Second Easley Middle And More Spending
By Alex Saitta
October 11, 2010
To fully understand the whats and whys behind this additional round of borrowing, spending and taxation, we have to retrace the steps taken up to this point.
When the building plan was on to the drawing board in 2005, Mike Keeshan & Associates and Superintendent Dr. Mendel Stewart presented a $158 million plan outlining the district’s building. Just before the referendum, the board majority voted to expand the plan to $197 million. The referendum failed with about 65% voting, no. Instead of listening to the voters and coming back with a smaller pay-as-you-go referendum, in 2006 Superintendent Dr. Lee D’Andrea put forth her $315 million version of the Greenville Plan, and BJ Skelton, Shirley Jones, Herb Cooper, June Hay, Kevin Kay and James Brice voted to by pass the voters.
Seeing an opportunity to grab more money, the bond offering was actually $336 million. Then at auction the coupon or the amount of interest promised to be paid was raised a bit and the sale brought down a total of $354 million. After Dr. D’Andrea left, it was discovered the plan was tens of millions above budget and some additional new borrowing had gone on, so the budget was capped at $365 million. Now the board is voting to raise that figure again to $374 million.
Size of the Plan:
Just to give you a sense of how much the plan has grown, the turn-key cost for the Easley Library was nearly $10 million. This plan has now grown to the equivalent of building 37 new Easley libraries.
On this issue, the district’s needs and wants has continued to grow, and the bond people have been willing accomplices because they make money every time the district borrows more money. The fees and issuance discounts are another $105,000 on this deal. The board was supposed to be the check on that, but it has had a difficult time saying “No”, so the right hands have just kept going up for more spending, more borrowing, and more taxes. Viola! The plan is close to $400 million.
The last budget figure was $365 million. Expenditures were estimated at $357 million, and there is a $7.7 million surplus on paper. Given the district is about 1/3 through construction, a reasonable approach would be to put that $7.7 million aside so the district would have a bigger cushion in case there is a string of unforeseen expenditures that pop up. Then when the construction is complete, given the district owes hundreds of millions in debt, whatever surplus remained would be used to help pay down some of this staggering debt.
The school district and the majority of the board don’t see it that way. If they have a $7.7 million surplus on paper, they are going to find a way to spend it. The district/ board came up with another $16.7 million in new “needs”.
The district got together with the bond people, and a school board is again finding it difficult to say “No, you’ve spend more than anyone ever dreamed of”, so instead they are borrowing more, spending more and taxing more to expand the plan.
Second Easley Middle School:
There are two alternatives on the table here.
a) Stick with the current plan to have 1 big renovated middle school in Easley. (Yes the current plan is to spend $21 million to renovate the current Easley High, giving it a 1,500 capacity, and all the middle school students will go there. Under the current plan, for instance, the 1939 building will be knocked down and a new 2 story building will be built in its place. Or
b) borrow another $9.1 million, raise the tax rate 6 mills and have 2 smaller renovated middle schools.
Either way, the children will be in a like new middle school or schools, with plenty of classrooms under both alternatives.
Adding a second middle school in Easley probably made sense about $350 million ago, but at this point, borrowing more, spending more, and raising taxes again is irresponsible.
The board has done a significant amount for the children on this building issue. Parents and students are getting more than they ever dreamed of back in 2005, when this plan was first discussed. They should be satisfied by now.
The one big renovated middle school will be a $21 million improvement over the current Getty’s Middle and it will solve most of the problems now facing Getty’s students.
The total debt obligation (principal plus interest) of the district has grown from $38 million before the plan to $631 million (16 fold). The current debt level is staggering, and making the $25 million debt payment is a drain on the county’s already very weak economy.
The property tax rate under the plan has tripled from 19 mills to 58 mills.
The general fund budget or the budget used to operate our schools is facing a $5 million deficit next year. Next year the district will not have enough money to fund what it has now. This building plan will add 20% more square feet of space, two new schools, additional staff, insurance and utility costs, etc. There isn’t any extra revenue to cover those new expenditures.
My belief is, at some point the board needs to say to the district leadership, you can’t get absolutely everything that you want at one time. We can’t afford to do all this without making even bigger cuts elsewhere in the budget.
Here’s a good analogy of what I think about the entire situation. Having smaller schools like having a new car is a good thing. However, if your job is facing a period of uncertainty, you have a $15,000 credit card bill and have to buy the car on time, buying a new car is a bad idea. The wiser choice would be to wait for the economy to improve and paying down some of your debt before you buy the new car. Most every responsible person would do that, and many make that decision every day, even though that new car will be more expensive in the future.
There is a shell game going on with the tax rate, so that needs to be fully explained.
First back to the beginning, in 2006 the district took out a 25 year loan for $336 million. Each year payments are made on that loan in June and December. The district doesn’t make those payments in cash; it borrows to make those pay ments. It takes out 2 short-term loans each year to make those two payments.
For reasons I’m still not 100% sure of, the district is going to change when it borrows the money to make the June payment. That series of short-term loans will pushed into the future by 8 months.
After the shift and that one payment series is moved 8 months into the future, it kicks the 2011 payment into 2012. As a result, in 2011, there will only be one payment that is due.
Given the taxpayers only have to pay one, rather than two payments in 2011, the tax rate would naturally fall from 52 in 2010 to 36 mills in 2011. Hurrah! Taxpayers get a rest bit for that one year.
Not so fast. The district sees this as an opportunity to raise more money, and they step into that 2011 hole and borrow an additional $9.15 million, so again two payments will have to be made in 2011. This new second payment stops the tax rate from falling, and actually pushes it back up through 52 and on to 58 mills in 2011.
In sum, the district is raising an extra $9.15 million in tax revenue, and raising the tax rate 6 mills next year from 52 to 58, instead of giving taxpayers a break for that one year.
When you look at how the cost of the plan has grown, how the pile of debt has grown and the tax rate has been tripled, it is clear the school board majority has taken this county to the cleaners on this issue.
Let me give you another statistic that supports my point. When the board majority passed the Greenville Plan, it borrowed $336 million. The county has made 4 annual payments of about $67 million. Given the way the loan was structured, only $2.8 million of the loan has been paid off. Most of the payments have been for interest and fees.
Now the board is adding another $9.1 million to the debt. So after all these payments, with this extra bor rowing, the people now owe more than they did four years ago, before they even made one payment.
Disconnect: Do you think any board members would put themselves personally in this situation like this? Throw more debt on themselves when they are already up to their eyeballs in debt? No way! One of the main reasons any elected official votes to do such a thing is they get what they want yet they personally only have to pay a infinitesimal fraction of the cost.
How many of you are not totally happy with your house because your master bedroom is too small or you’d like to have another room? You don’t run out and borrow money to expand your house, because you already owe $150,000 on it and that’s enough debt. You just live with it.
Computers: When you build a new facility, you budget for the building, furniture and equipment. They said they never budgeted for the new computers in the building plan, so they need more money now. There was plenty of money to build the building, furnish them and buy equipment. Like I said this plan is equivalent to building 37 Easley libraries. I believe the real answer is they ran out of money, because their list of wants continues to grow and money was wasted on things like flying board members around the country to look at model high schools and they spent $63,000 an acre for land they later didn’t use.
Savings?: It is true at this point there is a $7.7 million surplus in the plan (good management), but then the board creates another $16.7 million in new spending (bad management). In the end, there is no savings there.
It is true there is about $1.5 to $2 million in savings over the next 20 years because they are shifting that one series of payments out 8 months, but then the board took an additional step to borrow and spend $9.15 million more, so that savings got wiped out too.
This plan started at $158 million and is now $374 million. They like to tell us how much more it could have cost due to previous management. That’s true, but if you look at how the cost has grown over time, there isn’t any savings there.
If these are the examples the district has of them saving money for us, my request is they stop trying to “save” money for us. It is too costly.