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Questions raised about MDUSD bond expenditures

By Theresa Harrington
Friday, February 17th, 2012 at 7:51 pm in Education, Mt. Diablo school district.

Alicia Minyen, the taxpayer representative on the Mt. Diablo school district’s 2010 Measure C Bond Oversight Committee, has been raising questions about bond expenditures since she joined the committee.

Most recently, she is questioning two items that appear in the district’s first audit of money spent from the $348 million measure. The audit was completed by Christy White.

Here are the items questioned, as noted in the audit, which has not yet been posted on the district’s website:

Lease and general obligation bond payoff

On page 20, under “Tests of Expenditures”
“…In addition, the bond proceeds were used to prepay outstanding lease and general obligation bonds for a total of $14,288,580. We were unable to verify specifically in the bond ballot language the allowability of bond proceeds for debt service. Upon further inquiry, the district’s legal counsel advised us that these redemptions were permissible uses of the bonds and we relied on their expert legal opinion.”

Based on this, White concluded: “We found all expenditures tested to be in compliance with the terms of the Measure C 2010 Bond ballot measure and applicable State laws and regulations, without exception.”

Here is what the ballot measure said:

“To support quality education and safety for local students, and reduce impacts of State budget cuts by improving science, career and technical education facilities; upgrading classroom instructional technology; repairing leaky roofs; improving safety; maximizing energy efficiency including adding solar panels and modern air conditioning; and repairing, replacing, equipping or modernizing other school facilities; shall Mt. Diablo Unified School District issue $348,000,000 of bonds at legal interest rates, with independent citizen oversight, audits, and no money for administrator salaries?”

Issuance costs paid with bond premiums

On page 20, under “Deposit of Bond Proceeds”

“…The issuance costs were paid for with bond proceeds in the case of the Series C and D bonds, which appear proper. However, $1,781,511 in issuance costs was paid out of bond premiums for the Series A and B bonds. While this is an industry standard practice, there is a private letter to Poway Unified School District’s bond counsel from the State Attorney General’s office which expresses concern about the industry practice of artificially inflating the bond yield to generate a premium for cash out for construction and/or payment of issuance costs. The district did not receive any cash out for the construction purposes, which was the main concern of the Attorney General’s Office in citing the Superior Court decision. But, the district did use some of the premium for issuance cost payments, again a common practice. We found that the district did properly deposit these premium in a debt service fund pursuant to Education Code 15146(f) and then transferred the funds to the bond fund for payment of the issuance costs. Therefore, the district appears to have complied with the law.”

The letter says: “The law is clear that any premium, even if legitimate, must be deposited into a special fund, applied to pay debt service, and therefore cannot be diverted to pay costs of issuance.” It cites Gov. Code Sec. 29303 and Ed. Code Sec. 15146(f).

Gov. Code Sec. 29303 says: “…Whenever any bonds issued by any county or by any school, drainage, or other district in any county, whose accounts are required by law to be kept by the county auditor and treasurer, are sold at a premium or with accrued interest, or both, the amounts received for the premiums and accrued interest shall be deposited in the debt service fund of the county or district unless it is expressly provided by law that they be deposited in some other fund.”

Ed Code 15146(f) states: “The proceeds of the sale of the bonds, exclusive of any premium received, shall be deposited in the county treasury to the credit of the building fund of the school district, or community college district as designated by the California Community Colleges Budget and Accounting Manual. The proceeds deposited shall be drawn out as other school moneys are drawn out. The bond proceeds withdrawn shall not be applied to any other purposes than those for which the bonds were issued. Any premium or accrued interest received from the sale of the bonds shall be deposited in the interest and sinking fund of the district.”

Minyen questions whether the district’s bond counsel from the law office of Matt Juhl-Darlington can be considered to be truly independent. The firm contributed $10,000 to the Measure C campaign, including $5,000 donated May 10, 2010 (less than a month after the board approved a contract with the firm if the bond measure passed) and another $5,000 contributed so late that it didn’t get reported to the public until the election was over.

At the meeting, Committee Chairman John Ferrante initially told the group it couldn’t vote on the audit, since it hadn’t been publicly noticed as an action item on the agenda. Pete Pedersen, the Measure C program manager, said he didn’t realize he was supposed to do that. He said he had been expecting the group to accept the audit.

Since no one else raised any concerns about the agenda, the committee voted 7-0-1 to accept the audit as presented, with Minyen abstaining. Two of the members who voted to accept the audit had arrived late and missed a portion of the presentation and discussion, Minyen said.

Now, she’s wondering if the vote was legal due to the lack of public notice and lack of a quorum when the presentation and discussion began.

The audit covers expenditures through June 30, 2011. One committee member said she wants to be sure the next audit includes objections some members have to the district’s plan to install solar panels at Holbrook Elementary in Concord, which the board decided to close.

Pedersen has defended the idea of putting solar on the school, saying it could reopen in the future. But some committee members say it wouldn’t be cost effective to spend about $800,000 on a project that may not return the investment.

Do you agree with Christy White’s audit conclusions?

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105 Responses to “Questions raised about MDUSD bond expenditures”

  1. Doctor J Says:

    Heads up = “Master Plan for Bay Point” — code for new high school to be presented early March. Measure C funds. Lawrence, Eberhart and Whitmarsh now feel empowered knowing that public opposition doesn’t matter.

  2. Wait a minute Says:

    It will matter come election time!

  3. Helll Freezing Over Says:

    Sure would be great to see that list of projects the measure is being used to pay for, and what the status is … last status provided/listed on MDUSD site Measure C link is 7 months old:

    •The first connection of new solar to electrical system completed at Cambridge Elementary! More to follow shortly!
    August 12, 2011

    Just show us a list of the “projects” by school site = what is project, when did project start, what is % complete, what is cost to date compared to estimated cost, and what is the target completion date.

    And let’s ask the district & board which of the now 5 district high schools (NG, CP, YV, Mt, CHS) they are considering closing due to declining enrollment (reasons for closing an elementary and middle shool last year) in order to build a brand spanking new high school somewhere else. Isn’t YV at about 50% capacity? What is the estimated time to build a new high shool? And remember, solar has been installed at all current HS in the district costing us a LOT of $$$.

    Speaking of solar, what’s the status on the installations? All done? On Time? On Budget? Are we saving the $$$ we were told we would be?

    Did the trees mistakenly cut down at Delta View get replaced as promised? Trees at CHS were cut down too, and solar panels not on the approved plan drawings were installed … don’t remember that chang plan ever being discussed /approved – wonder how much more that cost us all?

    And back to building a new high school … What ever happened to the discussion about moving, relocating the several SNHS? What are the plans for Olympic?

  4. g Says:

    Dr. J @42—Since Holbrook Elementary was the ONLY district school on the Winning List for four years straight, but was closed last spring before it could even accept its 2010 prize money…

    …I doubt it!

  5. g Says:

    Ooops- should be Dr J @ 43. Here’s a little story on it:

  6. Theresa Harrington Says:

    I also did a blog post about Holbrook’s accomplishment:
    I’m not sure what the district did with the banner Holbrook received in the fall.

    HFO: A very general overview of the list of projects is on the Measure C website: If you click on “Schools” and select each school, you can see what was planned, along with a very general timeline.
    If you click on “Bond Oversight Committee,” then select “December, 2011 Quarterly Report,” you will see the progress.
    Regarding small necessary high schools, Superintendent Steven Lawrence told me he put that idea on hold because he thought it would be part of the strategic plan and might also be included in the Equity Team discussions. Now that the board has adopted its Equity Plan and appears to be taking up the strategic plan again, it is unclear when a task force to discuss the possible consolidation or closure of some small necessary high schools will be formed, as promised by Lawrence in his board-approved school closure plan, and included in his $1.5 million estimated savings.
    The boundary changes are also part of that savings, because parents will be responsible for transporting students who are now in the Meadow Homes and Bay Point areas to other schools. Currently, the district must pay for “overflow” busing.

  7. Realia Says:

    HFO @ 53: During the CVCHS debate, the superintendent threatened to shut down all the SNHSs and relocate the students at an expanded Olympic campus. Space would be made at Olympic by moving the Alliance program to the Glenbrook site. Haven’t heard anything about that idea lately.

  8. Alicia M. Says:

    Dr. J Where do you see the Master Plan for Baypoint?

  9. Anon Says:

    Looks like Bay Point wants their new high school too…but why weren’t all the voters within MDUSD told about this master plan?

  10. g Says:

    Speaking of Bay Point…A couple of board members who have been around for way to many years may need to answer some questions.

    Can anyone, (maybe a long time MAC member) explain to me why County Tax Assessor records show that Delta View Elem. is “owned by” Dianne Adair Day Care Corp., and the tax documents are mailed to their Corp offices in Pleasanton? WTH?

    And, even though the two Sequoias are on one legal address, Spectrum Center in Nashville, TN actually owns 1/3 of the property.

    Then there’s Glenbrook, County records say it is owned by the City of Concord, (huh?) and Holbrook is owned by Mt Diablo Contra Costa Child Care Advocates the private, “not for profit” child care center at Baldwin and Holbrook.

    I’m afraid to check more schools to see who actually holds their deeds!

    Even if, by some chance, for some crazy reason, these are just “mailing” addresses, and not deed holders–how in the world does Dent keep track of their legal docs? Is it any wonder that they have to keep re-doing paperwork and paying over and over for surveys and assessments and liens and on and on….

    Please send someone in from the State Attorney General’s office to take a really close look.

  11. g Says:

    Alicia: When you speak of “leases” of El Monte and Westwood, are these leases, in effect, actually “mortgages”? Borrowed funds? If so, does anyone really know what is the District’s true outstanding long term debt?

    Is that the answer to so many school properties being “owned” by outside entities?

    For Example, the Dianne Adair company appears to own Delta View, and that we lease space to their day cares for only $1.00 per year at 6-8 schools, and who were given double (8) votes on the school closure committee. Just how much money do you suppose we owe them for Delta View? For Alves? For who knows what else?

    Who really owns the district real estate? Does anyone know?

  12. Alicia M. Says:

    #61 – G El Monte and Westwood elementary are school sites owned by the district. The district used these schools as collateral to obtain cash to pay for energy efficient projects. I know one of the more expensive projects was solar panels on the roof of Northgate back in 2007. I asked the district how the rest of the money was used, but received no answer. In the meantime, the district owed the financing company annual payments and the interest was reasonable….but the 2010 Measure C ended up being used to pay the annual payments.

    Using school property as a collateral is a common type of financing that does not require a vote. MDUSD school sites are owned by them, or by the state or someone else like for Mt. Diablo High. If you want to know, just look up each school sites address in the Contra Costa Clerk & Recorder’s website or on the Tax Assessor’s website to see the owner of record. You may have to pay for some of the deed filings to see the actual owner name.

    Any leases or other obligations involving Delta View and Alves should be on the schools audit report…unless the amounts are immaterial. I haven’t looked into either arrangement, other than the $160k of 2010 Measure C money being spent on a proposed feeder pattern involving the Alves property.

  13. Alicia M. Says:

    G – As you know a portion of Glenbrook is being leased. If it is in fact owned by another party…City of Concord, then I don’t know how the district would have authority to lease the property if it is not owned by them.

    I know that leases are recorded just like deeds. Were the day care facilities deed filings or were they lease filings?

  14. Doctor J Says:

    So many issues about next Monday’s Board Meeting: another laugher: Evaluations of Supt and General Counsel — again ? How many Board meetings in 2012 has one of them been on “for evaluation” ? Will have to talk about other issues tomorrow.

  15. anon** Says:

    @Dr J #64: you’re too funny. I think both have been on numerous agendas for evaluations, but nobody knows the criteria or the results or if the reason these evals keep showing up is because they keep putting off the evals. Way too crazy and yet they walk up and down the halls at Dent like they’re some sort of gods (but you can usually find rolen in front of the Dent talking on his cell phone). If eye contact is a part of their evals, they should both lose points.

  16. Doctor J Says:

    Board Agenda 16.9 RDA Consultant again — We still haven’t seen the Annual Report for year 2010-11 on SIG Grant, Cohort 1 where MDUSD was out of compliance and had to write the “Corrective Action Plan” for year 2 (2011-12). 1st Contract $39k (4 schools), 2nd Contract $32k (3 schools), new Contract $4k (2 schools). I say NO NEW CONTRACTS until the public sees the “Annual Report for 2010-11 and finds out why MDUSD was “out of compliance” when RDA is supposed to make sure MDUSD is in compliance !!!!

  17. Theresa Harrington Says:

    It’s surprising that the board doesn’t ask to see the annual report. During the board’s first retreat last year, the facilitator said trustees should spend more time focusing on educational programs. Even if trustees aren’t that interested, the public deserves to see the annual report.

  18. Doctor J Says:

    Is MDUSD better off in the two years since Steven Lawrence became Supt on Feb 1, 2010 ? Contrast that with the advances that a district in Sacramento area that Lawrence has his eyes on for his next promotion and the importance that the Strategic Plan plays in San Juan.
    Does Lawrence have a shot at becoming the next Supt. in San Juan based on the needs assessments of the district and community members ? Why didn’t MDUSD do a comprehensive search like San Juan is doing ?

  19. Doctor J Says:

    Lawrence can’t hold a candle compared to this “Interim” Supt in communicating with the district. Why can’t Lawrence be focused on a Strategic Plan and communicating with the public like this ?

  20. Anon Says:

    The last bi-weekly newsletter was two months ago

  21. Wait a minute Says:

    Why can’t Stevie Lawrence be focused on a Strategic Plan and communication?

    Because he’s not that kind of a guy, he is instead focused on the Palace Intrigues of Dent and its dysfunctional leadership and he is most interested in staying in power himself rather then being a true leader.

    If you remember his taking of gratuities from Chevron over multiple secret meetings with them to discuss the contract for solar (on behalf of “Chevron Sherry Whitmarsh”) this is all you need to know about Stevie Lawrence and his motivations!

  22. Doctor J Says:

    With today’s announcement by the Legislative Analyst that State revenues are behind projections again by a few billion, Lawrence wants to promote more “doom and gloom” and cover up his $40 Million dollar surplus he extracted from the Unions. They will never trust him again.

  23. Theresa Harrington Says:

    Lawrence says the district is counting on “net metering” to meet its solar savings projections:

  24. g Says:

    Thanks Theresa; Lawrence states: “Without net metering, solar doesn’t make a lot of financial sense for school districts.”

    Did I miss something? Where in all of the contracts is the part about MDUSD being “tied to the PG&E Grid” to either sell extra energy back to PG&E, or even bank credits?

  25. Theresa Harrington Says:

    I think this question has also come up in discussions regarding putting solar on closed schools. I believe that Pete Pedersen has acknowledged that it wouldn’t make a lot of financial sense if the schools don’t reopen, since the district isn’t sure whether it will be able to sell back excess electricity.

  26. g Says:

    Lawrence needs to look into cost/savings differential between hooking one location to the grid -vs- hooking 50 locations to the grid!

    MDUSD executive: Opens mouth-inserts foot (again)!

    Note: “less than or equal to ONE (1) Megawatt, prior agreement and inspection, and let’s not forget we buy a ton of our energy on parallel grid from SPURR who hods a JPA with PG&E.


    As for Holbrook and Glenbrook: since they continue monthly to pay many thousands of dollars of the “contracted amounts” to SunPower, and everyone else involved, they will have the solar at those schools well paid for before they come up for the phase 3a or 3b build schedule.

  27. Theresa Harrington Says:

    The next quarterly report should be reviewed at the March 15 BOC meeting. Hopefully, the district will post it online 72 hours before the meeting.

  28. g Says:

    It would be nice (and legal) if they would attach documents to the Agenda! We need to be given ample time to read the Dec, and Feb minutes — and the Annual/Minority Report, and be able to comment if we choose to before they approve them!

    It appears that Ferrante, the godfather of district committees, doesn’t seem to know the law, or else in an attempt to overplay his role of godfather, chooses to just ignore the law and let Pedersen run his BOC for him!

  29. Theresa Harrington Says:

    At the last BOC meeting, Pedersen said he knew that he was supposed to post all the memos that Alicia Minyen has sent to the committee. He asked Ferrante to send the emails to him, which Ferrante promised to do. So far, I don’t see them posted.

  30. Hell Freezing Over Says:

    We should get $$ back (every family in the entire MDUSD area) every time someone admits they were supposed to post something but didn’t.

    It’s simply mind boggling … forgetting one time is forgiven. “Forgetting” over and over is a tactic.

  31. Theresa Harrington Says:

    Apparently, WCCUSD takes this more seriously. I heard their last BOC meeting was canceled because the agenda wasn’t posted 72 hours ahead of time.

  32. g Says:

    Theresa @79: That is hilarious! Pedersen pretending he didn’t receive/doesn’t have copies of everything Alicia has sent to the BOC, and/or Lawrence, and/or the Board–absolutely hilarious!

  33. g Says:

    Why is the Board and the BOC continuing to allow the District Man and his team to RUN the BOC in direct violation of “Independent Committee” standards? It is one thing to have him report his team’s activities and progress to the BOC at the BOC’s request. It is something else entirely to have have that team completely run the show. Ferrante opens the meeting, and adjourns the meeting. Pedersen Inc. does everything else.

    Pedersen decides who the committee may even consider for membership, based on HIS interviews and HIS choices. Chooses what will be on the agenda, based on HIS choices.

    Everyone in the District and on both this BOC and the previous 2002 BOC that permits or encourages this bass-ackward version of independence should spend a long time in front of the Grand Jury and then the Attorney General.

  34. g Says:

    And when it comes to the BOC Voting/Agreeing on anything, including whomever Pedersen approves for the committee—even though it may be expeditious folks—voting/agreeing by email is illegal under the Brown Act. If you want a new member right away, call a special meeting!

    While Pedersen may play the king’o’the hill, Ferrante and a couple others on that BOC could earn big money teaching the art of “feigned ignorance”!

  35. Doctor J Says:

    I guess Ferrante and Pedersen need a PRA request for all their emails regarding the BOC — should be quite a collection for the Grand Jury.

  36. Theresa Harrington Says:

    Agenda for Monday is posted:

  37. g Says:

    Transportation and Boundaries info==with no documents, no maps, just blindside?

    And it is really funny, they’ve done so many Supt and Counsel reviews they can’t keep the dates or names straight for their own agenda items. Who got reviewed on which date–which date is being reported out? Funnee!

  38. MoMx3 Says:

    I see they finally got through whatever process they had to do to fire DVMS teacher Bruce Cottrell. Good riddance to him! I haven’t seen any updates lately on this… what is going on with him, do you know Theresa? Did he get out of jail yet ? Awaiting trial? Did he do a plea?

  39. Doctor J Says:

    I note the minutes are incomplete — even according to the Eberhart reduced minutes policy — in that they do not report accurately what “action” was taken in closed session. There is no record of any acutal “action” or motions taken in closed session. Interstingly, the Feb 6 closed session still remains “unreported”.

  40. Doctor J Says:

    YOUR right to MDUSD Public Records.

  41. Doctor J Says:

    Any attend last night’s Delta View meeting to find out about the district’s plan to cut out bus transportation ? As G points out, there is generic listing on next Monday’s agenda, but no attached report. I wonder if the Trustee’s are getting “secret” reports not included in the agenda ?

  42. Doctor J Says:

    Where are the staff answers to the Board questions asked on Feb 6 – over a month ago – about the elimination of summer school and reduction of graduation requirements ?
    On Monday night’s agenda are posted the unanswered questions, and no staff report with the answers.
    “Since the new requirements have been in place for a year and half the Board would like the following questions answered:

    1. Has the district actually saved the anticipated $400,000?
    2. Has(sic)the changes in graduation requirements reduced the percentage of students completing the UC a-f requirements?
    3. What has been the impact of the change in math requirements?
    4. How do our current requirements compare to surrounding districts in Contra Costa County?
    5. What are the implications of raising the graduation requirements to 210, 220, or 230?
    6. What classes did students historically take for credit recovery in summer school, and are there less expensive ways for credit recovery besides summer school?”

  43. Doctor J Says:

    This is absurd. The minutes for Feb 27, 2012 say: “President Whitmarsh led the Pledge of Allegiance to the Flag and reported action taken in Closed Session.” Uh, what actions were taken ? Impossible to say. In one year, no one will know — no one knows now ! Minutes for Feb 27 did report on Explusion recommendations 15-12 and 16-12. Significantly the Agenda for Feb 27 did NOT list either Expulsions 15-12 nor 16-12 on the Agenda. The Agenda did list item 4.3 for readmission “one student” but nothing was reported in the minutes about it. Nothing was reported about the existing litigation, anticipated litigation, or the two evaluations. These type of minutes do NOTHING for informing anyone of what did or did not happen. Here is the Feb 27 Agenda. Where are the minutes from the March 6 meeting ?

  44. Doctor J Says:

    Correction: The Agenda does not list the Expulsions 15-12 and 16-12 under the closed session.

  45. anon** Says:

    And didn’t Cheryl Hansen request an inventory of buses from rolen and he said he’d provide that info at the next board mfg? I don’t see that on the sgenda-did it ever happen?

  46. Theresa Harrington Says:

    I believe Rolen said he would provide that to her directly. However, he also promised a Transportation report to the board, which he still has not presented yet. He said he wanted to wait until after the district got clarification on state transportation budget cuts. Now that the state has clarified that, perhaps he will present the promised report.

  47. Doctor J Says:

    This is the problem — information being provided in secret not to see the light of day by the public. Board members are entitled to ask that those kind of reports be made an agenda item, and be written and attached to the agenda. How many months ago was that promise by Rolen ?

  48. Doctor J Says:

    [This comment has been edited to delete personal information.]

    Curious things are happening. Rolen’s office suddenly schedules a “mandatory” sexual harassment training for March 21, and assigns every manager and administrator in the district to attend either an AM or PM session — no requests to attend the unassigned session permitted. Wow. What’s the rush Greg ? Greg are you teaching the course ? Looks like there are lots of conflicting meetings on the schedule.

  49. anon** Says:

    [Note: This comment has been edited to delete a reference to personal information.]

    @ Dr j -98 In regards to the bus inventory – I think it was requested by Hansen within the last 2 mos. But since board meetings’ reader’s digest minutes are always at least a month behind, there’s no way of knowing until next month or the month after-it could be intentional that the minutes come out so late-probably a part of Lawrence ‘s “shift-the-focus” strategy — if the minutes are never up to date, then he and his crew have a better chance of the community forgetting about goings-on at board meetings which provides him time to shift the focus and then he can’t ever be held accountable for anything. It’s actually a very clever (but very deceitful) strategy – you’ve got to give him that!

  50. g Says:

    That first one’s all yours Dr. J. 😉

    Thank goodness we have Theresa keeping good minutes for us!

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