Post by slp on Jan 20, 2008 20:24:10 GMT -6
eagledad said:
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
regardless of what decison the sb makes on tuesday, the questions you pose need to be answered.
This could be the most telling post I have read since on these boards.
Lets hope it is run in the herald or sun as opposed to the same LTE's we see each week.
good work ED