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A closer look at school construction bond oversight

By Theresa Harrington
Sunday, August 21st, 2011 at 4:17 pm in Education, Mt. Diablo school district.

The 2010 Measure C campaign promised voters funds would be spent to upgrade labs and classrooms, improve career technical education facilities, fix old leaky roofs and windows, make other basic repairs and provide safe places for after-school activities. This flyer, distributed in Walnut Creek, did not mention solar panels, which are projected to comprise about $88 million of the district's $348 million in bond expenditures.

I received the following e-mail last night from Terry Francke, of Californians Aware, regarding my story about Alicia Minyen, a 2010 Mt. Diablo Measure C Bond Oversight Committee member, who has had difficulties getting financial records from district officials:

“State law requires school districts not only to establish bond oversight committees but to accord them full cooperation in providing documentation of bond money spending. To treat Ms. Minyen’s requests as simply governed by the California Public Records Act is to defy the bond oversight law and invite a taxpayer suit to force the district to comply with it, if not a recall of the trustees who permit this obstructive nonsense.
Terry Francke
Californians Aware”

He included the following excerpt from the state’s Education Code Section 15278 et seq.15278, with emphasis added to pertinent portions:

“a) If a bond measure authorized pursuant to paragraph (3)of subdivision (b) of Section 1 of Article XIII A of the California Constitution and subdivision (b) of Section 18 of Article XVI of the California Constitution is approved, the governing board of the school district or community college shall establish and appoint
members to an independent citizens’ oversight committee, pursuant to Section 15282, within 60 days of the date that the governing board enters the election results on its minutes pursuant to Section 15274.

(b) The purpose of the citizens’ oversight committee shall be to inform the public concerning the expenditure of bond revenues. The citizens’ oversight committee SHALL ACTIVELY REVIEW and report on the proper expenditure of taxpayers’ money for school construction. The citizens’ oversight committee shall advise the public as to whether a school district or community college district is in compliance with the requirements of paragraph (3) of subdivision (b) of Section 1 of Article XIII A of the California Constitution. The citizens’ oversight committee shall convene to provide oversight for, but not be limited to, both of the following:

(1) Ensuring that bond revenues are expended only for the purposes described in paragraph (3) of subdivision (b) of Section 1 of Article XIII A of the California Constitution.

(2) Ensuring that, as prohibited by subparagraph (A) of paragraph (3) of subdivision (b) of Section 1 of Article XIII A of the California Constitution, no funds are used for any teacher or administrative salaries or other school operating expenses.

(c) In furtherance of its purpose, the citizens’ oversight committee may engage in any of the following activities:

(1) Receiving and reviewing copies of the annual, independent performance audit required by subparagraph (C) of paragraph (3) of subdivision (b) of Section 1 of Article XIII A of the California Constitution.

(2) Receiving and reviewing copies of the annual, independent financial audit required by subparagraph (C) of paragraph (3) of subdivision (b) of Section 1 of Article XIII A of the California Constitution.

(3) Inspecting school facilities and grounds to ensure that bond revenues are expended in compliance with the requirements of paragraph (3) of subdivision (b) of Section 1 of Article XIII A of the California Constitution.

(4) Receiving and reviewing copies of any deferred maintenance proposals or plans developed by a school district or community college district, including any reports required by Section 17584.1.

(5) Reviewing efforts by the school district or community college district to maximize bond revenues by implementing cost-saving measures, including, but not limited to, all of the following:

(A) Mechanisms designed to reduce the costs of professional fees.

(B) Mechanisms designed to reduce the costs of site preparation.

(C) Recommendations regarding the joint use of core facilities.

(D) Mechanisms designed to reduce costs by incorporating efficiencies in schoolsite design.

(E) Recommendations regarding the use of cost-effective and efficient reusable facility plans.

15280. (a) The governing board of the district shall, without expending bond funds, provide the citizens’ oversight committee with any necessary technical assistance and SHALL PROVIDE ADMINISTRATIVE ASSISTANCE IN FURTHERANCE OF ITS PURPOSE and sufficient resources to publicize the conclusions of the citizens’ oversight committee.”

Anton Jungherr, executive director and cofounder of the California League of Bond Oversight Committees, or CALBOC, told me that some districts don’t give bond oversight committees the respect they deserve.

“A lot of these districts think this is like one of their little local citizen advisory committees,” he said. “This is not that. This is an oversight committee required under the law because they got the benefit of the 55 percent vote. They could have gone with a two-thirds vote.”

In 2000, California voters approved Proposition 39, which lowered the threshhold for approval of school construction bonds from two-thirds to 55 percent, with the requirement that a citizen’s committee provide strict oversight of the spending.

But many citizens throughout the state serving on these legally required bodies do not understand their responsibilities, Jungherr said.

“They don’t know what they’re supposed to do and the districts are not helpful in telling them what they’re supposed to do,” he said. “It’s a basic conflict of interest.”

Better trained oversight committee members would provide stronger oversight, which districts are not eager to invite, he said.

“Our mission is to train some 5,000 bond oversight committee members in California,” Jungherr said. “There’s about 500 of these committees.”

His organization is conducting a statewide survey to find out how many districts are complying with Proposition 39. Some districts, he said, don’t even appoint oversight committees. Others don’t have websites or don’t post all the information they should.

“You get a great variety of understanding of these matters,” he said. “The problem is: there’s no central state agency that administers this or enforces this.”

Some oversight committees meet monthly, while others meet quarterly or annually. The minimum is one per year, he said.

I told him the 2002 Measure C Bond Oversight Committee hasn’t met since September, 2009 — even though money remained from bond proceeds.

“That’s illegal,” he said. “The committee is obligated to at a minimum issue a report until the funds are fully expended.”

After Minyen began raising questions about the 2002 Measure C audits, I noticed that no audits appeared on the district’s website for 2002, 2003 or after 2008. In response to a Public Records Act request, I received the following audits from 2002-03 and for fiscal year 2009: http://www.docstoc.com/docs/document-preview.aspx?doc_id=91135270

No audit appeared for fiscal year 2010. I repeatedly asked district officials if there was and audit for 2010 and if not, why not?

That question was never directly answered. However, the agenda for Tuesday’s board meeting shows that the district intends to belatedly enter into a contract for the fiscal year 2010 audit of 2002 Measure C funds: http://esbpublic.mdusd.k12.ca.us/public_itemview.aspx?ItemId=4390&mtgId=313

Jungherr said he serves on the West Contra Costa bond oversight committee, which meets monthly and receives 100-page reports.

“It not only shows what’s been spent, but it shows what’s been obligated,” he said. “If you issue a contract today for $100,000, what you want to know is what’s the contract amount, how much as been paid and how much has been obligated — otherwise, how could you know where you are and what your status is? That’s just normal bookkeeping.”

Jungherr said it’s also critical for districts to give oversight committees detailed information about revenues.

“You have not only the bond proceeds, but you have interest and state matching funds and developer fees,” he said. “How would you know how to manage a project if you don’t know what the total income is?”

In his opinion, Jungherr said districts have a higher duty to provide documents to members of their bond oversight commitees than to the general public, because committee members are legally charged to review such records.

An effective bond oversight committee can give credibility to efforts to pass new bond measures in the future, he said.

Minyen says the 2010 Mt. Diablo committee should meet monthly, so it can review detailed records related to bond proceeds and expenditures as they are happening. Given the size and scope of Mt. Diablo’s proposed projects, which are expected to cost $348 million and span seven years of construction, Jungherr said he agrees.

Jungherr said his organization was so impressed by Minyen’s knowledge and background that they elected her to their board of directors Aug. 12.

“We thought, because of her work in Mt. Diablo, she would be useful on statewide basis,” Jungherr said. “She is very meticulous and knowledgeable about bonds and refunding bonds.”

I also asked Jungherr whether it is important for oversight committees to follow their bylaws. He said bylaws are not legally binding according to state law, since they are approved by district trustees. However, he said a committee should strive to be in compliance with its own board-approved bylaws.

The bylaws of the Mt. Diablo oversight committee state that the group is supposed to hold an organizational meeting each July. Yet, the committee didn’t meet in July.

“Certainly it wouldn’t be a best practice to have the school board provide that in their policy and then have them not do it,” Jungherr said. “It certainly doesn’t give any credibility to the committee.”

John Ferrante, chairman of both the 2002 and 2010 committees, said he didn’t call a July meeting because all of the business that would have been conducted at such a meeting was discussed at the June meeting. When I asked him if the bylaws should be changed to reflect the committee’s practice, he said that might be a good idea.

John Parker, who is a member of both the 2002 and 2010 committees, said he has spoken to Ferrante about the need to hold another meeting of the 2002 committee. He said he recalled the 2002 committee discussing the need for another audit at its last meeting, but said the committee never met again to review it.

The state controller’s office criticized the San Joaquin Delta College in 2008 for lax bond oversight by its committee, calling it “passive, perfunctory and ineffective.”

It stated that the San Joaquin committee “apparently did not seek any information or data beyond that presented by Delta College’s staff during its quarterly meetings.”

Instead, it said the committee merely listened to staff presentations and did not engage in any other oversight activities.

“We also found that the information presented was general in nature and did not contain sufficient detail for the (committee) to conduct meaningful reviews of bond expenditures.”

The report also criticized the San Joaquin committee for failing to follow its own bylaws related to its annual report.

Garin Casaleggio, spokesman for the state controller’s office, said the controller’s office only audits districts if requested to do so by a state legislator.

Jungherr said many oversight committee members aren’t very motivated to provide strict oversight.

“In most of these districts, the school board makes the appointment,” he said. “Most of the people that get on those committees, they’re interested in lobbying for their locoal programs. Most of them don’t have any interest in bond oversight, and they have no skill in doing it, either construction skill or fiscal skill. And there’s no agency that’s training them.”

He said a San Mateo County grand jury recommended that the County Office of Education provide training.

His organization has helped to push for new legislation that would require annual performance and financial audits to be completed and submitted by March 31st for the previous fiscal year.

It also wants better enforcement of Proposition 39 violations. Right now, Jungherr said, citizens must take the district to court.

His organization would like to see legislation that imposes penalties on districts that don’t comply with the law, such as prohibiting them from spending bond money or from seeking future construction bond measures.

“To think that a private citizen has to go to court and pay the fee to enforce a consitutional and statutory requirement doesn’t make sense at all,” Jungherr said.

Minyen says she’d like to get legal clarification about expenses and revenues related to Proposition 39 projects.

According to the Smartvoter website, Proposition 39 authorized districts to seek bonds for repair, construction or replacement of school facilities and classrooms for projects evaluated by districts for safety, class size and information technology needs. Districts are prohibited from using bond funds for salaries or operating expenses.

Minyen questions whether solar panels meet these requirements, since district officials have said they are constructing the solar projects to provide general fund relief, for the express purpose of paying operating expenses.

She also questions the district’s plan to divert solar credits from the bond fund into the general fund. This goes against generally accepted accounting principles, since the credits are supposed to offset the cost of the solar panels, she said.

Jack Weir, a Contra Costa taxpayer advocate who served on the Contra Costa College District’s bond oversight committee, agrees. He said the college district left its solar rebate money in the construction fund, which lowered the cost of its project for taxpayers.

Jungherr, who is an accountant, shares this opinion, saying it’s “completely inappropriate” to transfer the solar rebates into the general fund.

“That should go to retire the bond,” he said.

Minyen also questions the legality of using bond proceeds to pay off Certificates of Participation (COPS) and leases, which she says appear to be operating expenses. In addition, she questions how COPS for landscaping and maintenance property at 2344 Bisso Lane in Concord, leased by a nonprofit public benefit corporation run by district trustees, fulfills the district’s obligation to spend bond money on safety, class size and information technology needs.

Do you believe the Legislature should adopt a law penalizing districts that fail to comply with Proposition 39?

[You can leave a response, or trackback from your own site.]

  • Number Eight

    Alicia #90,
    Welcome to the club! Brings to mind Ibsen’s “An Enemy of the People,” proclaiming that in matters of right and wrong, the individual is superior to the multitude, which is easily lead by self-advancing demagogues. http://en.wikipedia.org/wiki/An_Enemy_of_the_People

    In that case, the townspeople should have seen the tannery contaminating their water. In this case, the bond counsel said Bond Oversight Committee duty under Ed Code 15278 is to inspect school facilities, and the BOC should take a road trip to see that Bisso Lane building.

  • Theresa Harrington

    So far, the only road trip that has been requested is to SunPower, wouldn’t be to inspect the work being done on school sites.
    The committee could also request to see the Measure C headquarters at Holbrook.

  • Number Eight

    Googled California Education Code 15278
    http://law.onecle.com/california/education/15278.html
    It says: “Inspecting school facilities and grounds to ensure that bond
    revenues are expended in compliance with the requirements of
    paragraph (3) of subdivision (b) of Section 1 of Article XIII A of
    the California Constitution.”
    Nothing about visiting a factory, but sounds like fun!

  • http://www.k12reboot.com Jim

    Re Theresa #99, after looking at the agenda item in your link and the pdf included with it, it appears that the Board is being asked to approve a lease arrangement for the Northgate bleachers, even though the financial payments under the “lease leaseback” structure are not disclosed. The cost of the project and the capital donation from the Northgate Pride Foundation are shown, but the actual lease payments are not disclosed. How can someeone approve a lease if the lease payments are unknown? Were they ever disclosed elsewhere?

  • g

    Not only no copy of the Lease, or word of who “brokered” the lease, but no copy or reference to Bids. Did Northgate Pride handle their own Bid Process without input from MDUSD?? When did bidding occur and who else bid?

    Back on Friday, 5/20/11 Northgate Pride announced “On Tuesday, the Mt. Diablo Unified School District approved $1.5 million in funding from Measure C bonds to immediately be dispersed for a series of facilities enhancement projects at Northgate High School.

    To the Northgate community, this means compleing tthe next phase of the long-awaited sports complex. Instaling the bleachers will begin this summer.”
    —–

    However, I found no record of a 5/17 Board meeting, nor did this show up on the 5/10 agenda. I do recall seeing some reference some time ago of MDUSD splitting up some “extra” funds and giving $1.5million to each high school. I don’t recall that being Measure C “extra funds”, but maybe it was?

    I suppose if anyone can speak to the Lease/Leaseback arrangements it would be the Board Member employee of Seward Schreder Construction, since Schreder makes its living as a Lease/Leaseback company.

  • Theresa Harrington

    The high school improvement idea was approved May 10: http://esbpublic.mdusd.k12.ca.us/public_itemview.aspx?ItemId=3990&mtgId=302
    It was further defined and approved June 28: http://esbpublic.mdusd.k12.ca.us/public_itemview.aspx?ItemId=4172&mtgId=305
    It includes $9,000,000.00:
    Developer Fees: $636,594.00
    Proposition 55 Funds: $2,008,728.02
    2002 Measure C Funds: $2,577,653.00
    2010 Measure C Funds: $3,777,024.98

  • Wendy Lack

    At the August 24, 2011 Pleasant Hill Schools Advisory Commission meeting, the 2010 Measure C bond issue was discussed briefly. One Commissioner inquired whether the Commission can ascertain if bond funds are “fairly and equitably” distributed — i.e., whether Pleasant Hill is “getting its fair share.”

    Pleasant Hill residents deserve to have a means for objectively verifying the facts about how the bond measure specifically benefits their schools. After all, they’re paying the tab.

    Here’s the point: Besides the installation of solar panels, are Pleasant Hill schools getting ANY benefit whatsoever from the 2010 Measure C bond issue, for which PH residents are on the hook for roughly $150 million in combined principal and interest?

    I’m increasingly concerned that Pleasant Hill residents are subsidizing other District schools and, in so doing, basically getting ripped off.

    Hopefully the Commission will get the facts and report back to the community ASAP.

    Pleasant Hill residents deserve answers!

  • g

    Thanks Theresa. So, I think I get it. The District is pooling several bonds, measures, matches and whatever else, and splitting the combined $9million “Equally” among the 6 high schools. Then, since the $1.5 that Northgate is getting (which NG said was enough for bleachers in May, but apparently isn’t enough now), they are going to Lease the site to Southern so Southern can use their own money to build us some bleachers, and then we are going to pay “rent” on the “Site
    Lease and Facilities Lease” (grounds and bleachers) until they are paid off-with minor revisions-at some far off, yet to be negotiated, date uncertain, in the future.

    So Alicia, how soon do you suppose they can/will roll this Lease into a COPS refinancing too? 2012 or 2014?

  • g

    I also noted that in May they proposed to budget from Prop 55 the amount of $5,950,744. and from 2002 C and amount of $2,645,153. Plus Developer Fees $636,594. bring the budgeted amount to $9,233,491.00

    However, by 6/28 a lot changed-including the total- and Prop 55 is now only $2,008,28. and 2002 is only $2,577,653., and now 2010 Measure C that was mentioned but not specifically “budgeted” in May is taking up the slack from 55 and 2002 “C”==$3,777,025.

    So, in June they confirmed the May decision, but altered the budgeting without bringing it back for 2010 “C” specifics, approvals or revisions. Hmmm.

  • MDUSD Board Watcher

    G,

    You are on to something. I’m still trying to figure out who is benefitting from all the odd financial realtionships.

  • Alicia M

    G #108

    - The district can issue COPs on any lease/leaseback (usually its for a building and equipment). COPs are not subject to voter approval and does not get counted in the schools debt limit…so it provides a good financing source (although expensive) for struggling schools as a means to build or acquire equipment. The use of a non-profit corp. is allowed.

    The problem is COPs can be abused in that the school can use them to fund general operating expenses if they are sneaky. This happened at Richmond Unified, and they defaulted on COPs in 1991.

    Theresa had shown me the minutes for the bleachers. Seems strange, but from what I can tell the district okay’d a lease/lease back arrangement since under the Education code, in that arrangement, you do not have to seek multiple bids…it speeds up the process. Who picked the contractor? Who knows…could have been a contractor used by the district before? Common sense is to seek multiple bids to at least try to save money.

    However, if the bleachers are in fact on the 2010 Measure C’s project list. I can’t help but wonder why Northgate pride is paying anything at all?

    Or is Northgate Pride using the funds as a “pay to play” strategy to get their bleachers in now vs. later or never? Or maybe it is typical for parents to help the district pay for such things?

  • Alicia M

    Number eight – #103

    I did check out the Bisso Lane Property. I saw a four buildings…three warehouse looking structures and one building for Maintenance & Operations. The address was different from the 1994 COP lease. Hard to believe that this building cost over $6 million to build in 1994 when we were in a terrible recession…but I’m not familiar with commercial real estate.

  • Alicia M

    Jim – #104 – The bond oversight committee should get a copy of the lease. I’ll make sure to read it.

  • http://www.k12reboot.com Jim

    Thank you, Alicia. Having worked for quite a time in commercial real estate, I can’t imagine how a board could approve a lease in the abstract, without knowing what the specific payments would be. Yet the approval language seems to give quite a bit of discretion to the people who ultimately sign it.

    BTW, I am amazed — and grateful — that someone like you got onto the Oversight Committee. I don’t know how it happened, but clearly, someone is now watching over us.

  • 4Students

    Alicia #111,
    Your last statement is correct. Northgate parents learned a long time ago that they must pay up, and hence Northgate Community Pride Foundation was born in 1999. Former Northgate Principal Martha Riley made the decision to spend previous bond money renovating the theater instead of improving the athletic field as was done at other high schools. Even the theater renovations required significant community donations.

    Northgate never had a field with lights, and homecoming games were held at DVC or other locations, which required busing the team and band. NCPF raised the funds to transform the weed patch into a all-weather track and install lights, but then was spending $20,000 every year to rent bleachers which did not have enough capacity to seat the audience safely. NCPF was fundraising to add permanent bleachers which they estimated would take another 2 years when the Measure C funds became available. The contractor is probably a parent who lowered costs with sweat equity.

    The NCPF web site shows a future project would be an Aquatics Center. Northgate has no swimming pool and students joke that it’s on the roof. In the meantime, the water polo team drives to DVC, Moraga and other places just to practice.

    NCPF was founded to benefit all the Northgate schools, including the middle and elementary schools, but the high school improvements have taken years longer than expected. There are dangerous conditions at Foothill that should be remedied. The most obvious is that classrooms have been measured at 95 degrees. Foothill a/c was on the 2002 Measure C list, then on 9/22/09 the MDUSD Board said the last of that bond was spent except an emergency reserve.

    The Bond Oversight Committee should visit Foothill classrooms on a hot day, and visit the Gym locker room where the wooden benches have been falling apart and giving students splinters. See the new benches in front of the school that were paid for entirely with parent PFA funds, and that replaced old rusted dangerous benches. You bet the PFA probably had to pay overtime to have the district install those benches.

    I support your investigation of questionable financing, but we need the district to continue these projects for our students.

  • Alicia M

    4students – Thank you for the information. My focus is on reviewing expenses. As a committee member we are responsible for insuring expenses are on projects listed. Bleachers I think qualify as playground improvements (which is disclosed on the projects list), and I hope that every high school has or will get bleachers.

  • Alicia M

    #114 – Jim – Thank you. I think terms and conditions of leases should be discussed by the board during public meetings…are you sure the lease wasn’t attached to the board agenda? I think your concern is more of a Brown Act issue.

  • 4Students

    Alicia M #116,
    Do you have a link to the project list for the rest of us? Again, thanks!

  • Theresa Harrington

    Here’s the superintendent’s “Welcome Back” message, which touts the benefits of the solar project: http://bit.ly/qFfLcg

  • Flippin’ Tired

    Northgate isn’t the only school without a pool. Concord High and Clayton Valley High practice at Cowell Pool.

    Mt. Diablo High is getting their pool renovated – but they don’t have a water polo team or swim team.

  • Theresa Harrington

    CC Times investigative reporter Thomas Peele has written a column about the district’s response to Minyen’s requests for documents: http://www.contracostatimes.com/news/ci_18765031?nclick_check=1
    Ironically, Minyen said the district paid a “credit enhancement” to receive its high credit rating. She wants to know how much this cost.
    The financial adviser didn’t mention this when he praised the district for its high credit rating. If it hadn’t paid the credit enhancement, Minyen said its rating would have been downgraded.
    She wants to know if the credit enhancement was worth the cost.

  • 4Students

    Just tried to give Alicia background about the Northgate bleachers and NCPF. The difference for Northgate is they don’t have access to a city pool and have to drive farther to practice. I’ve heard CVHS would like a theater too. And I’ve heard in the past large donors to CPHS facilities were not treated well by the principal at the time. The point is for parents and community it can be an uphill battle dealing with and even donating to this district.

  • Alicia M

    Theresa,

    #121 – The credit enhancement should be part of soft costs. Did you get any soft cost detail yet?

  • Alicia M

    4Students –

    The only projects list I’ve had access to is found at :

    http://www.smartvoter.org/2010/06/08/ca/cc/meas/C/

    Just scroll down to the “Full Text Measure C” and you will see the projects list that was disclosed to the voter.

  • 4Students

    Alicia M #124,
    Thanks once again, and thanks to Thomas Peele!

  • g

    Must backtrack; lest we lose sight of $1.5Billion–just a reminder: The District posted just ONE sentence to invite applications for members for a 2002 Measure C Oversight Committee. However, NOWHERE does it explain, or say this is for a NEW committee, and instead very clearly and cleverly tries to dissuade applications by making it look like an already completed project by the links and information provided.

    Quote from the Ballot Measure: “Best of all, not one dime of Measure C funds can be taken by the State. All funds will be spent to improve local neighborhood schools right here in our community.”

    I’m not sure “neighborhood schools” includes that big array of solar panels at the Service Yard. (did Rio Vista get theirs yet? I also don’t think it was made clear to voters that they meant to include tech upgrades or parking lot repairs there or at anything other than at schools.

  • Number Eight

    Supt Lawrence wanted tech upgrades at Dent Center. Guess he needed upgrades to send the message about the typo on the board meeting time. How embarrassing.