As I was preparing to list the “pros and cons” and other factors involved in the decision whether to support this proposition to approve the Bond Authorization to spend $40 million by the SB CISD, I realized that School Board Trustees and the Superintendent are elected and appointed/hired. These individuals can come and go after each election. The only “constant factor” in the entire equation is the taxpayers. They are the ones who will be ultimately responsible for paying off this incremental $40 plus million incurred debt.
My first question is “Has the Board of Trustees and Superintendent justified the $40 Million General Obligation Bond sale from a financial or academic perspective?” My personal opinion and blunt answer is NO. The only justifications I have heard or read from the Board of Trustees and the public is that “There will be no new taxes!”, “It’s for the kids!”, “We are entitled!”, “Other cities have them why not San Benito?”, and the ever popular “It will improve the economy”. All these are “feel good reasons” but they are not financial justifications for adding $40 million dollars to the existing Debt Service of $97.2 million plus dollars. I see no return-on-investment from a financial or academic perspective. My second question is “Why did the Bond Committee or the Board of Trustees not conduct a “Feasibility Study” identifying the needs of the citizens/taxpayers? A Feasibility Study would include a Needs Assessment (Community Outreach, Researching area demographics, and Identifying potential user groups), Program Requirements (Project cost estimates and site requirements outlining various options), and Financial Performance (determine the “recapture rate” by estimating revenue potential and operating expenses for each option, and determine the cash flow). Providing this information to the public would give them a better understanding of the scope of the project and make an informed decision when voting. Taxpayers need to know what they are getting for $40 MM dollars. Here is what a “Feasibility Study” looks like. The “estimated total debt” extended over 30 years for this proposition ONLY, as projected by the CISD, will be $76,496,230. The “Total Projected Debt Service (including current Debt Service)” over the next 30 years is estimated to be $173 million. (Source: Estimated $40 MM Bonding Capacity). It was stated at the Town Hall Meeting that the State support would be about 50%. I may be wrong but my understanding is the State provided school funds may only be used for “instructional facilities” and that is the reason the new football stadium was funded by the “Lease Revenue Bonds Series 2006 instead of General Obligation Bonds (GO's). The question remains: “Are the proposed Performance Arts Center, Multi-Purpose Facility, and Aquatics Center considered “Instructional Facilities?” I read where the financial advisor, in response to the question: What will the interest rate be? He replied that it would be “more or less a little over 4%”. That may have been true back in the month of August. However, the Federal Reserve, America’s Central Bank, raised the target range for the federal funds rate by 25bps (basis points) or .25% for a range from 2 percent to 2.25 percent during its September 2018 meeting, in line with market expectations. Furthermore, policymakers expect one more rate hike this year probably at the Feds meeting in December, three or four rate increases in 2019, and one rate increase in 2020. If the proposed $40 million proposition is approved, the School District plans to issue the bonds in the spring of 2019 and the spring of 2020. My guess is that the interest rate paid by the taxpayers for the bond issue will be more in the 4% to 5% range. The interest rate will also depend on the current Credit Rating of the School District by a nationally recognized credit rating organization. Per the SB CISD Debt Transparency Report as of August 31, 2017, Standard & Poor’s rating services rates SB CISD Permanent School Fund Rating as “AAA” and Underlying Credit Rating as “A”. The Permanent School Fund Rating is always high because the funds are guaranteed by the Texas Permanent School Fund (PSF). Bundling up the committee recommendation into only one $40 million Bond Authorization Sale Proposition was a stretch by the School Board Trustees. From a voter perspective, the most logical and fair approach would have been to submit for voter approval three separate propositions for each of the proposed facilities and let the voters/taxpayers make their own decision. A comment was made by a School Board Trustee that she did want to see students leave the school district. It is common knowledge that in San Benito at least three out of five people are related to or know a school a teacher in the SB CISD. My own extend family has four certified teachers. I have talked to parents and teachers who have left the school district for other districts. Parents have told me that they moved their kids to another district because of concern for their kid’s security and a better quality of education. They are not leaving because of the lack of an aquatic center, a multi-purpose facility, or performing arts center. A school district’s tax rate consists of two parts: 1) Maintenance and Operations (M&O) and 2) Debt Service (I&S – Interest & Sinking Funds). The current tax rate is $1.3049 per $100 property valuation. The school district utilizes $1.17 to pay for the maintenance and operations by the School District and the rest, $.1349, is used to pay for the retirement of bonded indebtedness. “Maintenance and Operations Tax” fund the General Operating Fund, which pays for salaries, supplies, utilities, insurance, equipment, and the other costs of day-to-day operations. The “Debt Service Tax” pays off school bonds, somewhat like paying off the mortgage on a house. Debt Service Tax Rate can be used only to retire bonds sold for specific purposes: construction, renovations, buses, portable buildings, land, technology, and the cost of issuing bonds. To finance construction projects, the district sells bonds to investors who will be paid principal and interest. Payout is limited by law to 40 years. Proceeds from a bond issue can be used for the construction and renovation of facilities, the acquisition of land, and the purchase of capital items such as equipment. If this $40 million Bond Authorization Proposition is voter approved and the facilities are not self-sustainable on their own by charging user/public fees, the school district will have to either dip into the reserve fund and/or increase taxes for the M/O or maintenance and operations expenses of these facilities. I searched through all the School District web site and could not find a Financial Sustainability Report with Revenue Projections for the proposed facilities. Basically I was looking for any report that projects how the SB CISD was going to fund the operating or running of these new proposed facilities. Personally, this appears to be a classic case of putting “the cart before the horse”. Or the more popular “If you build it, they will come”. The City of Alice opened a newly built water park in the summer of 2016. Six months later, the City Council voted unanimously to “suspend aquatic operations” saying it had become too expensive to operate. The aquatic center was losing money; maintenance & operation expenses exceeded revenues. My point is that the SB CISD needs to present to the voters how they propose to fund or pay for the maintenance and operations of these proposed facilities before the bond sale is authorized. The SB CISD is proposing seeking partnerships with the City of San Benito or the Rio Hondo ISD. I follow the City of San Benito City Commission and am knowledgeable about the city’s financial position. Personally, I don’t think the City is in a position to be partnering with the School District to fund the maintenance & operations of the proposed facilities. The City has “top priority projects” to address (streets, water & sewer infrastructure replacement/repair, etc.). Recently, a representative from the School District made a presentation of the proposed proposition to the San Benito City Commission. I was informed that not one School Board Trustee or the Superintendent was present to answer any questions from the City Commission. Here is a novel idea. Instead of spending all these “extra millions of dollars the school district has on hand now that a certain bond has matured and been paid”, why not spend it on new schools, renovating existing schools, cafeterias, and security. Perusing the San Benito News and the rest of the print media and citizen comments on social media (Facebook), those are the most pressing issues that citizens face. Comments from parents of school age children are reporting that cafeteria lunch periods are broken into two periods. Those on the 2nd period lunch period are finding a shortage of food available. I have also heard complaints of students having to eat on the floor because of lack of eating space. Almost all public school teachers surveyed in a new report say they spent some of their own money to cover the costs of school supplies, according to a study released by the National Center of Education Statistics. The National Center of Education Statistics found that nearly all public school teachers spent their own money on school needs, spending on average close to $480 a year on school supplies. That average is nearly double the $250 federal tax deduction available to teachers. According to the study, 94% of public school teachers say they used their own money to pay for notebooks, writing utensils and other supplies without reimbursement in the 2014-15 school years. Roughly 44% of public school teachers spent $250 or less, while about 36% said they spent $251 to $500. The average amount of personal money spent was $479. Educators in low-income schools tend to spend more, the NCES found. A 2016 Scholastic survey also revealed that teachers at schools with mostly socioeconomically disadvantaged students have greater classroom expenses. Scholastic reported that teachers in high-poverty-schools spent $672 on school supplies on average, compared to their counterparts in low-poverty schools, who spent an average of $495. More than 4,700 educators took part in the Scholastic survey. Why do teachers do it? One teacher put it very succinctly; “Any teacher who’s worth anything is going to put kids first. We buy things because we have to do more than what we’re given.” As I stated previously, I follow the SB City Commission and not the SB School Board. Therefore, I proceeded to inform/educate myself by reading/viewing all the financial reports available on the School District web site and Bond Committee/Board of Trustees agendas, minutes, and videos addressing the proposed facilities. Unfortunately, any agenda items (Request for Approval of Financial Advisory Agreement with RBC Capital Markets, Request for Approval of the Engagement of J. Ramirez Law Firm for bond counsel services and authorizing the execution of an engagement letter related thereto, Request for Approval of an Order calling a bond election…) pertaining to the proposed $40 million Bond Authorization were all approved via a “Consent Agenda”. In a “Consent Agenda”, there is absolutely no public Board of Trustees discussion on any agenda item designated as a consent agenda unless discussion is requested by a board member. The posted “VII Agenda” specifically states “Consent Items are items for which no Board discussion is anticipated and which the "Superintendent recommends approval". Unfortunately, there were no agendas, minutes, or meeting videos of the “Bond Committee” appointed by the Board of Trustees on the School District web site. I am not alleging they did not meet but there is no public record available online. There were agendas/videos for all other committees (Building Committee, Curriculum Committee, Finance Committee, and Policy Committee). In summary, I am not opposed to the City of SB or the CISD spending tax-payer funds (state or locally supported) per se. I am opposed to spending funds on projects that are not fully justified financially or academically. Simple “feel good” justifications as I mentioned before just don’t do it for me when we are talking millions of dollars. I especially am against the Board Trustees bundling the three buildings into one proposition and not given a menu of individual options to vote on. The option of giving the voters an “all or nothing” is a disservice to the voters. I am still a firm believer that the “No New Taxes” pledge only applies to the current year. If this proposed buildings fail to generate the revenues required to be self-sustainable, the money to maintain and operate them have to come from somewhere. The Board of Trustees have to provide an answer to the question “How much is it going to cost to maintain & operate this buildings and where is the money coming from it they are not self-sustainable? By the way, does anybody know “Who and How” they arrived at $30 - $31 million, $3.5 - $4 million, and $5 - $5.5 without including the location or additional costs like new parking lots, etc? I recommend Voting NO and then start from scratch with a “Feasibility Study” and improved justifications and “more specific details and not just “pretty pictures” for each individual project. Just because we can afford it doesn’t mean we have to spend tax dollars because it makes us “feel good”! San Benito will grow but we have to “spend wisely” and not just spend to “Keep up with Harlingen or Brownsville, etc.! We don’t have the tax base or disposable income like other cities. Respectfully, Joe F. Rodriguez |
Wednesday, October 24, 2018
Bond 2018 ..... Yes or No?
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