About 100 people showed up tonight for East Penn School District's preliminary budget meeting.
What a farce and an example of why government is failing us at every level.
First, the 7th Generation Charter School is still working to get approval. While I disagree with their agenda of an environmentally focused education, as a conservative I support their right to engage in a free education market to offer their alternative education. Several speakers pointed out that the rejection of their charter request was specious at best.
One reason was that the school board was concerned that the facilities would not be ready in time. A contractor spoke to this by declaring that all the preliminary work was done and that all permit requests would be submitted by May 11th for review. And the work would be completed in time for a fall opening.
But, the school board obviously cannot understand how this could be. See government takes forever to do anything while private enterprise can accomplish much in little time with great efficiency. That is what politicians fear. Hence, they do not want competition.
Meanwhile, the floundering construction of the new Willow Lane school continues. Public Finance Management (PFM) spoke to the huge debt required to complete this school.
Another $10 million bond had to be released to provide more money for this school. This was eye-opening for many reasons.
First, PFM discussed the possibility of a "quasi-competitive" bidding process where a "few select underwriters" might be chosen to issue this bond combined with a bond refunding proposal because the bond refunding proposal on its own will not save enough money. Wall Street bankers again working to benefit at the expense of taxpayers.
School Board Director Charles Ballard mentioned that the Obama Stimulus Bill offers ZERO percent bonds for school construction. The catch? Such bonds would have to be paid off in 13 years. Yet, for East Penn that would mean $770,000 per year, which would be much better than also paying interest during that time period.
But PFM mentioned that Goldman Sachs - Wall Street firm - might take this 0% money and bundle it together to offer to school districts at a "reasonable rate". So the bankers will make money at taxpayer expense.
What did the school board do? They approved the new bond issuance. After all, the taxpayers will pay the interest, so who cares. The cost to taxpayers? Another $500,000 a year in debt service to taxpayers according to Superintendent Seidenberg - on top of the $16 million that will be paid this year.
Another gem that was relayed tonight to taxpayers? School Director Ballard mentioned that "sometimes we've had bond issues for five or seven years before we used it." So taxpayers pay interest on idle debt for five or seven years. Ka-ching, another tax hike.
A gem from Board President Alan Earnshaw (who is up for re-election), "I appreciate that you are the one navigating" us through these waters. Yes, PFM is also "navigating" Allentown through its troubled waters by helping to create a phony surplus with borrowed money, established a $10 million "lease buy back loan" with variable interest rates which hit next year and refinancing a bunch of pension bonds from a LOWER to a HIGHER interest rate. Yes, East Penn taxpayers can feel confident that a bond broker - which makes money by issuing bonds - is "navigating" East Penn School District.
Another classic from Superintendent Seidenberger - "We have a revenue problem". No, sorry, you have a spending problem. Property tax revenue has DOUBLED in the last eight or so years, which exceeds enrollment growth and inflation. But they are spending much faster.
And another gem from Financial Planner and Board Member Chris Jones. He declared that while business "can raise revenue" helpless government entities like school districts cannot. Well, with all due respect, Director Jones could use a little Economics 101.
Businesses thrive by increasing productivity to reduce prices, increase quality and remain competetive in a free marketplace. East Penn School District increases expenditures with little control and they actually raise revenue by raising taxes every year. Sorry Chris, but you have your economic models backwards with that lame reasoning. Government arbitrarily raises their "prices" every year.
And the last - Director Richwine declared that it is hard to do a good job for an "ungrateful public". Please. Control some expenditures and stop arbitrarily raising your prices every year because that is the resort of the weak minded and displays very uncreative, shallow thinking. Education can be improved with productivity increases and cost cutting.
But, politicians at every level display the same type of group think. Nothing can be cut without ending civilization as we know it and taxpayers must bear the cost of relentlessly increasing tax rates. I can think of nothing less intellectual than that sort of 'thinking'.
Tomorrow - what the school board did not want discussed - Are there two sets of books?
Tuesday, April 28, 2009
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6 comments:
Great article! Good work! Nothing like the truth.
What's wrong w/ this country is liberals like Stealth.
Joe,
For the record, the Seven Generations Charter School application was rejected for two deficiencies: it did not contain a curriculum or a discipline policy. Both of those items are required by the Charter School Law (which I read before casting my vote). Yes, we have concerns about the facility, but the law only requires that the applicant have a facility--it does not outline any minimum requirements for that facility, so that was not one of the factors upon which we based our decision.
Joe,
You also seem to have some misunderstandings about the Willow Lane Elementary School project. It is not "floundering." Here are the facts:
- It is a couple of weeks behind schedule because of weather conditions during the winter and early spring. The school will certainly open in time for the 2010-11 school year; even with the delays, it will be completed a few months ahead of time.
- The school will not be opening for the 2009-10 school year because Lower Macungie Township delayed issuing permits for close to a year. They did not provide explanations for their delays, but it probably had something to do with the change in governing structure and leadership in the Township.
- The $10 million borrowing is part of the original cost. We did not borrow the money previously because it will not be needed for the construction until later this year. The project has had no change orders to date, and the cost has not changed from the original bids.
- The cost would have been substantially lower (estimates range from 25-35%) if the district did not have to follow the prevailing wage laws. These force us to pay Philadelphia-scale wages for all labor on the project.
- Public Financial Management (PFM) was instructed to explore all options for the bond issue and bring a recommendation to the board that will minimize the overall cost. The board has not authorized the issuance of any bonds.
- PFM, working with the district business office, has saved the taxpayers of East Penn millions of dollars in interest charges while avoiding risky approaches (e.g. swaps and derivatives).
- There are leftover funds from some previous bond issues (less than 2% of the original issue amount, and sometimes less than 0.1%) that were not needed for the original project. (These are usually contingency funds that were not spent on projects.) Some of these funds have been in district accounts for a few years, waiting for a new project so we can "close out" the bond issues. These funds earn interest, often enough to pay the bond interest entirely. In fact, we have been in several arbitrage situations (interest earned was greater than interest paid) and had to remit the excess to the IRS (as required by federal tax laws).
Good information.
Up till the last point. How does investing 2% of the bond issue generate enough interest to pay total bond interest (the other 98%)?
If true, I would buy bonds on margin by the bucketful.
Joe,
Sorry, I should have said, "The interest earned on the unspent bond money is enough to cover the interest payments on that unspent money." In other words, when we have had small amounts of money left from a bond issue, it has had little or no taxpayer impact (i.e. no net cost to the taxpayer).
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