Saturday, September 21, 2013

Letter from CalBOC Director

Date:    January  8,  2013   To:    WCCUSD  Board  of  Trustees  and  Superintendent,  Bruce  Harter  
From  Alicia  Minyen,  Board  member  of  the  California  League  of  Bond  Oversight  Committees  (“CalBOC”)   and  concerned  taxpayer  
Re:    Resolution  No.  55-­‐1213  –  Waiver  from  Ed.  Code  15106-­‐Seeking  Debt  Ceiling  Increase  
I’d  like  to  express  serious  concerns  regarding  WCCUSD’s  impending  bond  indebtedness  waiver   application  from  Ed.  Code  15106.    Further,  for  reasons  expressed  below,  I  object  to  such  a  waiver,  and   question  the  actual  motivation  and  need  for  Measure  E,  a  $360  million  bond  ballot  measure  voted  on   November  6,  2012.      Please  read  this  letter  during  public  comment  and  enter  this  letter  and  its’   supporting  Exhibits  into  the  record  and  minutes.    Also,  please  be  sure  to  provide  the  State  Board  of   Education  a  copy  of  this  letter  and  its  Exhibits  as  a  formal  objection  to  the  waiver  from  Ed.  Code  15106   for  Measure  E.  
Because  the  smallest  increase  in  a  school  district’s  bond  indebtedness  limit  can  equate  to  hundreds  of   millions,  or  in  WCCUSD’s  case,  almost  a  billion  in  extra  debt  service,  it  is  important  that  WCCUSD’s  Board   of  Trustees  only  approve  such  increases  in  extraordinary  circumstances  considering  the   extreme   financial  burdens  imposed  on  its  entire  Community.    Based  on  my  review,  WCCUSD’s  Measure  E  waiver   should  be  denied  given  the  reasons  below  and  that:    1)  voters  were  provided  inadequate  and  misleading   disclosure  regarding  the  waiver  and  its  need  to  extend/increase  bond  indebtedness;  2)  WCCUSD  has   sufficient  current  funds  available  (exceeding  $400  million  in  bond  proceeds  to  fund  priority  projects  i.e.,   $280  million  from  Measure  D  and  $130  million  in  the  Building  fund);  and  that  the   cumulative  amount  of   outstanding  debt,  which  would  exceed  $3  billion  including  interest,  could  cause  a  material  financial   hardship  on  local  struggling  families,  like  my  elderly  in-­‐laws  who  are  on  a  fixed-­‐income  while  struggling   with  increased  medical  care  costs.      
Basis  of  Objection:  
  1. WCCUSD  may  have  obtained  authorization  from  the  voters  of  Measure  E  under  false  pretenses.     Ballot  disclosure,  which  is  the  75  word  text  prominently  disclosed  at  the  top  of  the  voter  Ballot,   failed  to  disclose  WCCUSD’s  current  5%  debt  ceiling  limit  under  Measure  D,  and  failed  to   disclose  its  definitive  need  to  obtain  a  waiver  from  Ed.  Code  15106  in  order  to  sell  Measure  E   Bonds.    Therefore,  WCCUSD’s  claim  that  the  Community  desires  Measure  E  is  in  question.    
  2. In  fact,  ballot  language  stated  that  Measure  E  would  be  sold  at  legal  bonding  capacity  limits,   which  was  2.5%  at  the  time  of  the  Measure  E  vote.    Specifically,  WCCUSD  prominently  disclosed   in  the  Ballot  language,  “  issuing  $360,000,000  in  bonds  within  legal  rates  and  bonding   capacity  limits  with  independent  audits,  citizen  oversight,  and  no  money  for  administrators’   salaries?”  
1  |  P a g e    
  1. WCCUSD  claims  they  disclosed  the  waiver  in  its  long-­‐form  ballot,  however,  such  disclosure  was   misleading  since  the  language  used  suggested  that  WCCUSD’s  seeking  a  waiver  was  only  a   possibility,  when  in  fact,  WCCUSD  definitively  knew  prior  to  placing  Measure  E  on  the  ballot   that  it  needed  a  waiver  from  Ed.  Code  15106  in  order  to  sell  any  new  bonds  outside  of  Measure   D.  
  2. Further,  WCCUSD  made  it  difficult  for  the  voter  to  ascertain  the  meaning  of  Ed.  Code  15106   since  WCCUSD  failed  to  define  and  explain  Ed.  Code  15106.    It’s  unreasonable  to  expect  t he   voter  to  do  legal  research  and  look  up  the  law.    Also,  WCCUSD  claims  ballot  arguments  disclosed   the  waiver,  however,  WCCUSD  should  realize  that  ballot  arguments  do  not  carry  the  same   weight  and  it  is  the  responsibility  of  WCCUSD  to  provide  clear  and  full  and  fair  disclosure  of  all   material  facts  surrounding  the  bonding  capacity  limit  and  waiver  rather  than  relying  on  the   Community  to  make  such  disclosures  in  ballot  arguments.  
  3. You  state  that  the  necessity  of  the  waiver  from  Ed.  Code  15106  was  a  matter  of  public  record;   however,  such  waiver  was  never  discussed  in  a  regularly  scheduled  Board  of  Trustee  meeting   prior  to  the  Measure  E  vote.    Furthermore,  most  voters  have  no  children  in  WCCUSD  and  do  not   have  the  ability  to  anticipate  WCCUSD’s  pursuit  of  such  a  waiver.      
  4. WCCUSD’s  current  debt  is  excessive  and  well  above  the  indebtedness  of  districts  with  similar   student  populations  and  having  a  similar  number  of  facility  sites.    Please  see  attached  Exhibit  A   which  shows  that  WCCUSD’s  Community  must  pay  $1,761,526,489  billion  (not  including   Measure  E  and  not  including  the  $280  million  remaining  on  2010  Measure  D).      
  5. WCCUSD  has  sufficient  funds  available  to  provide  its  priority  and  critical  safety  needs  of  its   students.    For  example,  WCCUSD  has  over  $280  million  in  2010  Measure  D  bonds  available  for   sale,  and  $130  million  in  its  Building  Fund  (as  of  June  30,  2012).    The  district  may  also  have  state   matching  funds.    Please  inquire  of  staff  to  determine  the  actual  number  of  available  funds   available  for  construction.          
  6. WCCUSD’s  Community  will  owe  more  than  $3  billion  when  it  sells  the  remaining  $280  million  in   2010  Measure  D  bonds  and  sells  $360  million  in  2012  Measure  E  bonds.    Currently,  WCCUSD’s   bonds  make  up  over  20%  of  a  taxpayer’s  property  tax  bill.    (See  Exhibit  B.)    Should  all  the   remaining  bonds  be  sold,  WCCUSD  bonds  could  make  up  more  than  30%  of  a  taxpayer’s  tax  bills   sucking  billions  in  discretionary  income  out  of  the  Community.    This  alone  could   jeopardize  the   district’s  viability  since  families  will  be  discouraged  from  moving  into  a  district  that  has  excessive   school  bond  debt  coupled  with  POOR  PERFORMANCE.      
  7. WCCUSD  claims  they  have  a  disadvantage  over  other  districts  because  of  its  lower  assessed   valuation  vs.  student  enrollment.    However,  the  district’s  analysis  appears  skewed  and  reality   shows  the  opposite.    WCCUSD  improperly  compares  themselves  to  some  of  the  richest  districts   in  the  State  of  California,  and  their  analysis  fails  to  compare  WCCUSD’s  voter  approved  bond   indebtedness  as  compared  to  voter  approved  bond  indebtedness  of  other  districts.    Also,   WCCUSD  should  compare  voter  approved  bonds  per  student,  compare  the  age  of  school  sites,   and  compare  number  of  school  sites.  
  8. Further,  the  Bonding  Capacity  chart  included  in  the  waiver  application  is  not  accurate  since   WCCUSD  shows  its’  current  bonding  capacity  at  2.5%  when,  in  reality,  its  current  bonding   capacity  is  5%  when  considering  its  5%  2010  Measure  D  waiver  already  sought  and  approved.    
2  |  P a g e    
By  considering  the  current  5%,  WCCUSD  actually  enjoys  the  3rd  largest  construction  bond   program  in  the  entire  state  (just  behind  the  largest  and  second  largest  school  districts  in  the   State.    Therefore,  WCCUSD’s  claim  of  inequity  among  other  schools  is  unfounded.  
  1. WCCUSD  also  does  not  appear  disadvantaged  since  it  has  received  over  $1  billion  so  far  in   capital  improvements,  far  above  average.    See  Exhibit  D,  “Capital  Asset  and  Debt   Administration”  from  WCCUSD’s  June  30,  2011  audit  report.      
  2. Furthermore,  the  Bonding  Capacity  chart  attached  to  the  waiver  application  fails  to  show  that   the  “Est.  Bonding  Capacity”  comparisons  are  NOT  VOTER  APPROVED  AMOUNTS.    For  example,   Mt.  Diablo  is  shown  to  have  a  $722  million  bonding  capacity,  when  in  fact  their  bonding   program  is  voter  approved  at  $598  million,  which  is  over  $200  million  less  than  WCCUSD’s   current  bonding  capacity  even  though  Mt.  Diablo  has  MORE  facility  sites  and  MORE  students  to   serve  with  similar  and  aged  facilities.  
  3. WCCUSD  enrollment  is  shrinking  and  doesn’t  make  sense  to  improve  schools  that  may  have  to   be  closed  prior  to  the  bonds  being  paid  off.    Please  see  Exhibit  C,  which  shows  that  WCCUSD’s   average  daily  attendance  has  declined  over  15%  over  the  last  9  years  (or  from  32k  to  27k   students).    (Please  also  note  that  WCCUSD’s  bonding  capacity  Chart-­‐Exhibit  B  shows  an  incorrect   number  of  students  of  $29,883,  which  happens  to  be  the  student  population  for  San  Ramon   USD.)        
  4. WCCUSD  claims  the  bond  program  has  been  well  managed  and  transparent.    However,  this   claim  cannot  be  substantiated  since  WCCUSD  failed  to  obtain  independent  performance  audits   in  accordance  with  Generally  Accepted  Government  Auditing  Standards  (GAGAS)  prior  to  2011.     Instead,  prior  to  2011,  the  bonds’  performance  audits  were  “agreed  upon  procedures”  where   WCCUSD  influenced  the  scope  of  the  audit,  which  may  have  compromised  the  integrity  of  the   audit  results  and  raises  questions  as  to  whether  or  not  that  bond  proceeds  were  spent  properly.  
  5.  WCCUSD  has  spent  bond  proceeds  on  nonpriority/noncritical  projects  that  give  the  appearance   of  favoring  richer  areas  within  WCCUSD  over  school  sites  in  poorer  areas.    For  example,  El   Cerrito  received  an  extravagant  Theater  where  Richmond  High  failed  to  get  necessary   improvements  needed  to  keep  students  safe.      
  6. WCCUSD  claims  improved  bond  ratings,  however,  the  Board  should  recognize  that  WCCUSD   purchased  credit  enhancements  for  its  bond  offerings  and  the  ratings  may  not  reflect  its  natural   rating.    Furthermore,  the  insurance  providers  to  the  bonds  have  been  downgraded,  as  reported   in  emma.msrb  as  of  December  2011.  
  7. WCCUSD  claims  it  has  not  exceeded  tax  rates  for  prior  bonds,  however,  the  Board  should  note   that  many  of  its  prior  bonds  are  at  the  maximum  tax  rate  of  $60  per  $100k  that  would  otherwise   have  been  exceeded  if  certain  bond  refundings  have  not  taken  place.      Further,  these  refundings   were  only  possible,  by  chance,  because  of  a  decrease  in  market  interest  rates.    Otherwise,  the   tax  rates  for  prior  bond  measures  would  have  been  exceeded  over  the  constitutional  limit.    Also,   by  WCCUSD  currently  being  at  the  tax  rate  limits,  such  as  with  Measure  J,  it  raises  questions  as   to  the  reasonableness  of  WCCUSD’s  growth  rate  projections  and  its  ability  to  meet  Measure  E’s   promised  tax  rate  of  $48  per  $100k  without  having  to  resort  to  Capital  Appreciation  Bonds,   which  have  already  been  sold  under  prior  bond  measures.    If  WCCUSD’s  true  intent  were  to  not   sell  Capital  Appreciation  Bonds  under  Measure  E,  then  the  Board  would  have  passed  a   Resolution  to  prohibit  the  sale  of  Capital  Appreciation  Bonds,  like  other  districts  have  done  (e.g.,   San  Diego  Unified).  
3  |  P a g e    
Outside  Support  May  Be  Unreliable:  
  1. WCCUSD  sought  approval  of  the  waiver  by  members  of  the  WCCUSD’s  Citizen’s  Bond  Oversight  
    Committee  (“CBOC”)  on  December  5,  2012.    However,  it  appears  certain  members  of  the  CBOC   are  not  independent.    For  example,  a  member  of  the  CBOC  who  was  also  running  for  WCCUSD   school  board,  and  while  Chairing  and  serving  on  the  CBOC,  received  $20k  in  campaign   contributions  from  Seville  Group,  the  construction  management  company  who  is  paid  with  voter   approved  bond  proceeds.      (See  attached  Exhibit  E.)    
  2. WCCUSD  claims  that  certain  cities,  like  City  of  Pinole,  support  Measure  E.    However,  after   reviewing  Pinole’s  minutes,  it  does  not  appear  that  WCCUSD  provided  all  material  facts  to   Pinole’s  Councilman  to  make  an  educated  vote.    For  example,  it  appears  that  City  of  Pinole  was   not  told  that  WCCUSD  has  over  $280  million  in  2010  Measure  D  bond  funds  available,  and  that   WCCUSD  was  already  granted  a  5%  debt  ceiling  in  2010  (which  is  effective  through  2020).    In   addition,  the  City  of  Pinole  was  not  given  an  estimated  cost  of  Measure  E,  was  not  told  that  the   district  needed  a  5%  debt  ceiling  through  2025,  and  Pinole  was  not  informed  of  the  total  debt   service  that  the  taxpayers  of  Pinole  will  be  required  to  pay.  (See  attached  Exhibit  F.)  
Possible  Hidden  Agenda  Regarding  Measure  E:  
  1.  The  motivation  behind  Measure  E  is  in  question  and  a  waiver  from  15106  appears  incredibly   pre-­‐mature.    Specifically,  in  reviewing  other  school  district  waivers,  there  is  no  other   circumstance  where  a  school  district  sought  an  increase  in  their  debt  ceiling  when  there  were   significant  bond  funds  available  (such  as  WCCUSD  having  $280  unissued  and  available  funds   under  2010  Measure  D  and  having  funds  available  from  unspent  bond  proceeds  residing  in  the   Building  Fund).    Further,  there  is  no  other  circumstance  where  a  district  sought  a  bond  ballot   measure  knowing  prior  to  vote  that  a  waiver  from  15106  was  definitively  necessary.    Generally,   it  is  unforeseen  circumstances  that  cause  a  school  district  to  seek  waivers  from  15106,   sometimes  years  after  a  bond  ballot  election,  because  growth  rate  projections  were  not  met,   which  ultimately  prevents  any  subsequent  sale  of  bonds  under  a  pre-­‐existing  bond  measure.     Districts  under  these  circumstances  reach  out  to  the  State  for  a  debt  ceiling  increase  because  all   funds  have  been  exhausted  and  the  only  means  of  raising  new  capital  is  by  risking  its  operating   budget  through  leveraging  of  district  assets,  such  as  through  a  Certificate  of  Participation,  Bond   Anticipation  Note,  Lease  Revenue  Bond  offering,  or  Lease.    This  is  not  the  scenario  for  WCCUSD   since  they  have  significant  available  bond  funds  and  are  not  immediately  faced  with  having  to   leverage  its  own  capital  assets  to  make  necessary  repairs/improvements.  
  2. Suspicions  are  also  raised  as  WCCUSD  has  received  significant  sums  of  campaign  contributions  in   connection  with  all  of  its  bond  measures.    There  is  a  pattern  where  such  contributors  receive   contracts  paid  for  with  bond  proceeds  that  suggest  a  motive  of  pay  to  play  and  gives  the   appearance  that  Measure  E,  as  well  as  some  prior  bond  measures,  were  more  politically   motivated  as  evidenced  by  the  excessive  amount  of  bond  indebtedness  and  those  who   benefited  from  the  bond  proceeds.    (See  attached  Exhibit  G.)