Brach Brodie Fee Trial

[insider]

District 204 transfers funds in anticipation of court ruling
By Justin Kmitch | Daily Herald Staff
Published: 1/12/2010 12:01 AM
www.dailyherald.com/story/print/?id=350207

A judge's ruling, already on delay, may not come soon enough for a district about to pay off a new $124 million high school.

Indian Prairie Unit District 204 trustees approved a $5 million transfer of funds Monday in anticipation of a DuPage County judge's ruling on whether or not the district is responsible for about $5.2 million in attorneys fees being sought by the Brach-Brodie property owners.

"We're simply asking the board to temporarily loan $5 million to the operation and maintenance fund to the capitol project fund through the issuance of bonds in a February or March time frame at which time that temporary loan would be repaid," said Assistant Superintendent for Finance Dave Holm. "This is a better approach than to simply guess what the outcome of the trial would be and to have the risk of overestimating or underestimating what that outcome may be."

The district, which includes portions of Naperville, Aurora, Bolingbrook and Plainfield, already owns 25 acres of the Brach-Brodie site at 75th Street and Commons Drive in Aurora and intended to purchase an additional 55 acres of the property for the 3,000-student Metea Valley High School.

Those plans fell through in September 2007, however, when a jury set the price of the land at $31 million - about $17 million more than the district anticipated.

The district is asking for claims of up to $3 million to be stricken from those made by the Brodie Trust and $2.2 million from the Brach Trust.

"The final decision in that case, which we may not know until February, factors into the amount we will need to borrow (for the final bond issuance for Metea Valley). We are recommending that we issue the bonds in February/March after the outcome of the case is known," Holm said. "In order to accomplish this we would need to borrow from ourselves to cover construction costs until the bond proceeds are received."

Trustee Christine Vickers opposed the transfer, as she has every other financial decision regarding the high school, saying that such a large transfer made her nervous.

[macrockett]

Maybe one day Justin will wake up and get his facts straight about the cost of MVHS. It hasn't been sold as $124 million since district residents voted and past the referendum in 2006. Just look at the docs under MVHS funding i posted under financials in my section of this board.

[Arch]

Justin is probably just printing what a former SB President asked him to print.

[doctorwho]

Jan 31, 2010 14:54:43 GMT -6 macrockett said:

Maybe one day Justin will wake up and get his facts straight about the cost of MVHS. It hasn't been sold as $124 million since district residents voted and past the referendum in 2006. Just look at the docs under MVHS funding i posted under financials in my section of this board.

Justin can read - I am sure he has read the many posts in his paper ( over and above here) that have explained in gory detail the cost of MVHS -- obviously chooses to ignore it and just go with what has been requested to be printed. Maybe if the SB actually updated the cost on their website as required - then the true cost will be out there. But likely not before any referendum is proposed

[rew]

So the borrowing is for construction costs, not the BB fees yet to be determined? My understanding of this is, they need to pay construction bills now, but they don't want to issue the bonds until they know the full amount they need (construction and BB fees) so they are borrowing from the Operations fund til they get a decision on the fees.

Is this an advantage in the issuance of the bonds?? Why wait? Is there an interest savings they're trying to capture? How much of the referendum money is yet to be issued?

Would they leave construction money on the table if it wasn't needed? The referendum said specifically for the construction of a third HS. Does that mean they cannot issue the bonds unless they have construction costs unpaid?

[blankcheck]

I think were were told time and time again, they can not take $$$ from the operations fund and move it to the building fund. Am I correct???

[macrockett]

Feb 1, 2010 10:19:36 GMT -6 rew said:

So the borrowing is for construction costs, not the BB fees yet to be determined? My understanding of this is, they need to pay construction bills now, but they don't want to issue the bonds until they know the full amount they need (construction and BB fees) so they are borrowing from the Operations fund til they get a decision on the fees.

Is this an advantage in the issuance of the bonds?? Why wait? Is there an interest savings they're trying to capture? How much of the referendum money is yet to be issued?

Would they leave construction money on the table if it wasn't needed? The referendum said specifically for the construction of a third HS. Does that mean they cannot issue the bonds unless they have construction costs unpaid?

Rew: Here is what i said under the board meeting thread a while back.

"The $5m was discussed back in Oct Casey, see Financial :: Budget Information and Documentation :: D204 Budget Problems: posts 29 and 33. The reason it is coming up again is they are waiting for the court to rule on the legal fees on BB, which has been moved back, again... I suspect they don't want to put things in motion now, only to find out later they need more money to cover the legal expenses."

So the delay, imo, is to quantify the need before they act as the bond issue is in stone.

As for the referendum money...you tell me how much they have spent on MVHS and I will tell you the answer. Not since June 1 have they disclosed MVHS spending. I asked Dave Holm, didn't get an answer. Asked Curt, same. I have more important things at the moment so I'm not going to waste my time with a FOIA right now either. I have a pile of info I will be requesting in the next month that i laid out somewhere on this board recently.

Referendum money is restricted to its purpose as you alluded to. As for borrowing against the land, it is my understanding they have wide latitude there. You can see my discussion in email with Dave Holm link above.

Finally, in addition to the $124 million referendum, they have $17 million from interest income and bond premiums I have gone over many times. I believe they are going to bump up to that number at the very least, and most likely exceed it, when you add in the fees for BB.

When you take into account all the costs, imo, we have now exceeded Brock Brodie site v Eola. I am so confident of that I am willing to wager on it. Any takers out there? I would agree to have a third party CPA do the work with the loser paying that fee as well.

modifed the link that didn't work to show the location of posts 29 and 33

[rew]

I thought we all agreed back in 08 that the move to Eola was going to cost more. Especially when they (I mean me and you) paid the extra $$s when MWG backed out.

I recall them saying they were borrowing from the district to cover the monies they thought would come from the 25 acre land sale?? (Look under in the news, back in October the board voted to do a bridge loan for $5M) Is this the same 5M or additional? So are we 5M in the hole or 10M?

Also, I thought it was said that if the district has to pay a hardship (from a lawsuit ie) that they had the ability to just pass that cost on...no ballots, no nothing. Can they really say the BB lawsuit is part of the construction money? I realize it's part of cost, but wouldn't the district normally pay some judgement out of operating funds...not exactly bricks and mortar.

[macrockett]

Feb 1, 2010 22:22:18 GMT -6 rew said:

I thought we all agreed back in 08 that the move to Eola was going to cost more. Especially when they (I mean me and you) paid the extra $$s when MWG backed out.

I recall them saying they were borrowing from the district to cover the monies they thought would come from the 25 acre land sale?? (Look under in the news, back in October the board voted to do a bridge loan for $5M) Is this the same 5M or additional? So are we 5M in the hole or 10M?

Also, I thought it was said that if the district has to pay a hardship (from a lawsuit ie) that they had the ability to just pass that cost on...no ballots, no nothing. Can they really say the BB lawsuit is part of the construction money? I realize it's part of cost, but wouldn't the district normally pay some judgement out of operating funds...not exactly bricks and mortar.

To my knowledge MWG was responsible for $3million, going from $16 to $19 million.

There is only one $5 million that I am aware of, the amount they are borrowing from the 25 acres.

I believe all costs incurred because of MVHS are referendum funds. However, as with the District's ability to issue the bonds early and accumulate $17 million in interest and bond premium (additional interest that taxpayers are paying that was never contemplated in the original referendum), the laws in this area are porour. So it is quite possible that some collateral costs can be paid from the operating fund. Best to ask Dave on that one.

The fact that they are seeking to borrow from the 25 acres not yet sold tells me that the 124m referendum money + the $17 million interest and bond premium are insufficient to complete MVHS.


As for the $5m, here is the email from Dave Holm:
dated 9/24/09.
Bold below are my questions, the balance is Dave's answers.
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

[e-mail]

[doctorwho]

Feb 3, 2010 22:40:02 GMT -6 macrockett said:

Feb 1, 2010 22:22:18 GMT -6 rew said:

I thought we all agreed back in 08 that the move to Eola was going to cost more. Especially when they (I mean me and you) paid the extra $$s when MWG backed out.

I recall them saying they were borrowing from the district to cover the monies they thought would come from the 25 acre land sale?? (Look under in the news, back in October the board voted to do a bridge loan for $5M) Is this the same 5M or additional? So are we 5M in the hole or 10M?

Also, I thought it was said that if the district has to pay a hardship (from a lawsuit ie) that they had the ability to just pass that cost on...no ballots, no nothing. Can they really say the BB lawsuit is part of the construction money? I realize it's part of cost, but wouldn't the district normally pay some judgement out of operating funds...not exactly bricks and mortar.

To my knowledge MWG was responsible for $3million, going from $16 to $19 million.

There is only one $5 million that I am aware of, the amount they are borrowing from the 25 acres.

I believe all costs incurred because of MVHS are referendum funds. However, as with the District's ability to issue the bonds early and accumulate $17 million in interest and bond premium (additional interest that taxpayers are paying that was never contemplated in the original referendum), the laws in this area are porour. So it is quite possible that some collateral costs can be paid from the operating fund. Best to ask Dave on that one.

The fact that they are seeking to borrow from the 25 acres not yet sold tells me that the 124m referendum money + the $17 million interest and bond premium are insufficient to complete MVHS.


As for the $5m, here is the email from Dave Holm:
dated 9/24/09.
Bold below are my questions, the balance is Dave's answers.
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

[e-mail]

"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"

geez - how long does it take to show a balance sheet ? Or course 4 months not long enough I guess yet to 'create' one

[macrockett]

District budgets are very complex Doc. So are project budgets. Give them some slack, we can wait another year or so.... Here, have something to drink while you wait....

[EagleDad]

We do not anticipate issuing the full $8.12M, but some amount less based on what is needed to complete the project.

Yeah right, this is from the guy who did not anticipate having the stimulus money stop pouring from the golden Obama faucet in 2010 either. Brilliant budgeting, just brilliant.

My only question on the remaining issuance amount (which they conveniently set aside by using premiums) is what premium will be set on that? When issued (not if, when) will the remaining 8.12MM turn into 15MM at unauthorized long-term taxpayer expense? This is all a shell game, with taxpayer monies over the long-term used to magically turn 125MM into 150MM or more. It should be illegal. We will pay much more for this over the long-term, it's a cash-out-at-closing-don't worry about-the-payments farce.

And we wonder why our state and local governments are on the edge of financial collapse? I say it's time to pay the piper and start living with our means.

[Arch]

This follows suit on how they (basically) took a cash advance on the credit card to throw it into a savings account and 'earn' interest for construction early on... Never mind the interest we paid to convert to cash in the first place (selling the bonds at a premium, like you mention EagleDad)