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Post by doctorwho on Oct 8, 2009 13:55:56 GMT -6
Mike, First, regarding the recent issue of $13 million. From the pdf presentation I see that the total is composed of $8.12 million which I assume is the balance available under the 06 referendum. Could you tell me about the $5 million from debt certificates? Why does the District need this money, what will it be used for and what is the authority under which the District was able to issue bonds to obtain this additional $5 million? The $8.12M does represent the remaining authority from the referendum. We anticipate the amount of this issue being significantly less than this amount. We are currently working on that determination. We are also investigating new bond opportunities that have become available within the Federal stimulus package. Debt certificates, although similar to bonds, are different in one significant way. The bonds are paid from the operating funds of the district and therefore there are no tax levies associated with them. The funding for the Metea project includes the sale of the 25 acres on Commons Drive. The debt certificates are designed to bridge the time necessary for the market to improve and we can sell the property. Section 17(b) of the Local Government Debt Reform Act authorizes governing bodies of governmental units, including school districts, to issue certificates of indebtedness to, among other things, acquire and improve real property. These certificates of indebtedness can be secured in any manner as the governing body determines, including pledging the proceeds of the sale of land, as provided for in Section 13 of the Local Government Debt Reform Act. Second, going back to the 07 bond sale. Why were they issued at a premium? Did anyone request this? If so, under what authority? In general, I would like to get as much information as possible on this. The first issue in July of 2006 was issued at $60,725,000 rather than the $62,330,000. We gave bidders the option to bid at par $62,330,000 or up to a maximum bid of $64,199,900, which is 3% more than the par amount. This is a common practice within the bond market. We received 12 bids, all bid with a premium. Essentially, the market set the premium. At that time investors buying these bonds preferred to buy bonds at a premium. Long term rates were perceived to be low at the time, and investors preferred a higher coupon to enable the bonds to be sold more fluidly in the secondary market. The second issue of $55,750,000, issued in July of 2007, was issued at a premium of $6,968,893. The District realized $62,345,081 for the project after all issuance costs were paid. At that time we requested bidders to bid at a premium. This was done after discussion with the Board in open session, and enabled the District to retain authority to issue more bonds if this was deemed necessary. We received 7 bids on the issue and we were able to issue the bonds at a premium price because investors were willing and interested in higher coupon bonds. The remaining authority has been part of the funding plan since the land options were being considered and openly discussed. Our financial advisors have indicated that the full amount of the remaining authority could be issued and still stay within the bond amortization targets set as part of the Board’s commitment to restructure the district’s bonded debt, as discussed during the referendum. We do not anticipate issuing the full $8.12M, but some amount less based on what is needed to complete the project. Such premiums are authorized by Section 10 of the Local Government Debt Reform Act and their use is controlled by Section 10-22.14 of the School Code. Section 10-22.14 allows the premium to “be used for the purposes for which the bonds were issued or, instead, for payment of the principal indebtedness and interest on those bonds.” Project Budget – We are currently working on a Metea Valley High School project budget update for the Board. Once presented to the Board it will become available to the public.David A. Holm, Asst. Superintendent for Business Indian Prairie CUSD 204 780 Shoreline Drive Aurora, IL 60504 630-375-3070 dave_holm@ipsd.org From: MACrockett [mailto:macrockett@wowway.com] Sent: Friday, September 18, 2009 12:07 PM To: Holm, David Subject: $13.12 million bond issue and 07 bond issue Hi Dave, I have a couple questions. First, regarding the recent issue of $13million. From the pdf presentation I see that the total is composed of $8.12 million which I assume is the balance available under the 06 referendum. Could you tell me about the $5 million from debt certificates? Why does the District need this money, what will it be used for and what is the authority under which the District was able to issue bonds to obtain this additional $5 million? Second, going back to the 07 bond sale. Why were they issued at a premium? Did anyone request this? If so, under what authority? In general, I would like to get as much information as possible on this. Thanks, Mike. ------------------ The District intends to borrow against the 25 acres as a funding source for MVHS if I read Dave's explanation correctly. If you add the referendum of $124.6m + the $17m + 5m, it looks to me MVHS has a $146.6 budget allocation at this point. My request for current costs on MVHS has not been addressed to date. As to the legal costs associated with BB, you can always FOIA them. yep- as I have been saying all along - a $150M unneeded HS... and then we wonder why we're broke. |
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Post by blankcheck on Oct 8, 2009 16:26:10 GMT -6
First, regarding the recent issue of $13 million. From the pdf presentation I see that the total is composed of $8.12 million which I assume is the balance available under the 06 referendum. Could you tell me about the $5 million from debt certificates? Why does the District need this money, what will it be used for and what is the authority under which the District was able to issue bonds to obtain this additional $5 million?
The $8.12M does represent the remaining authority from the referendum. We anticipate the amount of this issue being significantly less than this amount. We are currently working on that determination. We are also investigating new bond opportunities that have become available within the Federal stimulus package.
Debt certificates, although similar to bonds, are different in one significant way. The bonds are paid from the operating funds of the district and therefore there are no tax levies associated with them. The funding for the Metea project includes the sale of the 25 acres on Commons Drive. The debt certificates are designed to bridge the time necessary for the market to improve and we can sell the property.
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I'm confused. So they are using money from the operating fund for these debt certificates?
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Post by Arch on Oct 8, 2009 17:06:55 GMT -6
Arthur Andersen is on line 1...
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Post by macrockett on Oct 8, 2009 18:30:11 GMT -6
First, regarding the recent issue of $13 million. From the pdf presentation I see that the total is composed of $8.12 million which I assume is the balance available under the 06 referendum. Could you tell me about the $5 million from debt certificates? Why does the District need this money, what will it be used for and what is the authority under which the District was able to issue bonds to obtain this additional $5 million? The $8.12M does represent the remaining authority from the referendum. We anticipate the amount of this issue being significantly less than this amount. We are currently working on that determination. We are also investigating new bond opportunities that have become available within the Federal stimulus package. Debt certificates, although similar to bonds, are different in one significant way. The bonds are paid from the operating funds of the district and therefore there are no tax levies associated with them. The funding for the Metea project includes the sale of the 25 acres on Commons Drive. The debt certificates are designed to bridge the time necessary for the market to improve and we can sell the property. ----------------------------- I'm confused. So they are using money from the operating fund for these debt certificates? My interpretation is as follows: The District needs money to plug the hole in the MVHS revised budget. Originally that hole included funds from the sale of the 25 acres. Since the 25 acres are sitting there collecting dust and no one wants the buy the property, the District has decided to borrow against it, use the funds for MVHS and pay the debt service out of operating funds. At such time that the land does sell, the proceeds should be returned to the operating fund (we can only hope). So we had a referendum and will use all the proceeds on MVHS, $124.66 million (in three tranches, $60+M, $55+M and $8+M) + $17 million in additional interest we pay on those bonds from the referendum (see the MVHS funding thread for explanation of that) + $5M from the debt certificate. = approx $146.66 M for MVHS pending the District showing otherwise. |
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Post by asmodeus on Oct 9, 2009 5:04:30 GMT -6
This to me sounds similar to paying points on your mortgage in exchange for a lower interest rate, except in this case we pay a higher interest rate in order to get more money than the original face value of the bonds. If that is the case, what prevents a govt body from abusing this flexibility?
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Post by slp on Oct 9, 2009 6:09:55 GMT -6
And what about the remaining legal fees/judgements to be paid regarding BB?
have we ever gotten an answer as to what taxpayers have spent in total legal fees up to this point with regards to BB?
eta: I ask because , IMO these costs factor into the entire MV budget.
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Post by Arch on Oct 9, 2009 8:02:23 GMT -6
This to me sounds similar to paying points on your mortgage in exchange for a lower interest rate, except in this case we pay a higher interest rate in order to get more money than the original face value of the bonds. If that is the case, what prevents a govt body from abusing this flexibility? I look at it as taking a higher interest rate for 'cash back at closing' making the loan amount higher than the value of the asset... One of those practices that all the financial planners tell you is probably one of the dumbest things to do.... but the financial people who make these deals tell you it's perfectly legal and laugh all the way to the bank because of the cut they just earned at your expense. |
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Post by macrockett on Oct 9, 2009 8:22:47 GMT -6
This to me sounds similar to paying points on your mortgage in exchange for a lower interest rate, except in this case we pay a higher interest rate in order to get more money than the original face value of the bonds. If that is the case, what prevents a govt body from abusing this flexibility? Imo, it already has been abused. To the tune of around $17 million. The law is so sloppy in this area that you can drive a proverbial truck through it. Our District was able to increase the budget for MVHS by 17M/124.66M or 13.6% (that I am aware of) without any approval whatsoever of the taxpayers of this community. The actual interest number is whatever was collected in fund 60 from the 06 referendum bonds. (The question to ask the District is this: What is the total interest booked in fund 60 related to all bonds issued and related to the 06 referendum. Feel free to ask this question and let me know.)Everyone should be interested as to why we were selling bonds in 06 far in advance of anything material happening on the condemnation of BB. Were interest rates cheaper? Was there any legal obligation to do so? Ditto re the 07 tranche issued at a premium. Certainly as to the later, it appears that the District realized it was going to need more money for the MVHS budget, per the attached correspondence. winsome.cnchost.com/MAC/Memo_to_Dave_Holm_June_22,_2007%5B1%5D.pdf New Sale Date on Thursday, June 28th (2007) 11:00 AMWe have set a new sale date for next week with the objective of achieving interest rates around 4.60% or lower if possible. An updated official statement is being sent to broker-dealers today. If for some reason the market deteriorates by mid-week we will be ready to postpone the sale again. We would then be looking at a sale on or after July 9th. We have chosen the June 28th and backup July 9th because of our need to have additional bond proceeds for land acquisition and to earn additional investment earnings for the project. (On this one, I would suggest getting a copy of the video of the June 07 board meeting where this was discussed.) |
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Post by macrockett on Oct 9, 2009 8:33:02 GMT -6
And what about the remaining legal fees/judgements to be paid regarding BB? have we ever gotten an answer as to what taxpayers have spent in total legal fees up to this point with regards to BB? eta: I ask because , IMO these costs factor into the entire MV budget. Certainly agree on that one. I suggest a FOIA on this one to make it official. All legal fees (and other related costs) associated with the condemnation and acquisition of BB from the date of the condemnation in Dec05/Jan06 to present. The combination of these costs will be a very big number imo. |
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Post by macrockett on Oct 23, 2009 15:46:04 GMT -6
To: Financial Advisory Committee
From: Michael Crockett
My recommendations are divided into 4 categories: Financial, Physical Assets, Employees, and Contracts. I would also like to lay some groundwork
First, both the Federal Government and the State of Illinois are mired in debt. On the federal level our current debt is over $11 trillion dollars. www.treasurydirect.gov/NP/BPDLogin?application=np In addition, over the next 10 years our federal government is projected to borrow an additional $3+ trillion dollars but, more likely, it will be much more. www.cbo.gov/ftpdocs/99xx/doc9957/_selected-tables.2009.0406.pdf Still further, at the federal level it is estimated that we have un-funded liabilities of over $50 trillion dollars related to Medicare, Medicaid, Social Security and government retirement programs. www.pgpf.org/newsroom/press/owe/ In Illinois, the situation is no better. We currently have an estimated $11 billion dollar budget deficit for the current fiscal year, budget.illinois.gov/default.htm , and an estimated $73 billion in un-funded liabilities for the 5 state pension systems. trs.illinois.gov/subsections/press/history.htm . Further, other post employment benefit liabilities are estimated at over $24 billion. www.bondbuyer.com/issues/117_75/-286730-1.html . See also, generally, www.uhc.com/live/uhc_com/Assets/Documents/URS_StandardandPoorsReport.pdf . At the same time, Federal and Illinois tax revenues, current and projected, continue to lag outlays. www.heritage.org/research/features/budgetChartbook/Federal-spending-growing-faster-than-federal-revenue.aspx ; www.ioc.state.il.us/ioc-pdf/dwhreportFeb2009.pdf ; blogs.wsj.com/economics/2009/09/29/tax-revenue-tumbles-change-in-receipts-by-state/ ; www.apps.ioc.state.il.us/ioc-pdf/ffweb0409.pdf (Education Spending in Illinois) Second, consumers and taxpayers aren’t much better off. According to the Census Bureau median household incomes have been flat for a decade. economix.blogs.nytimes.com/2009/09/10/a-decade-with-no-income-gain/?hp In addition, consumer debt to net worth, especially taking into account the recent loss of wealth in their homes and the stock market, is near an all time high. If you look at page 9, D.3 Debt Outstanding by Sector, under Households, Total column, total Household debt is over $13 trillion (2009 Q2 at bottom of the page.) www.federalreserve.gov/releases/z1/Current/z1.pdf Correspondingly, household net worth can be seen on page 104 B.100 Balance Sheet of Households and Nonprofit Organizations, line 42, Net Worth (Fell from $63+ trillion in 2006 to 53 trillion now. Most of this wealth is concentrated in the hands of a few, as you know). www.federalreserve.gov/releases/z1/Current/z1r-5.pdf Further, according to CareerBuilder, 60 percent of households are living from paycheck to paycheck. blogs.moneycentral.msn.com/smartspending/archive/2009/09/22/60-living-paycheck-to-paycheck.aspx . Finally, the actual unemployment rate is much higher than the headline rate of 9.8% www.bls.gov/news.release/empsit.t12.htm (BLS shows a rate of 17%) and the Fed Reserve sees protracted, high unemployment, www.reuters.com/article/businessNews/idUSTRE57P3TC20090826 . Conclusion:
Reliance on Federal and Illinois State Government assistance is not advised.
Reliance on the taxpayer is also not advised.
Moving to the subject of District 204, it is important to note the District is a $270 million (now $284 million) per year business, with revenues and expenses that must be managed properly given the constraints that exist. On the revenue side, other than the federal and state funding sources discussed above, “local sources” (taxes) is the remaining material source of revenues. The important considerations here are growth and inflation. It should be clear that growth in the District is nearing an end with little available land left for development. winsome.cnchost.com/MAC/PMAProjections12-8-08.pdf (growth tax began trailing off in 05-06, collected in 07-08); winsome.cnchost.com/MAC/NapervilleResidentialPermits1999_2009Q1.pdf (development began training off some time ago as shown by the Naperville permit #s). In addition, inflation is not on the horizon www.federalreserve.gov/monetarypolicy/fomcminutes20090128ep.htm . The tax cap and cpi, cnx.org/content/m18338/latest/ ,will restrict the tax revenue collected beginning in 2010, next year. On the expense side, approximately 80% of our expenses are salaries, benefits and associated expenses. Historically, these expenses grow exponentially. In summary, the combination of little growth, little inflation and the exponential aspect of approximately 80% of our expenses means, based on current trends, District 204 is looking at a funding gap of approximately $7.5 million per year. Therefore, any solutions offered that does not seriously consider consolidation and, more importantly, our employees will not solve the funding issues of our District. Recommendations:
Financial: One of the biggest expenses in District 204 is interest expense on outstanding bonds. Protect the bond credit rating, currently Aa2, to avoid paying higher rates. In addition, refinance our outstanding debt as soon as possible to take advantage of the lowest rates in approximately 40 years. www.bloomberg.com/apps/news?pid=20601087&sid=aEGg_4IOt0hY ( for example, saving 1% on $300 million means per year savings of approximately $3 million). Physical Assets:--Need space utilization study of all schools to determine consolidation possibilities. Savings through consolidation are: --Maintenance costs on unnecessary buildings --Operating costs (eliminated in consolidation) Utilities, etc Administrative positions. Employees: Approximately 80% of the operating costs are for salaries, benefits and related expenses. Certified staff: According to the District website there are 2155 certified staff to 28825 students. That is one certified staff for each 13.37 students. Yet many, if not most, of the classes taught have a ratio of 25-30 to 1. There may be an explanation for this, however on its face, it appears to raise issues. District 204 needs to analyze whether the current scheme is the most effective and efficient or whether a more efficient plan can be implemented. Management: Flatten the management structure by eliminating administration personnel deemed nonessential, thereby putting more responsibility on teachers to carry out their duties without supervision, i.e., eliminate redundancy. Class instruction: Consider creating boiler-plate learning plans whereby all certified staff are on the same page as to what is taught and to provide uniformity throughout the District. This should help create efficiency as well. Contracts: All contracts should be reviewed for necessity, effectiveness and efficiency. --The District should seek to collectively bid contracts, where possible, with other Districts (larger quantity for lower price). Examples: office supplies, athletic equipment, maintenance contracts, other services. --The District should seek, where possible, to solicit bids on contracts using a broader net of potential goods and services providers to maximize potential bidders. Use of the internet B to B sites along with reverse auction bidding is one example. Streamline the process as well to save on administrative costs. Posted at reply #39: ipsd204.proboards.com/index.cgi?action=display&board=bidc&thread=2835&page=3macrockett@comcast.net Michael Crockett
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Post by macrockett on Dec 14, 2009 13:14:48 GMT -6
In my opinion, this is a rather pathetic response to a problem D204 should have know long ago.
When you know the growth in your District is slowing (all you have to do is follow construction permits to figure that out...the trend in those permits has been clear for several years) you become more conservative, you get proactive, you don't sit around and wait for the crisis to smack you in the face.
When your state has an unsustainable financial structure, you don't increase your dependence on and exposure to it (think transportation and ADK, among other things).
When your District is nearing its peak enrollment by every conceivable measure, you don't further strap the taxpayers with more debt for a school, that was simply unnecessary to satisfy your capacity needs, let along create more operating expenses (think MVHS administration and operations) for your District.
Finally, you look into the future and ask how secure is your tax base (I'm not talking about the current crisis but rather the health of employment and wages in America in the long term.) It should be clear, based on US census material, that wages for many business sectors are beginning to plateau for a variety of reasons (i.e., wages are stagnant for the last 10 years).
You also take sufficient steps to clean up the mess. What the District has recently proposed will barely make a dent in the increased expenses for salaries and benefits which will come over the next decade.
I call this planning and projecting, I'm not sure what the District callls what they have been doing.
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Superintendent's Budget Message
Reported by janet_buglio@ipsd.org on 12/7/09
Dear District 204 Community,
At the December 7, 2009 board of education meeting we discussed the current economy's impact on our district. The $13 billion deficit in Illinois ranks our state third in the nation, behind California and Michigan, in financial troubles. Decreased state funds, combined with the slow down in local tax revenue, created a projected $9.2 million deficit for our district for 2011.
With the goal of achieving a balanced budget for 2011, we asked for input on ways to reduce our deficit. We asked building administrators and also looked to our community. Our Citizens Financial Advisory Committee reviewed nearly 200 suggestions from the community and also made its own recommendations.
Over the past few months, we spent a great deal of time reviewing all suggestions with a priority of minimizing the impact to academic programs. The recommendation presented to the board focused on six areas: revenue enhancements, delayed expenditures, operational efficiencies, staffing efficiencies, health benefit efficiencies, and program efficiencies.
Our list of budget recommendations contains 30 items such as consolidating high school courses with lower enrollments, reducing operations and maintenance outlay, slowing down the technology refresh cycle, reviewing health benefit claims, increasing building rental fees, and eliminating six central office staff positions. You can see the complete budget presentation at the link below.
While this is our first recommendation, we have more work to do. Over the coming months we need to work on developing implementation plans for the items the board approves. We will continue to communicate with you as we move forward with the budget.
If you would like to see the video presentation from the board meeting, it is available at Budget Presentation VIDEO
Kathy Birkett
Superintendent
Budget Presentation 12.07.09 (pdf)
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Post by asmodeus on Dec 15, 2009 8:28:54 GMT -6
I don't understand what a "slow down in local tax revenue" means. Does it mean an actual reduction in revenue, or just that the rate of increase has dropped? I can understand if the revenues have decreased, but if the budget is predicated on perpetual growth, then shame on them. As Michael stated, that is not proper planning.
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Post by Arch on Dec 15, 2009 10:36:20 GMT -6
Yes, the growth did not continue linearly like they 'thought it would'... a lot of people think that if you got X% this year as an increase that it will continue and even grow continually year after year like some fantasy...
In a district that likes to squash and squelch everything someone says that might be construed as 'negative' or outside the rose colored glasses view of 'perfectville', it's easy to understand how this very fundamental mistake in planning was made.
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Post by macrockett on Dec 15, 2009 14:59:22 GMT -6
I don't understand what a "slow down in local tax revenue" means. Does it mean an actual reduction in revenue, or just that the rate of increase has dropped? I can understand if the revenues have decreased, but if the budget is predicated on perpetual growth, then shame on them. As Michael stated, that is not proper planning. It is bullsh*t asmodeus. Double speak for there is no inflation and the growth gravy train is over. There are only two material sources for local taxes, and these are it. If you think the federal or state govt are going to fund our school district, read above. (although the fed will continue to print money allowing the Washington to send a check to the states under this program www.ed.gov/programs/racetothetop/index.html Back to the budget, local revenue will either go up due to inflation (tax cap), growth in new homes and commercial property or, in the alternative you will vote for a new referendum to get around the above. That is 2011. I will say it over and over till everyone gets it, based on current trends we have to find approximately $7.5 million of new revenue, each and every year to cover salaries and benefits (approx 80%) and a few other costs (approx 20%). The cuts they are contemplating will make a dent in the cash outflow, a small dent. When it starts to get painful, let me know and I will tell you what to do about it. |
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Post by doctorwho on Dec 15, 2009 22:27:31 GMT -6
I don't understand what a "slow down in local tax revenue" means. Does it mean an actual reduction in revenue, or just that the rate of increase has dropped? I can understand if the revenues have decreased, but if the budget is predicated on perpetual growth, then shame on them. As Michael stated, that is not proper planning. The building of the unneeded 3rd high school after every single member of the SB and Admin knew the 'real' projected enrollments as well as the projected deficits comings to 204 BEFORE construction ( ALL ON OFFICIAL SD docs ) - and all associated future debt IMHO is one of the most wreckless single acts of wanton spending I have witnessed. If this was a national issue on that scale people would be calling for heads. |
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