Part of the Bay Area News Group

Mt. Diablo bond repayment plan may be overly optimistic

By Theresa Harrington
Monday, July 2nd, 2012 at 6:17 pm in Education, Mt. Diablo school district.

The Contra Costa County Tax Assessor released new data today that shows the Mt. Diablo school district’s Measure C bond finance plan may be overly optimistic.

Here’s a breakdown of dips in property tax revenue for Mt. Diablo district cities in 2012-13, according to Gus Kramer:

Clayton, 4 percent; Concord, 4.6 percent; Martinez, 1.5 percent; Pleasant Hill, 2.3 percent; Pittsburg, .9 percent; Walnut Creek, 0.7 percent.

Times reporter Lisa Vorderbrueggen has requested data specific to the Mt. Diablo school district, but has not yet received it. Still, based on the percentages above, it’s likely the district won’t meet the revenue projections included in its Measure C bond financing plan shared with the Times in April: http://www.docstoc.com/docs/document-preview.aspx?doc_id=123715065

This shows shows the district expected property tax revenues to drop by 1.19 percent in 2012, remain flat in 2013, grow by 2 percent in 2014-15, then grow by 4 percent a year through 2010.

This was a dramatic change from the financing plan presented to the Times by district adviser Jon Isom in April 2010, which estimated flat property tax revenues in 2012, 2 percent growth in 2013, 4 percent growth in 2015, then 5 percent annual growth from 2015-2052: http://www.docstoc.com/docs/document-preview.aspx?doc_id=123715043

On April 23, the Mt. Diablo school board voted to increase the tax rate above the originally promised $60 per $100,000 in assessed valuation for its combined 2002 and 2010 Measure C bonds. According to information presented to the board, trustees told the public that tax rates would likely rise to $89 per $100,000 when the first $150 million was sold and to $95 in 2015, when another $77 million is sold: http://esbpublic.mdusd.k12.ca.us/public_itemview.aspx?ItemId=5273&mtgId=341

However, the district never shared its growth projections as part of its presentation. Now, it looks as though those projections may be overly optimistic and could cause the tax rate to go higher than the public was told.

Do you think the district should have shared its growth projections with the public before voting to increase the tax rate?

JULY 3 UPDATE: Here are the preliminary figures for the Mt. Diablo school district, according to the assessor’s office: Mt. Diablo Unified School District’s property assessment roll for 2012-2013 is $28.54 billion, down from $29.2 billion in 2011-2012, or down 2.23 percent.

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

  • MDUSD Board Watcher

    Well what do you know? Just more lies and smoke and mirrors from Gary Eberhart.

  • vindex

    Unreal. This board is corrupt. Except for Ms. Hansen, vote them all out. They LIED to us. I voted for this bond with the PROMISE that my tax rate would be $60 per 100,000. As they said it was a “political” promise not a “legal” one. They should be ashamed of themselves.

  • FormerMDUSDparent

    This is exactly why no property tax measures for MDUSD ever pass. Taxpayers cannot trust the financial numbers coming from the District office or consultants. They may have achieved a short term victory in terms of passing this last bond measure but have severely crushed any hope of passing future tax measures.

  • Seriously…

    The district’s projections for the 2010 Measure C have always been wrong. I believe the faulty projections is why Hansen approved to sell $150 million instead of all $227 million remaining on the 2010 Measure C. There is currently another $77 million more in bonds to sell…but if the district reaches $60 per $100k because property values continue to decline, then the district cannot sell anymore bonds. So it may be the most recent sale of $149,900,000 may be all they get out of the 2010 Measure C.

  • Alicia

    The Contra Costa County Fire District projects 1.96% increases in assessed valuation after 2013, while this district projects 4% increases. It is interesting that there are big differences in growth projections of assessed valuations involving the same County.

  • Theresa Harrington

    Please note that I have added a July 3 update to this blog post with the actual figures for MDUSD from the assessor’s office, which show property tax revenues down 2.23 percent for 2012-13.

    Thanks for giving us the comparison for the Contra Costa Fire District. Since that includes more cities than MDUSD, it will be different, but could be comparable.

    Now, there appear to be at least four controversial issues surrounding the board’s decision to increase the tax rate: 1) it promised $60 per $100,000 when it put the measure on the 2010 ballot and raised the rate in April, 2012 without seeking new voter approval at the ballot box; 2) it appears to have overestimated tax revenues in the projections it used to sway the public, the board and voters who participated in the poll asking if they supported the April tax increase; 3) it presented a misleading bond resolution to the public and the County Board of Supervisors, without including the purchase agreement and preliminary official statement in its district board presentation, as stated in the resolution; 4) it used bond premium to pay the cost of issuance, which goes against guidance from the Attorney General to the Poway District.

    At the Bond Oversight Committee meeting, Pete Pedersen said he didn’t think the district got enough positive press about the solar project, since it is the largest K-12 project on the planet. But all these other issues considerably cloud the benefits of the solar project. In MDUSD, it appears that administrators and many trustees hope the end justifies the means. They appear to wish everyone would just focus on the end product, instead of worrying about all the questionable details involved in getting there.

  • g

    Oh, well. What’s a mere $660,000,000.00 tax shortfall split between friends? Keep in mind also that assessment value is not ‘collected’ revenue. This district is sitting on a boat-load of empty, and bank owned properties that will not be making timely payments of their fair share of those taxes, so the shortfall will most likely be a good deal higher.

    The quarterly reports for Measure C showed the true reason for this last sale.

    While they may not have ‘planned’ to sell that much at one time, the funds needed line was going to crash head on into the funds available line this summer.

    If they wanted to do much of anything in new construction (to keep their contractors happy) they absolutely had to sell more bonds, thereby going over the promised $60. threshold this year; just two years into the bond.

    That is why I said some time ago that the ‘citizen’s committee’ was being played like a fiddle. Making a big sale in June, that was sure to raise taxes and break bond promises, was NOT their idea–it was the districts idea–spoon fed to them–from the back rooms at Dent.

  • Alicia

    @G – As you know, the committee was supporting conventional financing, rather than expensive capital appreciation bonds. I’m not seeing this as being played. Similarly, Palo Alto Unified recently raised their tax rates by eliminating capital appreciation bonds on their new issues. Read their story at: http://www.paloaltoonline.com/news/show_story.php?id=25853

    In the back of my mind, I was concerned that the projections used for the $149.9 million may not be reasonable given current market conditions. However, I noticed that the projections used for the $89 tax rate had been adjusted downward from the projections the district assumed for ballot purposes in early 2010.

    The public should realize that optimistic “projection” calculations are a systemic problem across this State. There are no laws in place to provide assurance that projections be justified or reasonable. So this is just another example of why laws should be changed.

    So in the end, Taxpayers may not be as harmed as you think since the district will not be able to borrow more as property values decline. As “seriously…” said above, if the $60 per $100k is met or exceeded with just the $149.9 million, the district will not be able to sell the remaining $77 million in bonds.

    This is a plus in my mind since we will only be on the hook for $271 million of the $348 million voter approved amount for 2010 Measure C. In addition, the district refinanced much of the 2002 Measure C bonds at lower rates (which San Ramon is doing now), and this saves taxpayers money.

    Notwithstanding the positives of not having more capital appreciation bonds and refinancing at lower rates, the concerns Theresa identified above still exist and matter.

  • Alicia

    @G – Your concerns regarding delinquent property taxes will not impact the tax rate as of yet. Please note that the Contra Costa County is a participant in the Teeter Plan and will receive the appropriate amount of tax funds based on amount of the tax levy rather than actual collections. Further, if you look at the County’s delinquency rates, they have declined and are within the Teeter Plan threshold. Banks also pay property taxes on their owned real estate to protect their collateral.

  • g

    Alicia; We agree. It is fantastic that you were able to get a guarantee on the $149.9 that there would be no CABS. We are very greatfull you were able to accomplish that.

    That is not what I was referring to as being played. My point has always been that we should not have needed to sell more bonds for a few years, until tax revenues would be sufficient; but we DID need to because of how the first $117million was spent; and the committee, coming in and saying “let’s sell it now” played into their hands at just the right time.

    We don’t have a no CABs promise for the rest of the $77million, unfortunately. Also, of course, we all hope things will never reach the “worst case scenario.”

    However, you speak as if we, our taxes, and that $77MILLION obligation are “safe”.

    Sorry folks. That bond measure was a “forever” commitment. There is no time limit. This school district could stop today–spend just what it has so far–let a generation and maybe another bond measure or two go through–and THEN have some third-generation Isom/Eberhart/Pedersen look-alike come by in 20-30-60 years from now–when all of us are toes up, and say: “Hey, guess what folks? We still have $77MILLION in voter approved bonds available for sale without taking it for another vote–damn, but our grandparents were s t u p i d!”

    ——–

    I’m also happy to see that you are feeling so much better about the school district and the bond sales.

    I, on the other hand, am still feeling cheated!

    Had the district committed/spent the first $120million on school facilities’ and students’ actual needs, as we voted for and thought we were being promised–and THEN come back for its $100+million in solar funding costs, they knew they’d never have the backing of the taxpayes.

    That’s why they spent the first wad on solar, and the second wad on electrical upgrades needed to get the solar to work. (What? You mean we bought solar without having the infrastructure to connect it? — And we didn’t build those costs into the solar contracts? What?).

    That’s kind of like buying that fancy new low-flush toilet and then bolting it to the floor in your coat closet, isn’t it?

    Now, if we want the building/facilities improved, we have no choice but to sell more bonds than we can really afford, and pay higher taxes than were promised.

    ——-

    Ah, yes; the Teeter Plan—Folks–there ain’t no such thing as a free lunch!

    Sure, up to a point, the county will –(is, by law, required to)– make up for shortages between assessed value and collected tax revenue-for the schools’ as well as ‘other’ types of districts–EVEN if the County has to go borrow the money to do it–which, as I understand it; lessens the overall amount the State has to provide toward ‘k-12 education’; –which lessens the amount the county has available for other county services; –which lessens…!

    Ah, but at least, up to a point, we’ll have the funds to pay the bond holders.

  • Theresa Harrington

    Due to judge’s decision regarding Richmond refinery, WCCUSD’s property tax assessments are going up, according to assessor: Preliminary property tax value in the West Contra Costa Unified School District, per the Assessor’s Office, shows an increase of 6.72 percent, from $21.87 billion in 2011-2012 to $23.34 billion in 2012-2013. Assessor credits most of the increase to the effects of the appeals board decision in which the Richmond area refinery value rose significantly.

  • Theresa Harrington

    Unlike MDUSD, WCCUSD may consider another parcel tax in November: http://bit.ly/NaWGM3

  • Alicia

    Theresa, I believe some of the WCCUSD bond tax rates exceeded the max $60 per $100k cap due to declines in assessed valuations (and due to optimistic projections). So with assessed valuations increasing, the bond tax rates should decline.

  • Theresa Harrington

    Thanks, Alicia. I’ll check into that.

  • Linda L

    In 2010 the voters in this District passed Measure C with 61% of the vote.

    Voters believed that they would get $348 million with no increase in taxes.

    Voters believed a massive solar project would be a good investment.

    Some voters believed the bond was designed to fix leaky roofs and leaky windows.

    As a voter I knew none of this made sense. G, it sounds like you knew it too. I know Alicia knew it. In fact many people I know knew this and some voted “yes” anyway.

    So yes, I hold the District responsible for the campaign messaging and the choice of moving forward with a massive solar project.

    But I also hold the voters responsible, after all 39% of us understood the consequences.

    In addition, I applaud the District for having the political courage to change the structure of the $150 million regardless of the reason. I am not so jaded to believe it was for their personal gain nor am I so naïve to believe it was strictly for the taxpayer. I am certain that not all politicians would agree with the risky decision of changing the bond structure and would be more concerned with the potential political fallout. In the long run, what this Board agreed to do is good for our community and good for our children. It was wrong to continue to place the burden of this bond on future generations.

    G, you paint the picture that those of us who fought to change the bond structure were “played”. We knew long before addressing the Board that the District had run the idea “up the flagpole” in several venues. We viewed this as our opportunity to change the structure. We went into this with our eyes wide open. For the past two years the fight has been about the structure of the bond and the high cost to the taxpayer because of the structure. I am thrilled that the structure has now been changed for the $150mil in bonds and hope that the District is honest in their intent to apply the same restrictions to the $77mil. Don’t bother with the obvious line that comes to mind about promises. I get it. I am also thrilled that Palo Alto School District followed our lead and I would be ecstatic if other Districts did the same. CABs are being used across this State and it will wreak havoc on our economy in 20 years, those bonds will put a huge burden on our communities. There was no perfect way to fix this.

    As was pointed out, this bond can be delayed for years so would you have rather left $228mil out there to be sold 20, 30, or 40 years down the road with no way to insure no CABs? Would you have wanted the district to keep a flawed promise (but a promise no less) and sell CABs as planned?

    We can’t change the solar project. We can’t vote no on the bond (that opportunity has come and gone). We can only make what we have better.

    We should continue to be concerned with how the bond money is spent. We should continue to follow the $77 mil. We should also be happy with the progress we have made to date.

  • http://www.k12reboot.com Jim

    Linda is correct. At this point with MDUSD, we have to regard any significant damage control as an important victory. The CABs are a completely irresponsible vehicle for public finance. If the electorate decides that a project is important enough to borrow money for, then that electorate should pay interest on the money borrowed, rather than putting the inflated obligation off to a future generation of taxpayers.

  • Doctor J

    I guess Lawrence and Rolen continue to kick the hell out of the Times’ attempts to get to the truth by continuing with their systematic bulying “stall tactics” on producing public records. When is the Times going to put some teeth into their multiple requests that are systematically ignored and just sue MDUSD and collect attorney fees for the production of the public records ?

  • Theresa Harrington

    I see WCCUSD is planning to present the impact of the assessor’s estimates on the district at its Wednesday meeting (item D-1): http://www.wccusd.net/cms/lib03/CA01001466/Centricity/domain/16/packets/2012-2013/20120711_BOE_Packet.pdf

  • Theresa Harrington

    I just spoke to Jon Isom, who has been out of the office on vacation. He promised to run some numbers and get back to me, but he’s out of the office today also.

  • Theresa Harrington

    Isom says he doesn’t think the revenue decrease will substantially alter the tax rate or affect the district’s ability to issue the next $77 million in 2015.

    On another note, the CBOC has started a new feature called “Dear Alicia”: http://archive.constantcontact.com/fs055/1102591690180/archive/1110456513589.html

  • Seriously…

    @Theresa,

    I noticed that WCCUSD did not use bond premium to pay cost of issuance for their most recent bond issuance dated November 2011.

    http://emma.msrb.org/EP583231-EP456710-EP856707.pdf

    Berkley Unified’s most recent bond issuance did not use bond premium to pay cost of issuance.

    http://emma.msrb.org/EP583231-EP456710-EP856707.pdf

  • Doctor J

    See post #17 — Two more weeks and many document requests are still not produced ? The Times continues to get the hell kicked out of them by Lawrence and Rolen’s stall tactics. Is the Times giving up ?

  • Theresa Harrington

    Our attorney says the district appears to be within its rights to claim attorney-client privilege regarding advice given to the board.
    Regarding FCMAT, I’m still waiting for Lawrence’s response.

  • g

    I just don’t see how Rolen’s oral advice to “some” members of the board, saying that nearly $1,000,000.00 in cost of issuance being paid with a bond premium – which brings it above the amount approved by voters – can be kept confidential by the board.

    Did, or did not, the official Bond Counsel Juhl-Darlington make a legal assessment of that Poway Letter?

    Did Bond Counsel actually present either an oral or written “Assessment” to Rolen?

    Juhl-Darlington is NOT Rolen’s bond counsel, he is (our) the Board’s counsel.

    Or, did Rolen go out on that burning limb on his own?

    What do we pay Juhl-Darlington for, if we are just going to defer to Rolen in matters costing taxpayers nearly a million dollars.

    How can we get an opinion from the First Amendment Coalition–and/or the Attorney General’s office? Even without the Poway letter, the Bond law is clear–and bypassing the loose language of that law by Money Laundering in and out of accounts has to be illegal.

    Someone on the board knows, and owes the truth to the taxpayers, as well as the other members of the board that seem to have been
    illegally deprived of the back-up materials necessary to making sound fiduciary decisions on the public’s behalf.

  • Doctor J

    * The Board can decide to release it even if its “attorney-client” — even over Rolen’s objection. If the memo was share with others outside of “attorney-client” then everyone is entitled to get it. That may be hard to prove unless someone is a whistleblower. As for the FCMAT reports, I don’t understand why the Times doesn’t just get ALL of the emails, letters and all preliminary and final reports directly from FCMAT since they are a public entity. Why rely on Lawrence’s honesty to produce them ? He’s already denied what Carolyn Patton said. Just like I get the SIG spending reports directly from CDE and not the district because I can rely on CDE, but I don’t trust Lorie O’Brien or Bryan Richards to produce the true information.
    *My comment apparently didn’t make it — I’ll try again.

  • Doctor J

    I don’t seem to be able to post a link to FCMAT. Check out w w w dot fcmat dot org and look up their history.

  • g

    But we don’t want to lose sight of these paraphrased quotes about the Poway Assessment:

    “Rolen told ME in a board meeting”, but “I don’t remember when, or who was there!”

    Sherry Whitmarsh–Pants on fire!

    Both Lawrence and Eberhart said in a PUBLIC meeting that they had been given an Assessment. They should have to produce that Assessment.

    How is this any different than in a trial, where the Plaintiff, who has the ‘right’ to not disclose his personal injury or financial matters–but who instead DOES disclose SOME of those matters–and thereby opens himself up to be required to produce ALL of those matters that the Defendant wants to bring up?

    In other words: You bring it up in public–you make it available to the public!

  • Theresa Harrington

    g: You are correct that the attorney-client privilege does not prohibit anyone in the district from releasing the information. It merely allows them to refuse to produce it if they don’t want to.
    It is also curious that what Lawrence and Eberhart appeared to characterize as iron-clad proof that the district was acting within the law now appears to be nothing more than a conversation between Whitmarsh and Rolen at a closed session that Whitmarsh doesn’t recall well enough to remember the date or agenda item under which it occurred — and which Hansen doesn’t appear to recall at all.
    Also, as Seriously has pointed out, all other districts are not paying cost of issuance with bond premium. Yet, Whitmarsh appears to be under that impression because that’s what Rolen has apparently told her.
    During the public meeting, Lawrence and Eberhart didn’t say that all other districts were doing it. They said that other districts that work with Isom and the MDUSD bond underwriters are doing it.
    So, apparently, Isom and the underwriters believe it’s okay. But since they’re the ones being paid with the bond premium, they have a vested interest in telling the board that it’s okay and that it’s common practice.
    The attorney general’s office does not give legal advice to the public. But, I can certainly ask the First Amendment Coalition what it thinks of the district’s refusal to share its legal analysis.
    Our attorney said she didn’t understand why the district would want to keep it secret, since that’s what it’s relying on to assure the public that it’s acting within the law.

  • Theresa Harrington

    I asked Trustee Cheryl Hansen in an email if she recalled the closed session conversation referenced by Board President Sherry Whitmarsh regarding the “thorough analysis” of the Poway letter and “definitive assessments” of the district’s practice of paying cost of issuance with bond premium (as cited by Lawrence and Eberhart on June 25).

    Here is Hansen’s emailed response:

    “There has been no conversation in closed session regarding a ‘thorough analysis’ or ‘extremely definitive assessments’ nor has it even appeared as a closed session agenda item. If there had been a conversation, then it must be posted and reported on in open session which hasn’t happened either. I have no idea what conversation Sherry and Greg may have had because it has not occurred in my presence.”

  • Theresa Harrington