IRS Reviews $105M Poway School Bond

The Internal Revenue Service is now looking into that $105 million Poway school bond that will end up costing Poway taxpayers close to one billion dollars.

A letter from the Internal Revenue Service tells the Poway Unified School District it will examine its bond issuances to determine if they comply with federal tax requirements.

Part of the audit could include whether there is extra debt that voters didn't approve.

The District said it got $105 million in bonds to repair and build new schools in Poway under Proposition C, approved by voters in 2008.

But that's not the whole deal.

The District also got some upfront cash -- $21 million -- called a premium.

Reporter Will Carless from our media partner Voice of San Diego, first broke the story. He says one question for the IRS is how, exactly, the upfront money was spent.

"What the IRS is looking to see is whether it was actually spent on what it said it was spent on, or whether it went to buy buildings or laptops or whatever," Carless explained.

The distinction is important.

According to Carless, the District says it spent the money on the cost of financing Prop C, plus pay off interest on previous bonds.
There is a question as to whether that is legal; the state Attorney General sent a letter to the District saying it is not legal.

If, however, the District spent that upfront money on construction and repairs, then Carless says that definitely would not be okay.

"If you actually borrow more money and go do more stuff, then in that case, you're expanding what taxpayers allowed you to do," he said.

Carless says that because of the financing method used by Poway to pay off the bonds that $21 million upfront money translates into about $200 million.

He says that should make voters care.

NBC 7 reached to the District, but did not receive a call back from the District's Superintendent, nor from the District's attorneys who are handling the audit.

According to Voice of San Diego, those attorneys said this is a random, routine audit that should be wrapped up soon. They also said the District is “squeaky clean" on this.

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