What we don't know is what the net interest cost or the true interest cost of the winning bid. We were told that the winning bid and the cover bid were within .01% of each other. The board did not reveal either cost last night.
In 2009, we were quoted a 3.59% Arbitrage Yield, but in the Act 34 document, it was revealed that the True Interest cost was 4.10%.
Moody's report is here. The podcast to last night's meeting is here.
Update August 20, 2013 12:11 PM Taxpayers file lawsuit to block Woonsocket tax.
Update August 20, 2013 5:53 PM The MTLSD website is down, but I understand this was posted today. Also, residents have called Jan Klein today, asking for the winning bid and was told to file a RTK. Any stockbroker could have answered that question, but you won't get it from the School District .
| School Board Votes to Issue Bonds to Complete Financing for High School Project August 20, 2013
At the August 19, 2013 School Board meeting, the Board voted to authorize the issuance of General Obligation Bonds, Series of 2013 in the aggregate principal amount of $34,745,000 to provide funds for the completion of the renovations to the high school.
The bidding was favorable with the District being the only competitive bond sale scheduled in Pennsylvania this week, and the second largest and second highest rated sale of only 11 competitive sales across the country on Monday, August 19, 2013. There were a number of bids, and the bids were very close. The winning bidder was Mesirow Financial of New York City. Mesirow is generally not an active bidder on Pennsylvania school district bonds, but said they were enticed to bid due to the strong Aa1 credit of the District and the belief that their investor base would be excited to own these bonds. With this sale, the District will continue to finance the construction of the high school until its completion in 2015.
On August 12, the Board gave direction to the financial advisor and bond counsel to proceed to bid on an anticipated $33 million debt issue to fund the remaining costs of the high school renovation project. The bonds were directed to be wrapped around existing debt so the millage cost to the community will be minimized with the debt payments implemented over a three year period. It is anticipated that the increase in millage will be below .2 mills each of the next three years to complete this financing. |
23 comments:
The Rhode Island suit is very interesting. There is a rapidly growing but under-reported trend in the United States; and that trend is in taxpayer and/or public interest groups filing suit against local and state governments on the grounds of either misrepresenting legislation, especially in public sector construction projects, or failure to perform in accordance to the terms of publicly approved propositions. Even in Socialist California (and one may rightly say "especially in"), politicians who once that they could get away with anything are starting to feel the heat. A great example is the California "high speed rail" project that was "sold" to approving taxpayers on dubious technical and financial grounds:
Superior Court Judge Michael Kenny said the California High-Speed Rail Authority "abused its discretion by approving a funding plan that did not comply with the requirements of the law" and has failed to identify "sources of funds that were more than merely theoretically possible." - from Reason Magazine; see "Is High-Speed Rail a Fantasy? Adrian Moore and Wendell Cox on CA's Biggest Boondoggle."
One, indeed, cannot fool all of the people all of the time.
What we do know is:
Yesterday (the day of the bid) an investor sold:
$55,000 of MLSD 3.00% due Nov. 2015 at 104.468 yield 0.97%
Today (8/20/2013) an investor sold:
$20,000 MLSD 4.25% due Feb. 2026 for 98.847 yield 4.371%
Today an investor bought:
$20,000 MLSD 4.25% due Feb.2026 for 100.3 yield 4,11%
But we don’t know if these were the bonds sold by the District last night of if the District’s bids were competitive with these sales. We don't know because the Directors and the Investment Advisor didn't tell us the details of the sale. The information should be posted on the website.
Is there anything the school board reveals without having to file a RTK? Seems to me the solicitor is providing bad advice. Or none. The documents people have requested over the last few years are nowhere close to controversial or questionable. So one could ask, why? Why all the delay tactics? Why the smokescreen? The taxpayers are being soaked for their money but arent allowed to see how it's being spent? Our school board needs a harsh lesson on municipal law.
Even if we file RTKs, that is no guarantee that we will get an answer. I had filed a RTK for the complete final budget in June. I was told that MTLSD had until August. Here it is more than half way through August and nothing is on their website. Still wondering why all the changes in the Finance Office.
Elaine
But the point is, nobody should have to file a RTK for routine information. By virtue of our tax dollars being misused, we already have a right to know.
Our school board is out of control. Little fish in a little pond.
James,
The solicitor charges $2,600 per review of a RTK request. This is in addition to a $45,000 machine that was purchased so RTK requests could be filled. I can't tell you how many times the solicitor has charged us $2,600 for RTK requests but I wonder if the RTK request fees are being offset by the new athletic and fine arts fees the District is charging?
In addition the solicitor's office undertook a lawsuit against the municipality on zoning. The cost to the municipality and the district added together was $27,000. The attorney that wrote the brief is a terrific attorney but he lost the case because the law was not on the district's side.
These amounts add up over time but the Board told us they had cut to the bone at budget time. Well, the Moody's report has an interesting fact revealed.Moody's has a methodology to adjust reported pension data. The adjusted pension liability is $66 million or .84 of General Fund Revenues. Put another way, if we were to cure our pension fund liabilities in 1 year the liabilities would eat 84% of our General Fund revenues for one year.
How did we get into a financial mess like this?
Is there any correlation between this financial mess and the reluctance to release financial data to the public?
Is the financial mess a reason the last two board Presidents have not appointed a Finance Committee?
Moody's also says, "Principle is amortized at a below average rate of 34.7% in 10 years."
So by the time we can call these bonds in 10 years and refinance them at a lower cost, we have paid down our debt at a below average rate leaving an above average amount of debt to be refinanced in the future.
We have at least two directors who have asked if we can borrow even more money and they both voted to sell a bond where the pay down of principle is below average.
Consider the Local Effort to pay down this debt is 90% on the wallets of Mt. Lebanon residents and we have an "ABOVE AVERAGE DEBT BURDEN WITH SLOW PAYOUT SCHEDULE" according to the Moody's report.
How many changes do we need in the Finance office to get our finances in order?
Only one
So how does this escalating debt and increasing taxes make this school district/community an attractive place for prospective residents, especially in a down economy?
I really think newcomers will not want to move here for the "privilege" of paying higher taxes.
We wasted over $7,600,000 in extra debt service on the bond issue with capitalized interest and wrapped debt. We took the $7,600,000 and put it down the drain according to one board member's account of the bond deal.
We just hired a young fundraiser to raise $6,000,000 less the $872,000 + $40,000 in fees we paid PK + the $82,500 salary plus benefits we are paying the fundraiser. That is a cost for fundraising of $994,500, not including benefits, in the first year of the campaign. So the net result of the fundraiser is about $5,000,000 to the District.
Why should anyone support a fundraiser for about $5,000,000 net when we wasted $7,600,000 using a flawed structure for a bond issue? Nobody on the Board or the Administration acknowledged these facts.
Financial accountability is not going to happen in the schools until Dr. Steinhauer takes control of the District. Maybe the distracted high school Algebra ll teacher can help the good Dr. with the arithmetic.
Jerks and Double Jerks
Well said, John. The school board wasted $7,600,000, yet want to raise $6,000,000 in fundraising. Now we know the true purpose of the campaign. It is not about the kids, that's for sure.
Elaine
How do you like my magic eight ball photo? I am so sick of hearing, "File a RTK" with every question asked in this town. Maybe I should print it on Tshirts. What do you think, Jo?
Elaine
The magic eight ball is hysterical! Thank goodness we can laugh, otherwise we would be crying!
A blast from the past in the Almabac:
http://www.thealmanac.net/article/20130319/LIFESTYLES02/130319943/0/SEARCH#.UUn8DzeXRBw
"Board vice-president Lawrence Lebowitz, chair of the board’s revenue generation committee, said, “We’ve talked about creating a culture of giving here in Mt. Lebanon. This is a step toward that. There are risks, but I think the upside is outstanding.”
Larry unwittingly exposes the big truth, Elaine. The Board has created a culture of giving-- giving to the administrators, unions, solicitors, staffers, architects, construction managers, contractors and bankers.
Unfortunately, that giving culture doesn't give a hoot about the impact on parents, taxpayers and students who accept ALL the risks and downsides. If the fundraiser doesn't yield the $6 million prophecy, DeLuca still gets her $82,500/year for two years (2 year total: $165,00) regardless. Keep in mind the PK fundraiser is projected to yield $6 million over a period of 5 to 6 years, so she's going to be on the payroll for awhile longer than two years.
So Mr. Ewing really needs to revise his yield estimate of $5,000,000.
DeLuca costs over 5 years (excluding typical MTLSD 3.5 to 4% annual raises) would be:
5 years X $82,500= $412,500
6 years X $82,500= $495,000
Deluca's compensation with NO raises, no benefits, no office, travel or entertaining reimbursements over 6 years is nearly half a million dollars. Add PK's cut of $912,000+ expenses and the expected net yield is more likely south of $4.5 million in reality. Plus, there's no guarantee the gross will actually be $6 million.
On top of all that, Posti or Cappucci insinuated that the fundraising coordinator's position could become a permanent one! Yet another huge jump in district payroll, pension and healthcare in a period when student enrollment is falling.
So Mr. Lebowitz is right, they have created a culture of giving-- to everyone except the people they are charged to serve-- the students!
And the community is going to go ahead and re-elect two school board incumbents. Incredible!
We be ahead of the game if we let Elaine's Magic 8 Ball manage the district!
Here is the Almanac article saved in Google Docs, 2:48 PM.
Elaine
Mrs. Birks,
In the private sector the first layoffs of staff are the smallest and the most psychologically painful. Westinghouse Electric started their process by laying off four people. Just four executive vice presidents were fired. The saving were huge. Look at your administrative staff first because that is where the biggest savings per person is. Then think about not replacing retiring teachers and not offering their classes in the future. Athletes gym should be an easy shift, because it works very well.
I sincerely hope this helps you, Mary.
I agree with John here.
And kudos to Scott for standing up and actually trying to save money. Isn't it crazy we have to qualify "saving money" as a way to stand up?
Oh, and Posti's blog, as usual, is wrong.
We don't have just $64 million of outstanding debt AND after we float these bonds we will NOT have an additional $30 million to borrow.
Math is funny how it works.
Here is the link to Josephine Posti's blog, as referenced by 10:35 PM. http://jposti.blogspot.com/2013/08/financing-options.html
I love how she brings up middle school renovations.
Elaine
10:35 PM, what should the numbers be on Posti's blog?
Elaine
There's a non-electoral debt limit calculation in the budget or the CAFR.
Either one of those should do.
Posti in the meeting last week said that the District would still have $30 million left to borrow after this second round. My recollection is that they had $30 million left to borrow as of June 30 2012. And they just borrowed that.
They should be effectively maxed out at this point.
Here's the deal, rather than trying to figure out Ms. Posti how much more you can potentially borrow, whether it's $30 or $30 million, why not figure out how to work within a budget!
The district budget is now over $82,000,000 and it has been increasing at a rate of about $2,000,000 per year, even though enrollments have declined and all measutes of performance are pretty much stagnant.
Payroll has been outpacing inflation by a pretty good margin and pensions are wildly underfunded. This district cannot live off credit cards forever. So rather than spending huge blocks of time figuring out ways to dig a deeper hole, one by the way that even Dr. Steinhauer's magical frog won't be able to climb out of, learn to live within your means Mrs. Posti!
The state universities are reevaluatiing and reprioritizing their spending, its about time K-12 schools start too.
Here's the classroom lesson that our board, administration and teachers have failed to learn yet. They think there is an unlimited money tree out there and that they don't have to be competitive with other municipalities and school districts.
"It's not as if the strains now felt across the State System built up overnight. Even before the economy slumped, [university] administrators expressed worry over rapidly escalating employee pay costs, pension obligations and other expenses. Faculty at some schools, in turn, have bemoaned the spending and debt incurred over non-classroom ventures from trendy student centers to upscale suite-style housing.
Shoring up this year's budgets through sharp tuition increases was not an option, either politically or economically because the schools must compete based on affordability for a shrinking pool of high school graduates in Pennsylvania that is not expected to rebound until 2020."
Read more: http://www.post-gazette.com/stories/news/education/spending-cuts-loom-at-pennsylvanias-14-state-owned-universities-699767/#ixzz2ciyA2Vax
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