Bond Premiums being used to issue more Bonds

[EagleDad]

I was recently asked by a fellow poster where I got the information on the bond premiums. I thought I would create this post to list some of my thoughts.

I previously decribed the bond premiums in this discussion:

eagledad said:

FYI, Half of that additional 20MM that poster refers to (the rough difference between the 124MM approved and the 142MM to be spent) are "bond premiums". It's a handy way for a school district to take cash out "at closing" and justify issuing more bonds (8.2 Million in this case).

It meets the letter of the law, but not the intent of the voters who voted for 124MM. It is a racket offered up by the bond bidders. We'll give you 8.2 Million in extra "non-bond" cash , you take a little higher interest rate, we're all cool. OK? Kapeesh?

Theinformation about the bond premiums definitely did not come from our chief executive officer of the district, the newly arrived Dr. Daeschner. When I asked Steve Daeschner about it, he said the additional 8.2 Million was from “interest and stuff”.

I later expressed to a few board members my discomfort that our newly recruited leader (who is being paid a quarter million dollars a year, and will receive a lifetime 2nd retirement for serving us for a total of 3 years) could not sufficiently explain the sudden appearance of 8.2 Million dollars. I was told that different superintendents are better at different things. Apparently Howie Crouse was very strong at Budget, Finance, and Building (which is why he was perceived to be driving a lot of it). According to that feedback, Dr Daeschner is not interested in these topics and prefers to delegate them to others. Dr. Daeschner is said to be very strong at curriculum, learning strategy and, reporting data, so he won’t be able to answer questions on finance. My personal observations of his interest in all-day-K and other topics seem to back this up.

This in itself (recruitment and selection of these characteristics to lead our district at this time) I highly question. Is our current curriculum sub-standard or lacking (I do not feel so). Did we need an expert in this area when we were looking for a new superintendent? Personally, I think we have excellent and well managed curriculum. Knowing the challenges that we're facing in the district over the next 3 years of opening the third high school, expanding enrollment, creating a new middle school, and getting an operating referendum passed in support of it, I would personally have looked for a super who was strong in budget, finance, and building. This is not to say Dr. Daeschner is bad at what he does, just the wrong person for the district at the wrong time.

The presence of the bond premiums and reason we can now issue another 8.2 Million in bonds was confirmed through our School Board president, Mark Metzger. If you ask our board they will tell you that we received a fair market rate and that the arrangement of bond premiums is standard practice. They will even say that it did not affect the interest rate. This is clearly not true, in my book. If in seeking and negotiating the bonds the SD had said we do not want bond premiums (extra cash on the side) we would have received a better rate in the market. Keep in mind that this change in rate does not need to be a big number at these dollar amounts to have a huge impact to the overall cost. 0.1% on 116 Million dollars over 20 years is a lot of money. It is certainly more than 8.2 Million dollars – why do you think they “give” it to you? There is no such thing as free money, it’s baked into the deal. Add on top of that when we go back to get the remaining 8.2 million, now, instead of then we will likely get a higher rate due to market conditions.

Personally I don’t like this strategy, and I don’t think it should be allowed. If I were overseeing the district finances and providing good governance as I feel a school board member should, I would speak up about it. When the public OK’s 124 million in bonds like we did, I think that’s what you should issue, and you should get the best rate. It seems rather odd to me that we issued 116 million with an arrangement for 8 million on the side (conveniently totaling the 124 million we needed at the time), yet leaving us the “technically legal under the wording of the referendum and letter of the law” ability to issue another 8.2 Million in bonds at a later date without asking the voters through referendum. The School District appears now to be planning to do exactly that without asking anybody.

So, yes, District 204 we told our administration to go forth and secure 124 million from the bond market to build a school. They went out and got 132 million (or rather will when they issue this new 8.2 million they are now planning to, and indeed must do to build Metea). To me that does not sit right, and I am now embarrassed that I was leading the charge for it, but I’m done covering up those “inconvenient truths” for the board I helped put in place. I would like to apologize to Steve Calcaterra, Leanne Lyons, and Michelle Davis. I was wrong, please forgive me.

Another part of this new equation I am uncomfortable with, and gets us up to our new 146 Million in “funding” (for the 124 Million dollar school we supported) is the 10.5 Million listed as “interest on bond proceeds”. I can only assume that this is the interest we have made by investing the 124 Million in bond money we have been sitting on because we could not start building a school. This is a wonderful thing.

However, it is only half of the story. The inconvenient truth left out is that during the same time, we have had to PAY interest (somewhere between 4.3-4.5%) on these bonds to the bond investors. I’d like to know where this is reflected. I strongly suspect that it is not reflected in that figure at all, and that it reflects Gross Income, not Net Profit on that money. I really hope it is not a way of redistributing money (and costs) from the operating budget to the building budget.

So let’s look at our current board for a minute and what I would expect and hope from them. Curt Bradshaw has an MBA in finance and strategic management from the University of Chicago Graduate School of Business and is a Vice President for Morgan Stanley. John Stephens has a B.S. in finance and economics from Iowa State University and is a Sales Manager for Oracle. Bruce Glawe is the CEO of Oxford Bank. These three clearly know money and finance. As overseers of the Administration, I am hopeful they will recognize and question this creative accounting, and not simply rubber stamp it. Additionally, Christine Vickers is the money hawk, hopefully she will ask the difficult questions. Jeanette will question anything she doesn’t understand and look for the details she wants from the administration (whether she will get them is another thing). Next week will be telling. If this just goes flying through we will know it was pre-arranged. I call on each board member to ask their own questions and seek their own answers.

Maybe we’ll get another round of “Ditto”.

Also, I’d like to point something out, although I was not a proponent of it, the people in the district who are strong supporters and backers of air conditioning should keep in mind that this new budget, which has grown from 124 Million to 146 Million represents 22 Million in newly “found” money, or over two-thirds the cost of fully air conditioning all of our elementary schools. As we approach the coldest day of the year and embark on next week, keep these thoughts in mind. Possibly it will give you a chill thinking about it – I know it does me.

EagleDad

[204family]

Eagledad--are you sending in editorials to the daily herald and the tribune? You need a larger audience.

[casey]

Thank you for your very informative analysis. I'm glad to see this information is being made public. It should definitely be forwarded on the Sun, Herald, Tribune, Beacon News, etc. to reach a wider audience.

IMO, the current number of taxpayers involved in SB issues has multiplied exponentially. Never have I heard from so many Johnny-Come-Latelys questioning what is going on with our SB. The recent decisions by our administration have done a fantastic job of getting more people involved (as witnessed by the number of new posters here) in IPSD action. That's a good thing, too! Never have I seen our community so involved as more and more people are really waking up and questioning what in the heck is going on with our SB and SD?

When all is said and done, I would honestly be questioning whether censuring or resignations of several SB members would be warranted.

In all honesty, I think the 3rd HS is still a LONG way off.

[blankcheck]

I thought there was something odd about the financial statement they put forth. I can't believe we have 3 board members with a background in finance that would allow this to go on? Legal or not, they are treading VERY thin ice - if have not fallen through. So what can we do?
Thanks Eagledad for pointing all of this out.

[bbc]

good post eagledad. I also feel the main issues we should be addressing are the actions of our sb. The site selection is certainly an issue but, as you have pointed out, there is more behind the scenes.

[blankcheck]

I think a complete (in depth) audit of the books should be done.

[sam2]

Another excellent post Eagle Dad.

While I absolutely do not support the actions of our school board, the bond premium issue is a fairly standard practice. I agree that it is misleading at best, but our board is only doing what many other boards do. I expect that they knew full well there would be a premium and figured that into their calculations when they decided to ask for the $124 Million.

In a similar vein, many of you will recall that we avoided a larger increase in teh tax rate by refinancing existing debt for a longer period of time. This stategy added significantly to the interest cost of our outstanding debt. Plus, does anyone think that we won't need to incur more debt in the ( approximately) twenty years between today and when the existing debt is paid off?

The SB knows the costs of what they are doing. I don't think they believe the taxpayers do, or care -- just keep the rate low and everyone will be happy. Delay the operating referendum as a sign of fiscal responsibility -- come now -- it wouldn't pass in 2009. It may in 2010. It will certainly be needed by 2010. They promised us that when the prior referendum was passed.

[d204mom]

Other districts have done this?

Any way to check the wording on the referendums of other districts to see if it matches ours?

[sam2]

d204mom said:

Other districts have done this?

Any way to check the wording on the referendums of other districts to see if it matches ours?

Here's a long series of articles from the Herald in 2006. It offers both sides of the issue, but the short answer is, YES, lots of districts do this and it is expensive and, in some states (not Illinois) illegal.



BROKEN BONDS
Big money, unspoken practices: The costly world of school loans
Emily Krone and Jeffrey Gaunt, Daily Herald, 2/6/06

In the fastest-growing areas of a fast-growing state, school districts couldn’t borrow all they wanted.

Debt limits were tied to property values.

And property values weren’t rising fast enough to issue the bonds needed to build the new classrooms that would ease overcrowding.

Schools needed a way to borrow without racking up debt.

They hit on bonds with premiums — cash bonuses that the state didn’t count against debt limits, but did drive up the cost to taxpayers.

For a four-year stretch in the mid-1990s, schools were able to borrow more than voters authorized or debt limits allowed.

But when voters caught wind of the practice, the backlash was fierce.

Taxpayers sued to get their money back. Courts ruled that premiums must be counted as debt. The state legislature intervened and imposed even tighter restrictions, limiting the use of premiums to 2 percent of the loan and outlawing capital appreciation bonds.

“In hindsight, the things which are legal but stretch to extremes tend to cause opposite reactions,” said bond attorney Fred Rosenfeld.

“There’s almost always a political fallout,” Rosenfeld said. “As we found, it can be quite harsh.”

This all happened in Arizona.

As that state clamped down on debt-avoidance techniques, the pendulum was swinging in the opposite direction in Illinois.

In 1995, Illinois amended the Local Government Debt Reform Act — to give local governments more authority to issue bonds.

The act gave “supplemental authority regarding the issuance and sale of bonds” in order to accommodate “new market practices.”

A Daily Herald analysis of 206 school bonds issued since 2000 shows many suburban officials put that supplemental authority to full use — often resorting to three borrowing practices in order to skirt debt limit laws, bend interest rate restrictions or collect more than voters authorize.

The bond counsel for most of the school districts in the state was instrumental in drafting the debt reform law, saying one of its attorneys was the “chief draftsman.”

The Chicago law firm Chapman and Cutler states on its Web site: “Our public finance attorneys frequently draft the legislation necessary for school districts to engage in innovative financing techniques.”

Chapman Cutler did not return several requests for comment.

Chicago-based public finance firm McGuireWoods likewise promotes premiums and capital appreciation bonds as methods for overcoming challenges, such as when “a bond financed project or capital improvement program runs up against a referendum or other statutorily applicable limit.”

Those techniques allow districts to build the schools voters demand, McGuireWoods attorney Darryl Davidson said.

“You vote because you need a new school,” Davidson said. “Once the people decide that, it’s up to the school board and financial consultants to decide on the structure” of the loan.

Officials from other states call the techniques repugnant.

“That is called cooking the books,” Massachusetts Director of Accounts James Johnson said of collecting a premium in excess of borrowing limits.

Massachusetts treats premiums like any other type of debt — and counts them against voter authorization.

“We feel that substantial premiums … do not reflect financing of the building projects which the voters approved,” Johnson wrote in a memo sent to municipalities across his state.

The Idaho Supreme Court ruled back in 1962 that premiums must be included in debt limit calculations.

Other states have issued similar edicts.

Texas counts premiums against voter authorization or limits them to less than 0.5 percent of the total loan.

Michigan’s school code outlaws the use of capital appreciation bonds altogether.

The state of Washington does not explicitly prohibit capital appreciation bonds or premiums, but bond lawyers there have developed their own policies to limit their use.

“We put a lid on that,” said Cynthia Weed, a partner in the public finance division of the Seattle-based law firm Preston Gates & Ellis, which serves as bond counsel for school districts throughout the Northwest.

“We’re fairly scrupulous of not implementing a greater burden on taxpayers than what voters approved,” Weed said. “We also have judges that are not inclined to approve schemes to get around the debt limit.”

Local independence

Judges in Illinois haven’t ruled on premiums.

But the Illinois General Assembly has made recent attempts to improve borrowing habits — and keep costs down — at the state level.

A law inked in July requires pension fund bonds issued by the state to be paid off in equal principal amounts, restricting the costly strategy of back-loading debt.

There has been no effort to place similar restrictions on local governments.

Instead, the Illinois State Board of Education requires school districts to police themselves.

“The question of whether bonds have been issued prudently or imprudently is a judgment call subject to market forces and public opinion,” a department official said. “Local voters, taxpayers and bond purchasers are the primary parties that hold school boards responsible for their actions concerning the legal issuance of debt.”

That’s a big burden to put on school boards, said Annie Christie, a former member of the Vernon Hills-based Hawthorn School District 73 board in Lake County who fought against the district’s use of premium bonds.

“You should have house wives, college grads, professionals and dishwashers on the board. You should have the diversity from your community,” Christie said. “You shouldn’t have to be able to analyze a bond. You should be told truthfully whether it’s a good bond.”

Most school boards and administrators simply don’t have the expertise to ensure they’re getting the best deal for their district, said William Simonsen, professor of public finance at University of Connecticut.

“It may be the single largest purchase they ever make, but a lot of expertise lies external to government, with underwriters and financial advisers, and the like,” Simonsen said. “You have to be careful how you manage these networks of professionals who help you.”

New York has tried to level the playing field by requiring school board members to take financial training classes.

A school board member in a McHenry County district, elected last spring on a tide of voter unrest, said the state doesn’t necessarily need to police borrowing limits, so long as it ensures board members and taxpayers know what they’re getting into.

“I don’t think regulation about limits is necessary,” said Glen Stewart, elected in 2005 to the Huntley District 158 board. “I think regulations about explanations is necessary.”

Even better, Stewart said, would be for the state not to put districts like Huntley in the position of having to turn to costly borrowing practices in order to construct needed schools.

“I’m in favor of a legislative solution that would allow us to borrow more based on acceptable projections of new growth,” Stewart said.

Or, he said, he would support a requirement that when districts do engage in costly practices, “it has to be explained to the public.”

Cost of autonomy

Public finance experts say school boards — and taxpayers — need more backup than the people who help issue the bonds.

“It’s ludicrous” to abdicate responsibility to the people who stand to benefit most from a costly issue, said William Kittridge, director of the nonprofit Center for the Study of Capital Markets and Democracy in Arlington, Va.

Investors worry about their return, Kittridge said, and lenders worry about making the investment attractive.

And the objectives of the school district and the lender can be at odds.

“Their incentive is to make money,” Simonsen said of lenders. “They have the incentive, all else being equal, for higher interest rates.”

Bond counsels are concerned with making sure the investment is legal.

“Once I figure out that it’s legal, it’s (the school board’s) job to figure out the policy issue of whether they want to do it or not,” said Davidson of McGuireWood.

These are the forces — not schools, not taxpayers — that drive the process, Kittridge said.

Schools pay the bond counsel and the lender, called an underwriter, but that doesn’t make them allies, Kittridge said.

“In a bond sale where you have just an underwriter and a bond counsel at work, you have no one who works for the issuer, no one whose client is the issuer,” Kittridge said. “You don’t have anyone who is competent to assess the quality of the sale who is working for the issuer.”

In Oregon, the state filled that void, requiring that the treasury department sign off on local bond sales. The state’s Municipal Debt Advisory Commission also helps ensure sound debt practices at the local level.

Illinois, with more individual units of government than any other state in the nation, has historically afforded local governments a great degree of autonomy.

That tradition — and the muscle of the bond firms — makes reform unlikely, said J.B. Kurish, a former investment banker for First Boston Corp. and now a professor of finance at the University of Illinois in Chicago.

“You need to have somebody who provides oversight and sort of blesses in some way the pricing of the bonds and what people are doing, Kurish said. “It would be about trying to keep bankers and financial advisers honest. I wish we had the political power to do that here.”

TOP OF PAGE

To be clear, schools aren’t thrilled, either
Big money, unspoken practices: The costly world of school loans
Jeffrey Gaunt and Emily Krone, Daily Herald, 2/7/06

Something is rotten in the state of school funding, suburban school officials say.

That’s the reason many give for taking on high-cost loans.

A Daily Herald analysis of 206 school bonds issued since 2000 shows suburban officials often resort to costly borrowing practices in order to get around state-mandated debt limits, or to make new debt seem more palatable to current residents.

District officials acknowledge the loans are costly. But they say state law often leaves them with few alternatives.

New homes mean new kids. New kids demand new schools.

And districts often need to build those schools before the kids — and their taxpaying parents — arrive.

“What’s a school district like ours supposed to do — issue portables?” Huntley District 158 board member Glen Stewart asked, referring to mobile classrooms. “That’s not the answer.”

Stewart said he’s all for ensuring taxpayers know the true cost of school loans. But he also said fast-growing school districts like his in McHenry County don’t have many options.

Students, parents and the state and federal governments all demand good schools. But without the cash to build those schools, officials say, many districts have been forced to turn to creative financing techniques to meet the demands.

“Schools don’t go out and violate the law,” said Rebecca Allard, assistant superintendent for finance in Kane County’s Geneva Unit District 304. “We work within the parameters. To provide quality facilities, deal with ever-escalating growth, you live within the limits of the law.

“Sometimes I think schools are an easy target,” Allard said. “Tell us how to run our business, and we’ll live within those parameters. If you don’t like it, change the rules.”

Growing pains

The amount a school district can borrow is based on the total value of taxable property within its boundaries.

As new homes, stores and businesses are built, that property value rises — and so does the district’s ability to take on debt.

But even if district officials know new homes are coming, and know that property values are going to rise, future growth doesn’t translate into current cash.

“I think if you’re in a district that’s growing, the Oswegos and the Indian Prairies (in Naperville and Aurora), I don’t know how you keep up with that growth,” Geneva’s Allard said. “You can’t build schools fast enough.”

That is, unless district officials and their consultants find other ways to operate within state debt limits, while still coming up with the needed cash for building projects.

To that end, many district officials have agreed to pay high interest rates on school loans in order to receive up-front cash bonuses. And they’ve agreed to delay interest payments to hold down tax rates.

Officials have also pushed debt payments off as many as 20 years as they wait for property values to rise — which ensures future residents, whose kids will use the new buildings, help share in the cost.

The practices mean more money out of taxpayers pockets. But they also mean new students will have the schools they need, district officials say.

“There is an extreme balancing act that is taking place,” said Daniel Schuler, assistant superintendent for planning in Cook County’s Wheeling Elementary District 21.

Board members promise taxpayers they will be good stewards of the public money, Schuler said. But they also promise to provide a good education. Often, it’s difficult to reconcile the two.

“Looking at the demands that are out there in terms of providing a quality education,” Schuler said. “They’re struggling to weigh that against the fact that they’ve made some commitments to the community that they’re going to be fiscally responsible.”

And while the practices may be costly, school officials are quick to point out that they are legal.

“The law allows us to do this,” said Michael Zelek, associate superintendent for business affairs in Grayslake High School District 127 in Lake County. “We’re following all practices in the state statutes.”

State shortcomings

School districts wouldn’t be in such a pickle if the state picked up some of the slack, district officials say.

The state and federal governments offer grants to offset the cost of some classroom programs.

Districts receive general state aid to help cover some operating expenses — based on the relative abilities of their local taxpayers to pay for the costs of education.

But traditionally, districts and their taxpayers have received little help when it comes to paying for the actual buildings their students will learn in.

“It’s totally out of control,” Cheryl Crates, the chief financial officer in Community Unit District 300, said of the demands the state places on local districts.

The state helps cover the cost of education, Crates said, but historically does little to cover the costs of construction.

That’s a problem for a fast-growing district like the Carpentersville-based district in Kane County, where paying for new schools and more classroom space is nearly equally as important as hiring new teachers.

“They help in the education rate,” Crates said of the state. “Why are we not doing it on the bond side?”

A perennial struggle

State funding long has been a topic of conversation in Illinois. In 1994, it was the issue that launched former state senator and Democratic governor candidate Dawn Clark Netsch into the public limelight.

In the 11 years since her run against former Gov. Jim Edgar, education funding has remained a hot topic in Illinois.

“It is the state’s primary responsibility to provide a good, solid educational system — and to pay for it,” said Netsch, a professor emeritus at Northwestern University’s School of Law. “We’re not paying for the majority of it now.”

Netsch said many school officials who turn to high-cost borrowing practices — provided they’re otherwise acting responsibly — probably do so because they have little choice.

“Assuming you’ve got a district that’s behaved properly,” Netsch said, “but has not been able to get the (help) that it needs, then I suppose it does it out of necessity.

“They may not be the staggeringly poor districts,” Netsch said. “But they have as much right to be helped with their particular need to provide a good education.”

Netsch added, however, that district officials need to make sure they are fully disclosing the cost to taxpayers.

“I think government always ought to be honest with people about how much money they’re raising, how much they need and what they’re doing with it,” Netsch said.

“I think citizens are more likely to be less cynical and a little more supportive if they feel they are being told the truth,” Netsch said. “It could raise a new body of constituents for reforming the way we fund education in the state of Illinois.”

TOP OF PAGE

Taxpayers must force legislative bond fix
Daily Herald Editorial, 2/7/06

The familiar refrain heard at school referendum time is that the state of Illinois isn’t doing its share when it comes to school financing.

But as two Daily Herald investigations over the past year have shown, the state has already done plenty to allow local taxpayers to be relieved of much more money than they expected and often without their knowledge.

Since 2000, suburban taxpayers paid $263 million more than they thought they had authorized in tax rate hikes. And far worse, without their knowledge, they’ll be paying back at least a billion dollars more than they could reasonably have anticipated when they approved bond issues.

School districts and other taxing bodies might be defended by some as simply taking advantage of whatever the tax cap and bond financing laws allow. And indeed, that is an explanation often offered. But we’ve heard little that justifies acceptance of such laws into perpetuity or the lack of explanations to taxpayers of their costs.

In fact, we suspect most taxpayers will be less magnanimous, focusing their exasperation on both those who took their cash locally without explanation and those in Springfield who allow these practices to continue.

Though virtually all local school districts are operating within the law, too many have been operating outside basic rules of candor and transparency. Many have shown taxpayers one number, the bond issue request. But they don’t always explain the full cost of repayment or what methods will be used.

Since current law permits these practices, the ultimate responsibility for this falls in the lap of the legislature. Given the complexity of the laws, we’d be far more patient had the General Assembly not so recently failed to fix similar abuses once they’d been revealed.

After publication of another series on tax cap laws, nearly everyone vowed to fix them. That was almost a year ago. From that failure to act, we are left to assume that protecting taxpayers from hidden costs and unintended consequences is not an urgent concern.

The second series has exposed permitted debt financing methods that are even more expensive to taxpayers than tax cap laws. Those methods are banned in many other states for the best of reasons — they are deceptive, expensive and beyond sensible financial behavior.

Based on the lack of improvements to the tax cap law, we have little reason to imagine the governor and General Assembly will suddenly discover an urgency to save taxpayers from overly expensive debt financing laws.

Unless, of course, taxpayers who’ve been at the financial mercy of both state law and local taxing bodies finally get angry enough to sending a message in both directions. By demanding, as a prerequisite for a “yes” vote, that school officials explain the financing methods and the ultimate cost of any bond issues that are proposed in referendum. By electing school board members who understand school finance and fair treatment of taxpayers. And by supporting only legislators who will make certain school officials have no other choice.

[proschool]

Very impressive Eagledad.

I know that other districts have been much more abusive but that is no excuse.

How do they account for the money that the district saved on interest by delaying a project? Does it sell the bond right away and then invest it somewhere?

I would accept it if the district sold the bond when they needed the money and accepted a "premium" to account for the fact that they would be paying the money back in 23 years instead of 25 years as they would have if they sold the bond right away. Otherwise they should have just asked for the money they needed. It's just honest.

[bob]

Let's get this correct.

Only $124 million of bonds are being issued and what we have to pay back. No more than $124 million.

The SD got a $8 million premium for the bonds.

The SD issued $116 million in bonds and received $8 million in premiums. That premium, IMO, results in a higher interest rate being charged than without the premium.

Now in e-mails I received from SB members, the IR rate with the premium is is still lower than they projected.

If you need a simple explanation, the SD was offered cash back or a lower interest rate. They took the cash back And they still have room to sell another $8 million of bonds.

What I would like to know is the interest rate difference between the two?

The correct title of this thread should be $8 million bond premium for higher interest rate.

I found this rather disturbing that they did this. There should be a state law banning this practice.

[proschool]

I agree the law needs to be changed.

What if district can sell $124 million in bonds for 20 years in 2006 or sell $124 million in bonds for 18 years in 2008 and collect an 8 million dollar premium and not cost the taxpayer one additional dollar. There was interest earned/saved by delaying the start. Is this just the way the school district accounts for it?

[bob]

proschool said:

I agree the law needs to be changed.

What if district can sell $124 million in bonds for 20 years in 2006 or sell $124 million in bonds for 18 years in 2008 and collect an 8 million dollar premium and not cost the taxpayer one additional dollar. There was interest earned/saved by delaying the start. Is this just the way the school district accounts for it?

That is what I like to know.

[EagleDad]

Personally I don't count on passing laws to make my school district do the right things. I like the quote from the aricle above "Instead, the Illinois State Board of Education requires school districts to police themselves." I count on, and expect my board members to provide this leadership and governance.

But if they fail on that, then the citizenry must take action and laws must be passed.

[gumby]

eagledad said:

Personally I don't count on passing laws to make my school district do the right things. I like the quote from the aricle above "Instead, the Illinois State Board of Education requires school districts to police themselves." I count on, and expect my board members to provide this leadership and governance.

But if they fail on that, then the citizenry must take action and laws must be passed.

This places a greater burden on them to meet the requirements of fiduciary duty. I think good arguments can be made that they will have breached their duty if they don't consider viable alternatives available at a lower cost.