Notes on School Bonds

16 Nov

Pat Martin had a not-bad editorial this week in the Leader in which he took school districts to task for promoting “no-tax-increase” bond issues (like this). He states that what districts don’t tell you is that while the district will make the same bond payments as before, the payment period will be extended, so the district will in fact be spending more money than it otherwise would have. And if the district would instead proceed as was planned, that payment would go away and your taxes could then go down. Martin noted that school administrators, board members, and bond salesmen don’t like it when the paper points this out, understandably.

Martin also points out the foolishness of Jefferson R-7 having their bond vote in an off-year election, when nothing else was on the ballot. Thus the district had to pay about $18,000 to the county clerk to hold the (lightly attended) vote, which failed because issues voted on during “special” election dates require a 2/3 ‘yes’ vote to pass, instead of the regular 4/7. The district said it would get lower interest rates and lower construction costs if it had a quicker vote. Well, if the district wants to lower interest rates, see the next paragraph. As for construction costs, right now they are $0 because the vote failed and the planned  construction is not authorized.

On the subject of school bond vote shenanigans, state auditor Tom Schweich released a report this week that shows that most Missouri school districts (and other local government entities) cost taxpayers extra money by not using a competitive bid process to choose bond underwriters. Using this process would allow districts to sell bonds at a lower interest rate. In some cases, underwriting firms provide gifts such as sports tickets to their local government clients. So if you see your school board member at a Blues game this winter, ask him where he got his ticket.

According to the auditor’s report, Jefferson County school districts that conducted “negotiated sales” in which the underwriter also served as financial adviser for the district (the opposite of a competitive bid) from 2008 to 2011 include Crystal City, De Soto, Dunklin, Festus, Fox, Grandview, Hillsboro, Jefferson, Northwest, Sunrise, and Windsor. In other words, all of them (I assume that Fox is the school listed as Jefferson County C-6 in Appendix A).

So next time your school district asks you to approve a bond issue, keep these points in mind.

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