Friday, October 23, 2009

When Less is... just Less.

At their May 26, 2009 meeting, the School Board had item F3 on the agenda, a resolution giving the Treasurer the authority to issue and sell $10 million worth of Bond Anticipation Notes. The resolution was spelled out in its entirety, occupying more than four pages of the agenda.

I attended that Board meeting, and made comments to the Board expressing my concern about the apparently high interest rates we taxpayers were being obligated to pay. I also brought up a recurring theme – that the Board needed to talk about this stuff in public. Public discussion is required under the Sunshine Laws, and as voters we demand to hear how they process such decisions.

I learned after the meeting that the language in the resolution was just boilerplate that did not reflect what the actual borrowing rates would likely be, which Treasurer Brian Wilson expected to be less than 1%. I can understand granting the Treasurer a little negotiating latitude when he actually sits down to the do the bond underwriting deal, but this boilerplate language gave him a great deal more latitude than that.

The Board, the Superintendent and the Treasurer were clearly annoyed at my questioning of the language of the resolution. I suspect that some members of the Board did not understand it themselves. Of course the resolution passed 5-0 with little discussion.

For the Monday, October 26, 2009 School Board meeting, there are once again resolutions on the agenda to approve the sale of debt instruments – in this case, long term bonds. It seems as though the Board's new strategy is to ward off tough questions by just not publishing the details in the agenda any more.

I can appreciate that the number of pages it would take to include the full text of five separate resolutions is significant. However, there are two easy things the Board could do, either of which would be acceptable:

  • Provide the actual resolution language as an addendum. After all, it's not like they're actually printing paper copies and distributing them to everyone in the community. The cost to put a second PDF on the website with the agenda is about zero. Community members could decide for themselves if it is worth the paper to print it out (I certainly wouldn't).
  • Describe the key parameters of each bond issue: a) issue size (which they did state); b) maximum underwriting costs; c) maximum coupon rate; d) anticipated repayment schedule; and, e) what, if any, change to property taxes should be expected by the residents of our school district. After all, since this is a refinancing, there is a chance that property tax collections could actually go down if the long-term bonds are sold at a lower interest rate than the short-term notes they replace.

Not everyone understands the mechanics of bonds, but there are plenty of people in our community who do. I have no doubt that should copies of the full resolutions and eventual underwriting contracts be requested by a member of the public, they would be provided.

But we shouldn't have to keep individually asking for disclosure of stuff of this magnitude. It's trivial for the Board to provide this information. Their behavior suggests that they don't want to be questioned by the public. That was certainly the case in regard to the easement deal they signed with Homewood Homes as Bradley High School was being constructed.

Justin Gardner, Don Roberts, and I have committed that if we are elected to the School Board on Nov 3, we will see to it that this kind of documentation will be included in the agenda and minutes, and that meetings will be streamed and recorded for viewing by the public.

Please vote for GARDNER, ROBERTS, LAMBERT for Hilliard School Board.

Thursday, October 8, 2009

Rabbits & Hats

At tonight's annual State of the Schools address, Superintendent Dale McVey made the announcement that there would be no levy on the ballot in 2010, and that the District would take the steps necessary to allow our current level of local property taxes to carry the Hilliard City Schools to 2011.

He said that this was necessary because the information he has access to suggests that the public is not inclined to support a levy in 2010 because of the current level of economic distress in America. More on this at the end of this article.

He didn't say whether the next levy would be on the ballot in the Spring of 2011 or the Fall of 2011, but he definitely said there would be no levy in 2010.

By the way, it was interesting that he made this declaration, because to my knowledge the School Board has not made any formal statement to that effect. Is the Superintendent overstepping his authority with this statement, or has this been discussed out of public view, in violation of the Sunshine Laws?

There is a new Five Year Forecast being developed as this is written, due to be presented to the School Board at their Monday, Oct 12 meeting. I am extremely interested to see what has been changed from the last Five Year Forecast (May 2009) that gives the Superintendent confidence that no levy would be needed in 2010. According to that forecast, this fiscal year will end on June 30, 2010 with a cash balance of $11.9 million, and the following year will end on June 30, 2011 with a cash balance of $3.8 million.

Note that the May forecast was developed prior to the finalization of the Biennial Budget for the State of Ohio. Since then we have found that because of the dire condition of the State's budget, the State's funding to Hilliard City Schools will drop 1% ($370,000) in FY10 and 2% ($730,000) in FY11. In other words, all other things being equal, you can reduce the projected June 30, 2011 cash balance by another $1.1 million, down to about $2.7 million.

We should be reminded that in August 14, 2006, our School Board adopted policy DBDA which begins by stating: "The Board believes that maintaining a cash reserve balance of 10% of operating expenses is necessary in the interest of sound fiscal management." Our current operating expenses are on the order of $160 million per year, meaning our cash reserve – according to the Board's own policy – should be approximately $16 million.

Why did the Board make this policy in the first place, and why is 10% the magic number?

It's not of course. You have to think about cash like the gas in your car. Your car might be the one of the highest performing vehicles on the planet, like a nice million dollar Bugatti Veyron, but when it runs out of gas, your top speed is zero.

So saying you want to keep a 10% cash reserve is like saying you're going to stop for gas whenever the gauge reads about an eighth of a tank. I took a cross country motorcycle trip in 2007, and forgot to gas up during our stop in Roswell NM. That's not usually a big deal around central Ohio – there's always a gas station within a few miles. But we were in the desert on sparsely traveled roads where gas stations might be 100 miles apart. We just made it to a little hole in the wall, ironically in the middle of a huge oil field.

If the School District intentionally draws its cash reserve down to a few percent, it's like heading off into the unknown with the gas gauge near Empty. All it takes is one surprise, and you're in trouble.

So I'm real interested to see what kind of rabbit our school leadership pulls out of the hat to pass by all the gas stations in 2010.

And it bears commenting that we are just over three weeks away from a School Board election. Is any part of this a political maneuver to bolster the chances of re-election for the incumbent members? Nothing makes a voter happier than a candidate saying "no new taxes" – even when there is little chance of it coming true.

Our school leadership recently commissioned Saperstein Associates to conduct a public opinion survey of our community, which included questions about the willingness to support a levy in 2010. I know this because I was 'randomly selected' to participate in this survey, just like I am 'randomly selected' seemingly every time a survey has been done in the last few years. And once again, I am trying to get a copy of the survey report – if possible before the "Meet the Candidates" event next Tuesday.

Carrie Bartunek, the community relations coordinator, says the survey report has not yet been delivered by Saperstein to the Superintendent. But isn't it curious that the Superintendent would state that he made his "no levy in 2010" decision on the basis of public opinion?