, but does not indicate the subject of the investigation," he said. "We are announcing the receipt of this subpoena in order to ensure that our community is informed. While there will be many questions on this subject, the district must do its part to ensure that the matter being investigated has a fair and accurate assessment and will not discuss the inquiry."
Blake Boehm, vice½president of KNN Public Finance, which helped negotiate the sale, declined to comment at this time on how the investigation might affect the district.
On July 26, several district residents and elected officials drafted a letter to Contra Costa County Treasurer-Tax Collector Russell Watts, asking his office to work with the Contra Costa County Superintendent of Schools to initiate and complete a third party review of the district's bond program, to determine if there had been " ... violations of state or federal securities laws ... or if the district has been unfairly attacked ..."
The letter was signed by the president of the Howard Jarvis Taxpayers Association, executive director of the Contra Costa Taxpayers Association, Hercules Councilman Dan Romero, San Pablo Mayor Paul Morris, and several residents and former Bond Oversight Committee members.
Watts said Wednesday that county officials are waiting to learn whether the SEC finds any wrongdoing before taking further action.
"They are looking to see that all federal laws regarding bond finance are followed or adhered to, and if any laws are found to be broken, certainly they'll want the district to correct them," he said. "I don't know if there are other consequences."