Citizens committee to recommend oversight for future bond issues
'Best practices' to be discussed at Pleasanton school board meeting in September
It took more meetings than originally planned, but a citizens committee formed to look into cash-out refinancing will issue its final report to the school board next month.
Some members of the committee are still unhappy that a few of their questions remain unanswered, in particular what money from cash-out refinancing done by the school district was spent where. Cash-out bond deals, similar to home refinancing where a homeowner takes extra money for a project, were popular for school districts across the state in the mid-2000s until declared illegal by then-Attorney General Jerry Brown.
The committee did learn that some of the money from Measure B was spent on projects that were to have been completed with Measure A money after the Measure A language, which had been missing, was discovered by Alameda County officials. The district spent nearly $1.7 million in Measure B bonds on Donlon Elementary, more than $981,000 at Harvest Park, more than $453,000 on Foothill High School, nearly $39,000 at Vintage Hills Elementary and nearly $36,000 on Lydiksen Elementary. Committee members also noted that $2,140 from Measure B was spent on Mohr Elementary, although that was a "growth" school and all work there should have been paid by developers.
The district took nearly $6.8 million from refinancing of Measure A and Measure B bonds in six borrowings between 2003 and 2005. Raneri pointed out at the final citizens committee meeting that the money from refinancing was commingled with other money and said there was no way to separate it out to determine where it was spent.
The district saved taxpayers $9.7 million by refinancing bonds at a lower interest rate. Using the cash-out method, much the way a homeowner would when refinancing a mortgage, the district borrowed $6.79 million and will have to pay back, with interest, $9.28 million; that $6.79 million, legally, should have gone to reduce taxpayer debt.
Some of the committee members wanted to focus on moving forward by not having those same sorts of problems in the future.
Jack Dove, the only member of the original bond oversight committee appointed to the citizens committee, read a statement to that effect at the beginning of Monday night's meeting.
"Instead of belaboring problems of the past, we should be looking to the future and those things we can do to meet the challenges which our leaders and educators are facing," Dove read.
A series of "best practice" recommendations will be forwarded to the school board for its mid-September meeting. Those recommendations include forming a citizens bond oversight committee to watchdog future voter-approved bonds, even if not required by law.
Lori Raineri, head of Government Financial Services, the firm called in as a consultant about past bond practices, also recommended the creation of an audit committee and a staff debt review committee. That committee would review proposed financings and review how the administration is handling the district's outstanding debt. At the request of the citizens committee, Raineri agreed to include a public participation component to that recommendation so that residents could be kept in the loop.
Best practices recommended by the consultant are included in a 22-page document; Raineri said her hope is that the staff debt review committee would become familiar with it and ultimately become the district's best practices experts.
Those best practices are:
* Establishing a written debt management policy;
* Adopting guidelines to achieve the lowest borrowing costs, taking into account short-term and long-term taxpayer debt;
* Hiring an independent financial advisor, using a request for proposals (RFP) method for the best costs and services;
* Using a similar RFP process to hire a bond counsel and for an underwriter;
* Pricing bonds in a negotiated sale, in which the bond issuer negotiates both the bond yield and the underwriter's compensation to minimize the total cost of borrowing;
* Using caution when issuing variable rate bonds; and
* Developing a formal policy for refunding.
Also recommended by Raineri is ethics training, although attorney Robert Kingsley did give school board members and administrators a half-day course in ethics last February.
However, at least one committee member, Julie Testa, remains unhappy with the idea of leaving bond repayments in the hands of staff, something she said led to the district using cash-outs like a revolving loan for school construction projects not approved by the voters.
Testa also said she would prefer for a group of citizens to monitor the repayments being made to both the Measure A and B bonds.
The bond issue became a hot-button item in the weeks before a vote on Measure E, which would have established a $98 parcel tax for Pleasanton homeowners.