The Repo Man Ate My Homework

December 20, 2004 2:23 PM

Local Town Mortgages Students' Textbooks. "[The South Plainfield school board] plans to sell nearly all student textbooks to a bank or financial institution, which then would lease them back to the district over a period of five years. The more than 2,500 books would remain in students' hands, and the move would bring a quick boost of about $965,000."
(via Patridiot Watch)
posted by Karmakaze (33 comments total)

That's just retarded.

Can't they raise the property taxes?
posted by bshort at 2:27 PM on December 20, 2004

Can't they raise the property taxes?

They would, if they were long hair commie lovin' lefty liberal Hollywood East Coast elitists and not God Fearin' American Heartland Folk.
posted by eyeballkid at 2:32 PM on December 20, 2004

eyeballkid, you maybe don't know that NJ is firmly a bue state...Democrat governor, senators, and 7-6 Democrat in the House of Representatives. The South Plainfield mayor is a Democrat.

I'm okay with this, as long as they don't touch the weaning hats...
posted by 1016 at 2:41 PM on December 20, 2004

The bank is gonna be pissed when they find out they turned around and took the books to the pawn shop.
posted by Devils Rancher at 2:42 PM on December 20, 2004

And I am firmly an idiot...

*blue* state...d'oh!
posted by 1016 at 2:42 PM on December 20, 2004

It will be a great day when our schools get all the money they need and the Air Force has to blah blah blah...
posted by Specklet at 2:45 PM on December 20, 2004

I feel an obligation to note that South Plainfield is in New Jersey's 7th Congressional District, which is represented by a Republican. That said, Middlesex County, in which South Plainfield is located, went 56-43 for Kerry. Very blue state-ish indeed.
posted by 1016 at 2:48 PM on December 20, 2004

I grew up in Jersey, lived there over 30 years, the last four of them a town or so over from the one in the story. Blue or red, it is a corrupt state at every level of government (not every politician, just a lot of them) and RTFA shows the district's budget problems are caused by a combination of corruption and incompetence.
posted by billsaysthis at 2:50 PM on December 20, 2004

[This is sad.]
posted by dirtynumbangelboy at 2:52 PM on December 20, 2004

It doesn't matter how blue your state is, the school budget always gets voted down.
posted by smackfu at 2:57 PM on December 20, 2004

...and then people wonder why Johnny can't read his mortgaged textbooks.
posted by bshort at 2:59 PM on December 20, 2004

Isn't this just worsening and postponing the real problem five years into the future?
posted by spazzm at 3:06 PM on December 20, 2004

My first thought was that it could be an excellent opportunity for a privately held organizaton to influence the curriculum. "Oh, we got a much better deal on these _new_ history books..." The article didn't go into too much detail on how this is a good plan for the banks that lease-back the books.

Or, do I need another layer of tinfoil?
posted by FYKshun at 3:11 PM on December 20, 2004

So what's missing from the article (and the comments of horror at something that is simply a financial transaction):

* Any indication of what interest rate is being charged by the bank - all the article mentions is that the $965,000 is a five-year loan.

* Why the school district didn't borrow the money using the textbooks as collateral, but used the more complicated sale-leaseback approach.

* The implications of the lease-back for income tax revenues of New Jersy. In October, for example, Congress banned the future use of sale-leasebacks of government infrastructure, such as a subway system, to generate funds for local governments, because of the loss of federal tax revenues.
posted by WestCoaster at 3:26 PM on December 20, 2004

I don't get it. How often do the textbooks get updated? If they're going through a set every five years (which wasn't my elementary school experience), what's the problem. Textbook pricess are artifically inflated. This seems like a decent way to offset some of the cost. Not sure what the bank is thinking.
posted by yerfatma at 3:29 PM on December 20, 2004

*cough* photocopier *cough*
posted by elpapacito at 3:32 PM on December 20, 2004

Actually this kind of deal is done with private investors and city governments all the time. San Francisco MUNI [PDF] pulled this stunt in 2002. The gist of it is, the city sells the rail line for $40 mil, pays lawyers $10mil and keeps $30 mil. For the investor's the deal is just a shady tax shelter. Recently the Fed's told cities to stop pulling this kind of crap. I wouldn't be surprised if the book deal was the same thing.

On preview.. what West Coaster is getting at.
posted by MiltonRandKalman at 3:33 PM on December 20, 2004

Note that they are talking about receiving getting $965,000 from 2,500 books - that's a $386 'boost' per book. I can't be sure, but I'm guessing these aren't antique author-signed first edition books.

I think this is just a way for them to quickly receive cash that avoids the hurdles that are involved in issuing bonds and getting voter approval for them. Using books is what makes this really weird - leasebacks usually involve something more substantial, like a building (on preview: though, as WestCoaster/MiltonRandKalman said, maybe they can't use a building).

Adding Frontline's "Tax Me If You can" had some interesting stuff about cross-border leasing tax shelters.
posted by milkrate at 3:40 PM on December 20, 2004

karmakaze, nice page title!

My question is what if the bank decides to change the books? Say they decide that evolutionary theory isn't proper and they substitute a "science" book with creationism, what can the school do then?
posted by fenriq at 3:51 PM on December 20, 2004

fenriq: Original author/publisher sues them. It's not like the school board writes the books themselves.

All in all leasing schoolbooks seems to make sense. At the end of the lease, the bank is left with a bunch of heavily-used schoolbooks from a no-longer-current curriculum. Better them than the school if it means money in the school's pocket now.
posted by mendel at 4:04 PM on December 20, 2004

See also Private Finance Initiative. That's how we're running the UK nowadays.
posted by biffa at 4:09 PM on December 20, 2004

The real issue this brings up has been skirted for years - many school districts are in poor financial shape and things are only going to get worse.

I for one am glad. That means less competition for jobs down the road.
posted by bakiwop at 4:19 PM on December 20, 2004

Mathematics 101

BROUGHT TO YOU BY YOUR LOCAL MCDONALD'S RESTAURANT
posted by mr_crash_davis at 4:28 PM on December 20, 2004

billysaythis, that was kind of my point...that saying they'd fix it if only they were west coast blue staters was kind of missing the point.

Grew up in New Jersey, too, in the same Congressional district, too.
posted by 1016 at 4:41 PM on December 20, 2004

Mendel, gotcha, I was pretty sure there was some means to stop it from happening.

What happens when the text book publisher says the old edition's are no longer good and they need to buy the new one? Kind of what luriete is saying above.
posted by fenriq at 4:42 PM on December 20, 2004

Nobody mentioned the sale of the Chicago skyway this year for $1.8 billion. Same deal -- city gets a lot of money up front, investor gets huge tax break.
posted by Mid at 4:49 PM on December 20, 2004

3. investor gets huge tax break.
4. PROFIT!

Corporations are profiting from public assets and good will. Its a sham.
posted by stbalbach at 4:53 PM on December 20, 2004

Yale Professor Michael Graetz describes an illegitimate or abusive shelter as "a deal done by very smart people that, absent tax considerations, would be very stupid."

...this sure sounds like a tax sheter to me.
posted by LimePi at 5:37 PM on December 20, 2004

shelter. tax shelter.
posted by LimePi at 5:38 PM on December 20, 2004

That was a good frontline!
posted by billsaysthis at 8:49 PM on December 20, 2004

Anyone else notice what a jerk bakiwop is?

I'm this close to calling him a troll.
posted by jon_kill at 8:35 AM on December 21, 2004

When you're putting your textbooks in hock to pay employee salaries because your bookkeeping wasn't up to snuff to begin with, how is it good sense to enter into a lease arrangement that you're not sure you'll be able to keep?

The sale and lease-back of textbooks was approved by the state Legislature in 1998, Davis added. More than a dozen state districts have used the method to bring in quick cash over the last few years, he said, noting that public institutions such as school systems and municipal governments rarely default -- which in this case would mean the books could be repossessed.

"It's almost impossible to happen, which is why it's a good collateral," Davis said.

Miss a payment, lose your textbooks. For a district that can't track money, is this wise?
posted by FormlessOne at 8:47 AM on December 21, 2004

Anyone else notice what a jerk bakiwop is?

bakiwop seems to have imploded over the past two days. no skin off my nose.

i'm with West Coaster and stbalbach. what they're doing is depriving the New Jersey government of millions of dollars in tax revenue. it's short-sighted. educational budgets may always lose, but this isn't the way to fix them. i'm sure the school officials had little choice, which is too bad. it seems equivalent to raising taxes (or rebudgeting educational expenses). it's kinda like Ahrnohld "fixing" the California budget by issuing billions of dollars in bonds. you gotta pay some day.

i remember hearing some talk about the Treasury Department cracking down on municipal leasebacks last Christmas (see third post). i guess nothing came of it.
posted by mrgrimm at 11:54 AM on December 21, 2004