Watchdog alleges district broke law by failing to pay interest on loan repayments to Measure M fund

0
1

By David M. Greenwald

On Tuesday evening, the Measure M Citizens Watch Committee unanimously backed a recommendation and letter from President Donna Neville, alleging that the school district is breaking the law for failing to repay loans made by the fund. measure M to the general district fund without paying interest on these loans, as required by state law.

“The law here is clear. In trying to resolve this issue with the district, I consulted with over half a dozen legal colleagues who work in public finance and bond compliance, and they all confirmed that interest must be paid on these loans. Neville said in a letter that will be sent to the neighborhood.

“Over the life of the Measure M program, this non-repayment of loans with interest could represent up to half a million dollars in lost interest, depending on the amounts borrowed, the interest rates and the duration of the loans” , she continued. . “It’s not just illegal; it is a betrayal of the confidence of the voters.

The letter continued, “Nothing in the text of Measure M, which was approved by district voters in November 2018, provided any indication that the district would use the proceeds from the sale of Measure M bonds to grant interest-free loans to the general fund, ultimately depriving the Construction Fund of a significant amount of interest it would otherwise have earned.

Donna Neville informed her colleagues that at the last council meeting, Superintendent John Bowes reported that the two-member subcommittee had met and decided not to recommend any changes to district policy – “qu ‘he was not going to recommend paying interest on that loan. “

The problem stems from a basic problem that school districts all over the state have: a cash flow problem where there is not enough money available to cover normal operating expenses. It has to do with when districts receive their money versus the need to pay expenses on an ongoing basis.

As a result, districts regularly borrow money to pay for these operating expenses, and then repay the loans when the funds come from tax revenue.

“Borrowing is perfectly legal,” Neville explained. She made it clear that they did not question the legality of the loan. “Our real concern here is that when the district commits to this loan out of what is a constitutionally restricted fund, it pays back the loan and meets virtually all of the procedural requirements, but it pays no interest on the loan. “

She explained: “The case law is very clear, we borrow from a constitutionally restricted fund like this, when you pay back the loan, you have to pay it with as much interest as that money would have earned if it had stayed. in the fund. “

Responding to a question from Eric Roe, another committee member, Neville noted that internal borrowing is always the most profitable thing for the school district. “There are other alternatives, they are all much more expensive,” she explained. “In a way, we’re fortunate to be able to borrow internally,” Neville added, noting that most of the time these building funds aren’t cash rich.

Neville estimated that on the $ 8 million loan he would have incurred about $ 100,000 in interest if he had remained in the account. On the other hand, if the district had borrowed from outside, the interest would have reached $ 400,000.

Eric Roe said: “The district is running out of cash, (and) of course there is a lot of extra money in the bond fund, as the bonds have all been funded well in advance due to the conditions. ” He said: “I can certainly see both sides of the debate.”

Neville noted that in chatting with Tom Adams, his response was, “Where am I going to get this interest?”

Bret Hewitt noted: “It is a fundamental proposition that a dollar in a week will not be worth the same amount as a dollar today without an interest component. This is called money valued over time.

“If the school district pays back $ 15 million and $ 12 million before that without interest, we are by definition lowering the purchasing power of bond funds,” he said. “There is no other way to look at it.”

He said: “It is clear to me that it is our duty as champions of the bond fund we have to take this issue forward.”

It was a difficult question for committee members, noting that the district was in dire financial straits.

On Tuesday, the committee asked the full board to take up the matter. Neville in her letter noted that she first raised this concern with district staff and no action was taken to get the whole board to respond to it.

She wrote: “At a non-public meeting of the two-person policy subcommittee on September 14, 2020, the policy subcommittee decided not to recommend any changes to the current district policy regarding interfund borrowing.

She continued, “Because the two-person advisory subcommittee decided not to recommend any changes to the district’s inter-fund borrowing policy, the board never considered this issue at a public meeting. opened.”

Instead, a statement was made during the “Directors Announcements” portion of the meeting that the subcommittee was not recommending changes to district policy.

The watch committee voted unanimously to reiterate their concern and allowed Neville to forward the letter to the district.

Superintendent John Bowes, Assistant Superintendent Matt Best and Amari Watkins, Associate Superintendent of Business Services, who succeeded Bruce Colby, who has since retired, this year attended Tuesday’s meeting. None offered any comment or information to the committee or to the public.

—David M. Greenwald report


Support our work – to become a support at $ 5 – $ 10 – $ 25 per month, click on the link:


Source link

LEAVE A REPLY

Please enter your comment!
Please enter your name here