Is Facebook planning to develop its own games? Revised Zynga terms open the door












As Zynga (ZNGA) continues its free fall into irrelevancy with layoffs and its one-hit social games, the gaming company has revised its contract with Facebook (FB) to free it from being “forced to launch games exclusively on the Facebook platform” and “obligated to use Facebook Credits for Zynga game pages,” according to AllThingsD. The change of terms filed with the SEC also includes a clause that states “Facebook will no longer be prohibited from developing its own games” on March 31, 2013. Could Facebook start developing its own social games? Theoretically, yes. But would Facebook really jeopardize its relationships with game developers who already make games for its social network? Probably not.


“We’re not in the business of building games and we have no plans to do so,” a Facebook spokesman told AllThingsD. “We’re focused on being the platform where games and apps are built.”












AllThingsD’s report says the change in terms isn’t so much as a bid by Facebook to make its own games, but to shed its dependence on Zynga to supply it with hit games. The new revised terms give Facebook more leverage and other game developers such as Wooga and King.com greater incentive to create games.


At the end of the day, Facebook is a publicly traded company chasing profits, despite what CEO Mark Zuckerberg says. It might not be developing games today, but that doesn’t mean it won’t create them in the future. The new terms with Zynga now leaves that door open, should it want to make its own games one day.


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Katy Perry, Carly Rae Jepsen get Billboard honors

NEW YORK (AP) — Billboard named Katy Perry its woman of the year, but the pop star thought her year was 2011.

"I felt like my year was last year ... I thought my moment had passed," Perry said in an interview with Jon Stewart at Billboard's Women in Music event Friday in New York City.

Perry released "Teenage Dream" in 2010, and the double platinum album sparked five No. 1 hits on the Billboard Hot 100 chart that spilled over to 2011. She tied the record Michael Jackson set with "Thriller" for most hits from a single album.

She re-released the album this year, which launched two more hits and a top-grossing 3-D film.

Perry thanked her fans, who stood outside of Capitale hoping to catch a glimpse of her.

"I don't really like to call myself a role model for my fans, but I hope I'm an inspiration, especially for young women," she said when she accepted the honor.

Perry also thanked her mom at the event, which honored women who work in the music industry.

In like fashion, newcomer Carly Rae Jepsen also thanked her mom — and stepmom — when accepting the rising star honor. The "Call Me Maybe" singer said she's happy and surprised by her success.

"It was sort of the key to unlocking the rest of the world for me and was something that none of us were expecting," she said, in an interview, of her viral hit.

British singer Cher Lloyd performed Perry's "E.T." at the luncheon, which also featured a performance from rising country singer Hunter Hayes.

Perry, who wore a fitted pink dress, joked about recording a follow-up to "Teenage Dream."

"Have you heard it? I haven't," the smiling singer said on the red carpet.

___

Follow Mesfin Fekadu on Twitter at http://twitter.com/MusicMesfin

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Hockey Coaches Defy Doctors on Concussions, Study Finds





Despite several years of intensive research, coverage and discussion about the dangers of concussions, the idea of playing through head injuries is so deeply rooted in hockey culture that two university teams kept concussed players on the ice even though they were taking part in a major concussion study.




The study, which was published Friday in a series of articles in the journal Neurosurgical Focus, was conducted during the 2011-12 hockey season by researchers from the University of Western Ontario, the University of Montreal, Harvard and other institutions.


“This culture is entrenched at all levels of hockey, from peewee to university,” said Dr. Paul S. Echlin, a concussion specialist and researcher in Burlington, Ontario, and the lead author of the study. “Concussion is a significant public health issue that requires a generational shift. As with smoking or seat belts, it doesn’t just happen overnight — it takes a massive effort and collective movement.”


The study is believed to be among the most comprehensive analyses of concussions in hockey, which has a rate of head trauma approaching that of football. Researchers followed two Canadian university teams — a men’s team and a women’s team — and scanned every player’s brain before and after the season. Players who sustained head injuries also received scans at three intervals after the injuries, with researchers using advanced magnetic resonance imaging techniques.


The teams were not named in the study, in which an independent specialist physician was present at each game and was empowered to pull any player off the ice for examination if a potential concussion was observed.


The men’s team, with 25 players and an average age of 22, played a 28-game regular season and a 3-game postseason. The women’s team, with 20 players and an average age of 20, played 24 regular-season games and no playoff games. Over the course of the season, there were five observed or self-reported concussions on the men’s team and six on the women’s team.


Researchers noted several instances of coaches, trainers and players avoiding examinations, ignoring medical advice or otherwise obstructing the study, even though the players had signed consent forms to participate and university ethics officials had given institutional consent.


“Unless something is broken, I want them out playing,” one coach said, according to the study.


In one incident, a neurologist observing the men’s team pulled a defenseman during the first period of a game after the player took two hits and was skating slowly. During the intermission the player reported dizziness and was advised to sit out, but the coach suggested he play the second period and “skate it off.” The defenseman stumbled through the rest of the game.


“At the end of the third period, I spoke with the player and the trainer and said that he should not play until he was formally evaluated and underwent the formal return-to-play protocol,” the neurologist said, as reported in the study. “I was dismayed to see that he played the next evening.”


After the team returned from its trip, the neurologist questioned the trainer about overruling his advice and placing the defenseman at risk.


“The trainer responded that he and the player did not understand the decision and that most of the team did not trust the neurologist,” according to the study. “He requested that the physician no longer be used to cover any more games.”


In another episode, a physician observer assessed a minor concussion in a female player and recommended that she miss the next night’s game. Even though the coach’s own playing career had ended because of concussions, she overrode the medical advice and inserted the player the next evening.


According to the report, the coach refused to speak to another physician observer on the second evening. The trainer was reluctant to press the issue with the coach because, the trainer said, the coach did not want the study to interfere with the team.


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Better economy, higher profile fuel L.A. Auto Show attendance









The Los Angeles Auto Show usually ends up costing Eric Nolan a bit of money.


The Bakersfield resident and self-described Mustang guy says he and his wife, Iris, come to the show every year. More than once, they've ended up buying a vehicle they've seen.


"But we just bought a car a week ago for her, so she's not getting another one," Nolan said as the couple checked out an Audi A8 diesel.








They were among thousands who showed up on Friday, the first public day of the L.A. Auto Show, which runs until Dec. 9. Last year, about 920,000 people attended, a 22% increase since 2009, said Brendan Flynn, the show's communications director. This year's attendance could approach the pre-recession peak years, when about a million people streamed through the convention center doors to check out the new models, Flynn said.


The profile of the Los Angeles show has risen steadily in the last several years. Before 2006, the L.A. show was considered more of a backwater, despite the huge industry presence in the region, because it was held in January and essentially overlapped with the North American International Auto Show in Detroit.


"The Los Angeles Auto Show ranks No. 2 in terms of industry significance after the Detroit show," said Jesse Toprak, an auto industry consultant who has attended the major U.S. shows for the last 15 years.


Location has a lot to do with it, Toprak said. The region is home to U.S. arms of the major Asian import brands, including Toyota, Honda, Hyundai, Kia and Mazda. Most automakers also maintain design studios in California because the state is the largest auto market in the U.S. and a trendsetter. The state's environmental activism and concentration of "green" consumers also has distinguished the auto show.


This year, 42 auto brands are displaying hundreds of new models. About 50 are world or North American debuts.


"It's become a really important show and really is the way to see the electric and green cars that the automakers are bringing out," said David Strickland, administrator of the National Highway Traffic Safety Administration, as he toured the convention center on Thursday.


In 2006, the show moved its opening date back to November. "The automakers really wanted us to move so that they could take advantage of the L.A. market because it was so important," Flynn said. "It was just too hard to take advantage of both shows at the same time."


About half of those in attendance, like Nolan, are actively in the market for a new car, Flynn said. More than two-thirds, he said, add a vehicle to their shopping list after coming to the show.


Strolling around the Convention Center in downtown L.A., it's easy to see why. Visitors can sit in, touch and compare a variety of vehicles that wouldn't be offered at any single dealership.


That's what brought Lanny Nelms to the show from San Pedro. He's looking to replace his 13-year-old Chrysler with a fuel-efficient hybrid and came to compare various models. Space is also important, Nelms said, as he admired a Jetta Hybrid at Volkswagen's sprawling display. "This is probably the most roomy."


Volkswagen was among several automakers offering buyers incentives at dealerships. With the U.S. auto market nearly recovered from its slump in 2008 and 2009, foot traffic from buyers like Nelms is driving up attendance at the show.


David and Penny Silvera from Long Beach are more in the window shopping phase. They came to lay eyes on cars from BMW and Porsche, which this week introduced a redesigned Cayman.


Why those two brands? "Their styling," David Silvera said. "We own BMWs now, and my goal is maybe someday to have a 911."


david.undercoffler@latimes.com


jerry.hirsch@latimes.com





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Prop. 8 supporters, opponents await Supreme Court decision









At San Francisco City Hall, officials are awaiting their moment in history, but they just don't know when it will come.


In the complex calculus of gay marriage in California, weddings could become legal within days. So City Hall is preparing for a possible crush of same-sex couples seeking marriage licenses and making contingency plans for demonstrations.


But it is also possible that this preparation is for naught and the future of same-sex unions will remain up in the air for months or longer.





CHRONOLOGY: Gay marriage in the U.S.


The U.S. Supreme Court is poised to take up the issue of gay marriage in California as soon as Friday morning. The moment has prompted nervous debate within the gay-rights movement about the best path to achieve gay marriage.


If the justices opt not to hear the Proposition 8 case, then a federal appeals court ruling that found the 2008 state ballot measure banning same-sex marriage unconstitutional would stand, clearing the way for marriages to begin. If the justices take up the case, a ruling would not come until next year and gay marriage would remain on hold until then, or longer depending on how the court rules.


Were the high court to decide to rule on Hollingsworth vs. Perry, it could lead to a historic victory legalizing same-sex marriage nationwide. But gay activists are well aware that the court could rule against them and throw the movement back at a time when same-sex marriage has seen a series of election victories at the state level.


Opponents of gay marriage, by contrast, are eager for the Supreme Court to weigh in and are hoping it will block the growing legalization of same-sex unions.


"This claim that somehow hidden within the U.S. Constitution is this right to redefine marriage is just false," said Brian Brown, the president of the National Organization for Marriage.


Jim Campbell, legal counsel for Alliance Defending Freedom, which represents the official proponents of Proposition 8, agreed, and said he hoped the high court would conclude "that defining marriage as the union of a man and a woman is constitutional."


It's been four years since California voters approved a ban on gay marriage. During that time, several more states have legalized gay marriage; it is now legal in nine states and the District of Columbia. Many gay-rights activists in California feel left behind and eager for the state to resume marriages. The question is: How best to make it happen?


Jeffrey J. Zarrillo, who with his partner is a plaintiff in the federal suit now before the court, wants the high court to hear the case, which he is confident of winning. "This case is important in all 50 states, not just California," said Zarrillo, 39, a Burbank resident.


TIMELINE: Gay marriage since 2000


But Kate Kendell, executive director of the National Center for Lesbian Rights, is one of the voices of caution. "Anything is possible with any court," she warned, and legal scholars don't give a win in the case "the best odds."


For that reason, Kendell said she hopes the court doesn't take the case. That would still "put a grave marker on top of Proposition 8 once and for all and allow California couples to marry." Recent studies from the Williams Institute at UCLA law school, a think tank on sexual orientation policy, found that there are nearly 100,000 same-sex couples living in California, and that 24,000 would marry in the next three years if they had the opportunity to do so.


The long years of litigation also have left some gays and lesbians impatient and frustrated and questioning whether the courts remain their best forum for achieving marriage equality. Given the victories on election night, some believe that the ballot box, not the legal system, may now be the answer.


"There are definitely divisions in terms of people's views," said Gary Gates, a researcher at the Williams Institute. Some "say if this case hadn't come up, and we had put it on the ballot … we might have had marriage back."


The divergence of opinion echoes back to the days when the historic federal lawsuit was first filed in 2009. At the time, many gay-rights groups opposed going into federal court, fearing a setback at the U.S. Supreme Court. They preferred to tackle marriage rights state by state.


CHRONOLOGY: Gay marriage in the U.S.


But with voters passing marriage bans across the country, a political strategist in Los Angeles, Chad Griffin, hired a top-notch legal team to sue to overturn Proposition 8 in federal district court in San Francisco. Both the trial court and the U.S. 9th Circuit Court of Appeals ruled against California's marriage ban.





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Thousands touched by photograph of New York cop helping shoeless man












NEW YORK (Reuters) – A photograph of a New York City police officer crouching by a shoeless panhandler to give him a new pair of boots on a cold night in Times Square has drawn a deluge of praise after it was published on the police department‘s Facebook page this week.


By Thursday afternoon, nearly 394,000 people had clicked a button on the department’s Facebook page to indicate that they “liked” the photograph. Tens of thousands left comments, most praising Officer Lawrence DePrimo for his charitable deed.












The photograph was snapped by Jennifer Foster, an employee of the Pinal County Sheriff‘s Office in Florence, Arizona, during a trip to New York this month, according to police.


She took the picture shortly after she noticed the man asking passersby for money.


“Right when I was about to approach, one of your officers came up behind him,” Foster wrote in an email to the New York Police Department accompanying the snapshot, according to the picture caption on the department’s Facebook page. She said she was some distance away, and the officer did not know he was being photographed.


“The officer said, ‘I have these size 12 boots for you, they are all-weather. Let’s put them on and take care of you.’ The officer squatted down on the ground and proceeded to put socks and the new boots on this man.”


DePrimo and Foster could not be reached for comment on Thursday, and the police department did not respond to queries about the photograph.


DePrimo, 25, joined the force in 2010 and lives with his parents on Long Island, according to The New York Times. He paid $ 75 for the boots from a nearby Skechers store after an employee there gave him a 25 percent discount upon learning they were to be donated to a man in need.


“I wish more cops were like this guy,” one person wrote on the department’s Facebook page. Others suggested there were plenty of good-hearted police officers about, even if their good deeds were not photographed or touted on Facebook.


(Editing by Paul Thomasch and Stacey Joyce)


Internet News Headlines – Yahoo! News


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Attorneys say Halle Berry, ex settle dispute

LOS ANGELES (AP) — Attorneys for Halle Berry and her ex-boyfriend have settled court issues that arose after a Thanksgiving Day fight at the actress' home.

The fisticuffs involved Berry's ex-boyfriend Gabriel Aubry and her fiance, actor Olivier Martinez. Aubry was arrested after the fight, which left him with a black eye, a broken rib and other injuries.

Aubry obtained a temporary restraining order against Martinez. The model and Berry have been battling over custody of their 4-year-old daughter for months and have appeared twice in a family law court since the fight.

Blair Berk, an attorney for Berry, and Shawn Holley, who represents Aubry, released a statement after Thursday's hearing that said the two sides had reached an amicable agreement.

No details were released, and the attorneys declined to answer questions.

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Clearing the Fog Around Personality Disorders





For years they have lived as orphans and outliers, a colony of misfit characters on their own island: the bizarre one and the needy one, the untrusting and the crooked, the grandiose and the cowardly.




Their customs and rituals are as captivating as any tribe’s, and at least as mystifying. Every mental anthropologist who has visited their world seems to walk away with a different story, a new model to explain those strange behaviors.


This weekend the Board of Trustees of the American Psychiatric Association will vote on whether to adopt a new diagnostic system for some of the most serious, and striking, syndromes in medicine: personality disorders.


Personality disorders occupy a troublesome niche in psychiatry. The 10 recognized syndromes are fairly well represented on the self-help shelves of bookstores and include such well-known types as narcissistic personality disorder, avoidant personality disorder, as well as dependent and histrionic personalities.


But when full-blown, the disorders are difficult to characterize and treat, and doctors seldom do careful evaluations, missing or downplaying behavior patterns that underlie problems like depression and anxiety in millions of people.


The new proposal — part of the psychiatric association’s effort of many years to update its influential diagnostic manual — is intended to clarify these diagnoses and better integrate them into clinical practice, to extend and improve treatment. But the effort has run into so much opposition that it will probably be relegated to the back of the manual, if it’s allowed in at all.


Dr. David J. Kupfer, a professor of psychiatry at the University of Pittsburgh and chairman of the task force updating the manual, would not speculate on which way the vote might go: “All I can say is that personality disorders were one of the first things we tackled, but that doesn’t make it the easiest.”


The entire exercise has forced psychiatrists to confront one of the field’s most elementary, yet still unresolved, questions: What, exactly, is a personality problem?


Habits of Thought


It wasn’t supposed to be this difficult.


Personality problems aren’t exactly new or hidden. They play out in Greek mythology, from Narcissus to the sadistic Ares. They percolate through biblical stories of madmen, compulsives and charismatics. They are writ large across the 20th century, with its rogues’ gallery of vainglorious, murderous dictators.


Yet it turns out that producing precise, lasting definitions of extreme behavior patterns is exhausting work. It took more than a decade of observing patients before the German psychiatrist Emil Kraepelin could draw a clear line between psychotic disorders, like schizophrenia, and mood problems, like depression or bipolar disorder.


Likewise, Freud spent years formulating his theories on the origins of neurotic syndromes. And Freudian analysts were largely the ones who, in the early decades of the last century, described people with the sort of “confounded identities” that are now considered personality disorders.


Their problems were not periodic symptoms, like moodiness or panic attacks, but issues rooted in longstanding habits of thought and feeling — in who they were.


“These therapists saw people coming into treatment who looked well put-together on the surface but on the couch became very disorganized, very impaired,” said Mark F. Lenzenweger, a professor of psychology at the State University of New York at Binghamton. “They had problems that were neither psychotic nor neurotic. They represented something else altogether.”


Several prototypes soon began to emerge. “A pedantic sense of order is typical of the compulsive character,” wrote the Freudian analyst Wilhelm Reich in his 1933 book, “Character Analysis,” a groundbreaking text. “In both big and small things, he lives his life according to a preconceived, irrevocable pattern.”


Others coalesced too, most recognizable as extreme forms of everyday types: the narcissist, with his fragile, grandiose self-approval; the dependent, with her smothering clinginess; the histrionic, always in the thick of some drama, desperate to be the center of attention.


In the late 1970s, Ted Millon, scientific director of the Institute for Advanced Studies in Personology and Psychopathology, pulled together the bulk of the work on personality disorders, most of it descriptive, and turned it into a set of 10 standardized types for the American Psychiatric Association’s third diagnostic manual. Published in 1980, it is a best seller among mental health workers worldwide.


These diagnostic criteria held up well for years and led to improved treatments for some people, like those with borderline personality disorder. Borderline is characterized by an extreme neediness and urges to harm oneself, often including thoughts of suicide. Many who seek help for depression also turn out to have borderline patterns, making their mood problems resistant to the usual therapies, like antidepressant drugs.


Today there are several approaches that can relieve borderline symptoms and one that, in numerous studies, has reduced hospitalizations and helped aid recovery: dialectical behavior therapy.


This progress notwithstanding, many in the field began to argue that the diagnostic catalog needed a rewrite. For one thing, some of the categories overlapped, and troubled people often got two or more personality diagnoses. “Personality Disorder-Not Otherwise Specified,” a catchall label meaning little more than “this person has problems” became the most common of the diagnoses.


It’s a murky area, and in recent years many therapists didn’t have the time or training to evaluate personality on top of everything else. The assessment interviews can last hours, and treatments for most of the disorders involve longer-term, specialized talk therapy.


Psychiatry was failing the sort of patients that no other field could possibly help, many experts said.


“The diagnoses simply weren’t being used very much, and there was a real need to make the whole system much more accessible,” Dr. Lenzenweger said.


Resisting Simplification 


It was easier said than done.


The most central, memorable, and knowable element of any person — personality — still defies any consensus.


A team of experts appointed by the psychiatric association has worked for more than five years to find some unifying system of diagnosis for personality problems.


The panel proposed a system based in part on a failure to “develop a coherent sense of self or identity.” Not good enough, some psychiatric theorists said.


Later, the experts tied elements of the disorders to distortions in basic traits.


This article has been revised to reflect the following correction:

Correction: November 29, 2012

An earlier version of this article misstated the number of traits included in the proposed criteria for narcissistic personality disorder.   The final proposal relies on two personality traits, not four.



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Small union is causing big problems for ports









The small band of strikers that has effectively shut down the nation's busiest shipping complex forced two huge cargo ships to head for other ports Thursday and kept at least three others away, hobbling an economic powerhouse in Southern California.

The disruption is costing an estimated $1 billion a day at the ports of Los Angeles and Long Beach, on which some 600,000 truckers, dockworkers, trading companies and others depend for their livelihoods.

"The longer it goes, the more the impacts increase," said Paul Bingham, an economist with infrastructure consulting firm CDM Smith. "Retailers will have stock outages, lost sales for products not delivered. There will be shutdowns in factories, in manufacturing when they run out of parts."








Despite the union's size — about 800 members of a unit of the International Longshore and Warehouse Union — it has managed to flex big muscles. Unlike almost anywhere else in the nation, union loyalty is strong at the country's ports. Neither the longshoremen nor the truckers are crossing the tiny union's picket lines.

The strike started at the L.A. port's largest terminal Tuesday and spread Wednesday to 10 of the two ports' 14 cargo terminals. These resemble seaside parking lots where long metal containers are loaded and unloaded with the help of giant cranes.

The union contends that the dispute is over job security and the transfer of work from higher-paid union members to lower-paid employees in other countries. The 14-employer management group says that no jobs have been outsourced and that the union wants to continue a practice called "featherbedding," or bringing in temporary workers even when there is no work.

The two sides haven't met since negotiations broke down Monday, but they were scheduled to begin talking again Thursday night. The union has worked without a contract for 21/2 years.

The clerical workers are a vital link in the supply chain. They handle the immense flow of information that accompanies each cargo ship as well as every item in the freight. One shipload of shoes, toys and other products is enough to fill five warehouses.

Logistics clerk Trinie Thompson, 41, normally spends her days working with railroad lines and trucking companies to ensure that the right containers are sent along to their proper destinations. On Thursday, she was walking the picket lines at the docks.

"We will be setting up trains to Houston, trains to Dallas, to Chicago, to the Pacific Northwest," said Thompson, who has worked for 10 years for Eagle Marine Services terminal, which is affiliated with the giant APL shipping line.

"For a typical container ship, we will have to set up multiple trains. We might be sending 200 to 300 containers to Chicago alone, and there will be paperwork for all of them."

The strike comes at a time of simmering labor unrest at other U.S. ports, underscoring the unusual power labor holds in maritime trade.

On the East Coast and Gulf Coast, another group of shipping lines and terminal operators called the United States Maritime Alliance has repeatedly failed to reach agreement on a new labor contract with the International Longshoremen's Assn. A strike that might have involved dozens of ports was avoided only after both sides agreed to extend negotiations past the September end of their current contract.

A strike also was narrowly avoided at Portland, Ore., only a few days ago in a dispute between grain shippers and union workers.

Operations at Oakland International Airport and at the Port of Oakland, the third-largest port in the state behind Los Angeles and Long Beach, were affected by a brief strike this month.

Maritime unions "have successfully organized one of the most vital links in the supply chain, and it's a tradition they nurture with all of their younger workers," said Nelson Lichtenstein, a UC Santa Barbara history professor and workplace expert. "They have a very strong ideological sense of who they are, and for now they are strong."

In Los Angeles and Long Beach, the 800 clerical workers have been able to shut down most of the ports because the 10,000-member dockworkers union is honoring the picket lines. Work continues at only four cargo terminals, where the office clerical unit has no workers.

"Longshoremen stand up when other workers need our help," said Ray Ortiz Jr., a member of the International Longshore and Warehouse Union's Coast Committee. "Sure, it's a sacrifice to give up a paycheck when you refuse to cross the picket line, but we believe it's in the long-term interest of the Los Angeles-Long Beach harbor area to retain these good local jobs."

Stephen Berry, lead negotiator for the shipping lines and cargo terminals, said the clerical workers have been offered a deal that includes "absolute job security," a raise that would take average annual pay to $195,000 from $165,000, 11 weeks' paid vacation and a generous pension increase.

At a news conference Thursday, Berry denounced the tactics by the clerical workers, calling them "irresponsible."





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California school districts face huge debt on risky bonds









Two hundred school districts across California have borrowed billions of dollars using a costly and risky form of financing that has saddled them with staggering debt, according to a Times analysis.


Schools and community colleges have turned increasingly to so-called capital appreciation bonds in the economic downturn, which depressed property values and made it harder for districts to raise money for new classrooms, auditoriums and sports facilities.


Unlike conventional shorter-term bonds that require payments to begin immediately, this type of borrowing lets districts postpone the start of payments for decades. Some districts are gambling the economic picture will improve in the decades ahead, with local tax collections increasingly enough to repay the notes.





DATABASE: Bonds by district


CABs, as the bonds are known, allow schools to borrow large sums without violating state or locally imposed caps on property taxes, at least in the short term. But the lengthy delays in repayment increase interest expenses, in some cases to as much as 10 or 20 times the amount borrowed.


The practice is controversial and has been banned in at least one state. In California, prominent government officials charged with watching the public purse are warning school districts to avoid the transactions.


One sounding the alarm is California Treasurer Bill Lockyer, who compares CABs to the sort of creative Wall Street financing that contributed to the housing bubble, the subsequent debt crisis and the nation's lingering economic malaise.


"They are terrible deals," Lockyer said. "The school boards and staffs that approved of these bonds should be voted out of office and fired."


Most school bonds, like home mortgages, require roughly $2 to $3 to be paid back for every $1 borrowed. But CABs compound interest for much longer periods, meaning repayment costs are often many times that of traditional school bonds.


And property owners — not the school system — are likely to be on the hook for bigger tax bills if the agency's revenues can't cover future bond payments, Lockyer and other critics say.


Several financial consultants who advise school districts on CABs declined to comment, as did the chairman of their trade group. Education officials acknowledge some drawbacks with CABs, but argue that the bonds are funding vital educational projects.


The Newport Mesa Unified School District in Orange County issued $83 million in long-term notes in May 2011. Principal and interest will total about $548 million, but officials say they are confident they can pay off the debt.


The bonds "have allowed us to provide for facilities that are needed now," said the district's business manager, Paul Reed. "We could not afford to wait another 10 years."


Overall, 200 school systems, roughly a fifth of the districts statewide, have borrowed more than $2.8 billion since 2007 using CABs with maturities longer than 25 years. They will have to pay back about $16.3 billion in principal and interest, or an average of 5.8 times the amount they borrowed.


Nearly 70% of the money borrowed involves extended 30- to 40-year notes, which will cost district taxpayers $13.1 billion, or about 6.6 times the amount borrowed on average.


State and county treasurers say debt payments of no more than four times principal are considered reasonable, though some recommend a more conservative limit of three times.


"This is part of the 'new' Wall Street," Lockyer said. "It has done this kind of thing on the private investor side for years, then the housing market and now its public entities."


The Poway Unified School District, which serves middle-class communities in north San Diego County, is one of the school systems faced with massive CAB debt payments. In 2011, it issued $105 million in capital appreciation bonds to complete a school rebuilding program.


Because the recession had depressed property values and tax revenue, Poway district officials realized that using conventional bonds might jeopardize a promise to district voters to limit the tax rate.


So on the advice of an Irvine-based financial consulting firm, they turned to the long-term notes. Under the deal, the school board could keep construction moving, avoid reneging on its pledge to voters and stay within the legal limits. And it would not have to repay the bonds for decades.





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