Editorial: Why an outside audit?
An announcement by Poway Unified School District Supt. John Collins regarding the controversial capital appreciation bonds issued last year leaves us scratching our heads.
During last week’s school board meeting Collins said the district is retaining the services of an “independent forensic accountant” to examine certain aspects of the issuance bonds, approved by district voters (not living in Mello Roos districts) to pay off the balance of the “Building for Success” school upgrade program involving 24 of the district’s campuses.
The so-called Proposition C “Series B” bonds cannot be refinanced and the district taxpayers will not begin paying on the $105 million until earlier bonds are retired, in 20 years. Since interest will accrue, taxpayers will end up paying nearly $1 billion by the time the bonds are paid off 20 years later.
Collins and school board have been feeling some political heat over the use of CABs. They have repeatedly defended their decision by saying that CABs are commonly used throughout the state (the district itself issued a $3 million CAB as part of the earlier Proposition U program), that recession-related market conditions beyond their control increased the interest rates and that extending bond payments out another 20 years at the current repayment rate of about $55 per $100,000 of assessed valuated was exactly what voters approved in 2008. The district has also insisted that it has been forthright and transparent about every aspect of how the school improvement program was run and financed.
So, all that said, why hire a former FBI agent to look into how the matter was handled?
Collins said the expert will focus on five questions:
• Did the district act responsibly upon the market information it was given at the time of decision?
• Was the district given advice and counsel based on the highest industry standards?
• Are there any issues of integrity with any parties involved in the transaction?
• Were the fees paid to the parties involved at or below industry standards?
• Were the processes that were followed acceptable industry standards?
So this district-hired expert will pore over the records of the transaction and render an opinion on whether everything was on the up and up.
We would be surprised, shocked even, if the final report concluded that anything was amiss. Cynics will say a positive report is expected, since the district is paying for it.
As stated here before, the area where the district fell short was in 2007, and again in 2010, when it failed to clearly communicate that it had run out of construction money, that it needed more money to finish the work and that they faced three choices: stopping the project, raising property taxes or proceeding with a long-term bond. Officials knew in November 2010, when the bonds were authorized, that CABs would be used and that they would include a no-call provision.
We also said that it appears that nothing can be done about the CABs, since they can’t be refinanced.
To protract the second-guessing on all this by bringing in an outside auditor is, from where we sit, a waste of time and district (taxpayer) funds.
Related posts:
- PUSD hires forensic accountant to review bonds
- Editorial: Road to success, or Armageddon?
- School board meeting avoids ugly theatrics
- PUSD releases statement on school bonds
- PUSD not alone in high-interest financing
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It might tell us who knew what and when they knew it and penetrate Collin's smokescreen and obfuscation…
Smart move on Collin's part. By calling in an "outside" auditor, she raises the bar on the need for an actual independent auditor who would be outside of the control, and restrictions (aka "focus"), of the board. Say what you like about the decision of the board, and terrible financial costs it has wrought upon the property owners in Poway, Collins is a sufficiently skilled bureaucrat to be flexible enough to appear to lose in the short term, while playing to win in the end.
I'm a bit confused over one point in this editorial. It is obvious from the documents that were at the OCTOBER, 2010 meeting that they knew these bonds had no call feature. Mangum made that motion and the paperwork shows it clearly. Why did the editorial say November? Makes no sense.
Completely agree with the rest. This is a waste of time and money and an attempt to cover.
It was a typo I'm sure. We all know Mangum and Vanderveen moved and seconded the authorization of the bond in October 2010. What I find entertaining is how silent the Mangum supporters have suddenly become. It's like crickets.
Could it be that when faced with the truth of Mangum's knowledge and participation, that they realize his apology was disingenuous and that they have egg on their face?
Great editorial full of REAL facts. Because after all isn't that what Mangum's group has been hollering for all along?
Sounds like a lot of 'demonstrable untruth' to me. I just had to use that term, new to me, but I think we could shorten it to just two letters. I'll bet you can guess what they are.
What "sounds like a lot of "demonstrable untruth?" The facts in the editorial or the behavior of Dr. Collins?
Mangum has a new flyer out that states he supports bond reform. Which has to be the funniest bit of baloney I've read all week. How fascinating he supports bond reform after he was a party to this whole mess.
The flyer also says "as a school board member Jeff protected our schools when budgets were severely cut by the state – AND HE WILL DO THE SAME FOR OUR CITY." Really? Dude you jacked us to the tune of a billion dollars.
Does that mean he's going to go out and try and jack our city to the tune of more millions or a billion dollars of debt?
Did you know that Poway Unified School District’s bond underwriter contributed $25,000 to the Prop C campaign and then was awarded the contract to sell the bonds for a profit?
And finally – the big reveal. PUSD got an additional $31 million to cover the costs of the 2009 Series A and 2011 Series B. That additional, unauthorized $31 million will cost taxpayers $200 million. Nice going Mangum and friends.