posted by Tom Moertel at 11:57 AM /
On his blog, School Board Director James Fraasch has posted his July Update. In it, he offers a frank assessment of our community's current school situation – uncompetitively high taxes, declining student population, stalled high-school project, short-sighted policy changes by the school board – and tries to examine the question that most residents are probably asking themselves: Now what?
There aren't any easy answers. The problems Mr. Fraasch discusses are serious, but solving them won't be enough. That's because the real problem is one of leadership.
Our leaders, to be blunt, are how we got these problems. Our leaders, past and present, created these problems, grew these problems from seeds they themselves planted. Every time our leaders talked about hard decisions but failed to make hard decisions, a seed was sown. Every time our leaders spent boldly in good times but failed to cut boldly in bad times, a seed was sown. And every time our leaders "handled" the public but failed to hear the public, a seed was sown.
I'm not sure what to do about the seed-sowing – solving that problem is going to require our community to change in ways that I'm not sure it can – but I do know that the first step is to be honest with ourselves about our present situation. Read Mr. Fraasch's July update. Think about it.
Then, you tell me: Now what?
There aren't any easy answers. The problems Mr. Fraasch discusses are serious, but solving them won't be enough. That's because the real problem is one of leadership.
Our leaders, to be blunt, are how we got these problems. Our leaders, past and present, created these problems, grew these problems from seeds they themselves planted. Every time our leaders talked about hard decisions but failed to make hard decisions, a seed was sown. Every time our leaders spent boldly in good times but failed to cut boldly in bad times, a seed was sown. And every time our leaders "handled" the public but failed to hear the public, a seed was sown.
I'm not sure what to do about the seed-sowing – solving that problem is going to require our community to change in ways that I'm not sure it can – but I do know that the first step is to be honest with ourselves about our present situation. Read Mr. Fraasch's July update. Think about it.
Then, you tell me: Now what?
Labels: high school renovation, james fraasch, mt. lebanon school board, property taxes
24 Comments:
One to make your blood boil a bit more. You all remember those board member(s) that were patting themselves on the back for issuing $69million premium bonds at those HISTORICALLY LOW RATES. Ok, so under the indenture, coupons are payed on Feb 15 and August 15 of each year. Since the bonds settled on/about October 21st 2009, seems like we are about 3 weeks from paying what amounts to 10 Months of interest on capital that is, well.. probably parked in 3 month treasuries. So, we're paying an aggregated average interest rate of around 3.5% and recieving 0.15%. You can do your own math since anything more that rough estimates will be called a "False statement" by some member of the board. And, now.. are you ready for the funniest part of all.. Seriously.. Don't want to keep you suspended forever.. I know.. the suspense.. Anyway, back to those HISTORICALLY LOW RATES.. well, here is a select portion of the maturity schedule and the rates paid from the MT lebo bond indenture
2011 $ 7 00,000 2.000% 0.920% 101.409% 621842PV9
2012 1 ,795,000 3.500% 1.330% 104.933% 621842PW7
2013 1 ,885,000 5.000% 1.640% 110.800% 621842PX5
2014 1 ,955,000 5.000% 1.990% 112.388% 621842PY3
2015 2 ,030,000 5.000% 2.290% 113.489% 621842PZ0
2016 2 ,105,000 4.000% 2.570% 108.285% 621842QA4
2017 2 ,190,000 5.000% 2.790% 114.531% 621842QB2
2018 2 ,280,000 3.000% 2.990% 100.070% 621842QC0
2019 2 ,370,000 5.000% 3.090% 115.355% 621842QD8
ok, now lets say we take the 5 year maturity(bonds issued in 2009 that mature 2014), which was AA rated and issued to yield about $1.99%. Now lets compare that to the current composite bond rate curve available from yahoo finance..
5yr AA 1.45
go ahead and see for yourself...
http://finance.yahoo.com/bonds/composite_bond_rates
My points are many.. But one idea maybe now that we have reformed Wall Street, maybe we should starting looking to reform SCHOOL BOARDS that.. OF all the czars that are floating around America, I am sure we can find a School Board czar the help clean up the insanity..
Well said, Tom. For one thing, there are many people who owe James Fraasch an apology, starting with the majority of the school board and certain members of PTA. We are lucky to have James Fraasch on the school board looking out for the community. He has been warning us for several years now. The leadership or lack of, owes the residents of Mt. Lebanon an apology, as well. We were accused of being fear mongers, or stone walling the high school renovation, when it really comes down to their own doing. The school board majority is its own worst enemy. When I hear that they spent almost two months choosing the right shade of blue for the turf, instead of putting that much energy into meeting zoning requirements, it is almost laughable. Shame on them!
Elaine Gillen
Amazing piece, as usual, by Mr. Fraasch!
It is both humbling and stunning to me to think that someone like James would spend this much time and effort IN A VOLUNTEER POSITION to educate the populace of Mt. Lebanon on where its been and where it is now headed. And, of course, the conclusions can only make anyone with a level head both mad (2MM in interest wasted) and sad (resistance by other board members to see the forest for the trees).
As anyone who reads this blog knows, our answer to the question "Now what?" has been to "Move out". It was not an easy decision and it won't be one that won't come with some sadness. But we surely know that life will go on and, as long as one leads their life putting God, family and country first (& second & third) it doesn't really matter where you live in America - as long as where you live has access to an NFL Sunday Ticket and DirectTV subscription....
That said, and it may be because our house is priced too high, (though our realtor thinks otherwise), we have yet to sell our house. We know that things are moving in Mt. Lebanon below 300K and, yes, there was the house not far from us that sold for 1.1MM. But by and large there is a ton of competition in the 400 to 600K marketplace. It is a buyer's market and we know it. What we have seen, though, is that families who have come through our home but also looked in USC and in the North Hills have chosen to buy outside of Mt. Lebanon. We are an n of 1, so how the looming high school decision or related tax hike plays into that I honestly don't know. But I think it's fair to say that we've seen the top real estate valuation-wise, and it might not be back.
Great work, again, James. And thank you for your efforts on behalf of the rest of us!
Do you remember when Mr. Remely lectured the community about "what we can't get" for $75 million? His list was very, very long. Well, looking at the list of "deduct alternates" that the board is now considering it appears that this board has not figured out how to get what they want for the $113 million max. that they claimed would bring us a 21st century learning utopia. And be sure to notice that the deduct alternates that they come up with will be designed to elicit the greatest emotional response from segments of the community. This will be a blatant attempt to gain some support for maximum spending and the inevitable cost over-runs.
Joe Wertheim
Since I signed off as an author of this blog, I've mostly kept my counsel to myself. The affairs of Mt. Lebanon, especially the School Board, were in a bad state; there was nothing that I could add over the last several months.
But James Fraasch -- and kudos again to him for an especially courageous post -- shows that things really can go from bad to worse.
What appears to be fiscal mismanagement by Board members is best addressed by people with relevant expertise. I once wrote on this blog that folks who vote in School Board elections should pay more attention to the professionals who support the Board than they do to the volunteer politicians who mostly follow their advice. I stand by that statement; James Fraasch is the exception who proves the rule.
What has me steamed tonight are the two new policies discussed by the Board, the first (adopted!) regarding pre-decision disclosure and discussion of Board information, and the second (under discussion) regarding publication of the names of citizens filing state-permitted Right to Know requests. These represent nothing less than an abusive attempt by the Board majority to deprive the citizens of this community of the information and tools that they need, and to which they are entitled, to exercise their duties as citizens. People worried about alleged abuses of government power going on in Washington DC should spend at least as much time looking in their Mt. Lebanon backyards - and at the meeting rooms of the local School Board. Even the most resolute ACLU skeptic should be licking his/her lips at the lawsuit that should and I hope will be filed to overturn the first policy and the second, if we have the misfortune to see it adopted. Can you imagine the outcry if Congress adopted a rule that prohibited its members from publicly discussing materials relating to proposed legislation?
Why the secrecy, School Board? Why the gag rule?
In response to Tom's absolutely appropriate question -- Now what? -- the prospect of (yet another) civil liberties lawsuit in Mt. Lebanon is hardly appetizing. As in the case of the School Board's suit against the Municipality, lawsuits usually represent failure. But to turn around the usual "failure is not an option" mantra, failure appears to be our only option. Move out? Practically speaking, it's not a realistic choice for most people, and politically speaking, it is obtuse for "a community with character" to turn around and tell residents, "love it, leave it, or lump it." Recall the School Board? That's not permitted under PA law. Vote out the objectionable majority? That's possible in theory -- but what about the mistakes and tax hikes in the meantime?
My real hope is that the grassroots activism spawned this Spring by the high school project is sustained through at least a couple of electoral cycles -- and that it breaks the unhealthy stranglehold that the two major party committees have on local political office.
Meanwhile, follow the advice of Alan Hamel, husband of Suzanne Somers and long-ago TV spokesman for a long-ago California supermarket chain: Tell a friend!
I could echo everything that's been said here and add more, but instead I'd like to take a different approach. Specifically, I would ask - no, challenge - each of the remaining 8 school board members to individually respond to Mr. Fraasch's post. For the last year, we've been told that Mr. Fraasch is crazy and out to destroy our community. However, as months pass and our tax bills rise (with no corresponding return), Mr. Fraasch appears to be more the psychic than heretic.
So step up members of the Board. Tell us where we go fom here. Tell me how Mr. Fraasch has it wrong and how you have it right. We all know you read this blog, so please use this sapce to speak up. And please spare me the personal call or the email. That's the easy way out. Everyone needs to hear what you have to say.
Thank you, Tom, for bringing attention to the issue of leadership and thanks to James for his courage and commitment to doing the right thing. I never gave that policy concerning pre-decisional deliberation much thought. This was probably because I was laser focused on the many other school board issues at hand, one being the recent identification of deduct alternates that may pull the rug out from under certain folks who wholeheartedly supported the $113 million design. It’s too bad the elimination of features may now be necessary given the previous presentation on “What $75 million will not buy”.
I wouldn’t give a hoot if the school board was just some extraneous “leadership team” comprised of volunteers having little impact on more than their own scope of authority over some kind of agency operating in a vacuum. Sadly, the board’s actions have immediate impact on every person living here now and in the future.
I believe we are in the process of a community awakening. Tune in tomorrow for a soon to be announced town hall meeting which will be even more enlightening than James’ blog post! To receive town hall details since space will be limited, please sign the petition. Certainly, those who have signed are already engaged and may be interested in attending. Grassroots efforts must be cost effective since there are no taxpayer dollars available to fund a glossy town hall announcement. The online petition is free! Please join us at:
http://www.ipetitions.com/petition/mtlhscost/
Password is spendwisely
As Mike stated above, “Tell a friend”.
-Charlotte Stephenson
To Michael,
The first bond payment has always been fixed to Feb 2011. The farther away from that date that we floated the bonds, the more "carry interest" we had to pay. In a perfect world we would have floated the bonds the day before the payment due date and paid no carry interest.
I did not include this carry interest in my calculation. That was just the difference between floating the BAB bonds versus traditional municipal bonds.
Your other point is right on the mark. Look at the coupon payments. 5%. The market was asking less than 4% at the time but since we went to market trying to maximize proceeds, the buyers of bonds were all too happy to pay more than face value for a bond with a higher than market coupon payment. This is how we got the premium.
Interest rates today on municipal bonds are about a quarter percent above where they were in October. My guess is that eliminating one year of carry interest would have all but evened out the difference in interest rates.
James
To James,
My information for interest payment dates is sourced from the Official Statement of the $69mm bond issue. The date of August 15, 2010 was explicitly stated in the Mt Lebo Official Statement for the bonds which states:
"Interest on the Bonds is payable initially on August 15, 2010 and semiannually thereafter on February 15 and August 15 of each year until the principal sum thereof is paid."
Your response is an example of part of the problems with the school board. The board has 30 different sets of numbers, projections and data pieces for every point that anyone raises. This allows board members to find some number or data point somewhere that supports or discredits any point or decision. And if you can't make your case with some number or data point, you stonewall or create a policy that hides the inconvenient truths. We've seen this scenario play out over and over again. Whether it is the wild tail of the enrollment projections, the budget numbers, or in this case, when the first interest payment is due.
We could spend time on “carry interest”, accrued interest, TIC, Build America, Yield to Call and a thousand other points that marginally relevant to the fact that the board is wasting tax dollars. My point from the beginning was that board members sprained their arms patting themselves on the back for presumably issuing debt at HISTORIC LOWS. Now, with no shovel in sight, you guys have cost us about $2million in interest thus far and the clock is still ticking. Furthermore, you could have issued the bonds today at a lower interest rate. I would like to say that the board has cost us roughly an additional $200 per household so far but I am sure that a board member will argue the number of households used in the denominator to invalidate and inconvenient truth. By the time all this stuff is settled, the BOARD and the BOARD alone will be responsible for squandering millions of the citizens tax dollars while potentially destroying the fabric of the community through a massive financial squeeze.
Michael A
What next? As a community we need to call on the school board members who are responsible for this mess to immediately resign before they do any additional damage.
Don't forget about the teacher contract talks - the best is yet to come!
(continuing)... and then the new leaders need to direct the school district managers to develop a plan to consolidate the schools, eliminate programs, reduce the staff, and cut our taxes!
Then we need to examine the structure and authority of the governing body to make sure that someting like this never happens again.
Dear Michael A(nonymous),
James Fraasch is the sole voice of reason on the current school board. He explicity states in his July blog entry that he "voted against" the issuance of the bonds as proposed and ultimately passed. Your beef is not with him. It is with the other 8 and their like-minded citizens of Mt. Lebanon with, apparently, overflowing bank accounts and 401K's. Please stop shooting at the messenger.....
I'd like to see the structure of the school board replaced with three elected officials. Each official would have a one-term limit, the terms would be coterminous, each term would last for three years, and the board members would be elected at-large.
In contrast to the volunteers that Charlotte illudes to, the three elected officials would be paid $60,000 per year by the district to serve. The employment status of an elected official would be on a contract basis and the position would not have any benefits.
I also think that we should change the authority of the board to prohibit any tax increase without the majority of a public vote on the ballot.
Have you ever tried to buy a stock at historically low prices only to see its price go even lower after you bought? Or sold a stock because you felt you should capture your gains even if it did climb some more? It's not fair to judge yourself after the fact because all you can do its try to make the best decision you can at the time.
"I made my fortune by selling too early," --Bernard Baruch
On the other hand, the bond advisor is a professional and certainly made a fee giving that advice so it's fair to judge them by the results.
Also, is there no other place to park the money than T-bills? What interest rate is the municipality paying for its debt? Couldn't the school district lend this money to the municipality on a short term basis until it's needed? Then the difference in rates wouldn't hurt so much. If not the municipality, surely there are other good governmental borrowers nearby willing to pay 2.5% for a year or two.
Dave B., if the Board was prepared to start digging when they borrowed the money, I would tend to agree with you. If there was community-wide support for this project (or at least a narrow majority), I would tend to agree with you. However, what's become brutally obvious is that this Board figured that if it went ahead and borrowed the money, everything (and everyone) would quickly fall in line behind them. That has happened - not by a long shot.
In this instance, we CAN judge their actions and their motives with the benefit of 20-20 hindsight. Hell, we don't even need hindsight. Mr. Fraasch and others were sounding the alarm BEFORE they borrowed the money. No one else wanted to listen. In this instance, the Board believed it was easier to say they we're sorry after the fact than it was for them to ask permission in advance.
Come to think of it, I haven't even heard the apology just yet.
Well, this may fall on deaf ears, but maybe we should just all get behind it just so we don't waste that interest money. I'm sure it would feel lousy to many here to do that, but facing reality has its own rewards. Whatever its merits, the lawsuit will surely now add to our debt service costs.
These are all great observations, but doesn't anyone else have any suggestions on how to address these problems?
Griping alone doen't make things change guys!
Unless that is the path that you're being lead down...?
Or here's a novel idea, withdraw the appeal/lawsuit and use the $69 million to start fixing the high school for heaven's sake!
David, the idea of "just getting behind" the high-school project as a way of cutting our losses is an idea that doesn't make sense unless you view the high-school project as the only thing that matters. In truth, it's just a small part of the overall problem – a never-ending series of decisions that look like "best practices" on the surface but underneath are deeply flawed.
Unless we change the way those decisions are made, we're in trouble. The consequences of bad decisions are real. They add up over time. When your bills grow faster than your ability to pay for them, something's got to give. And, in our case, what's going to give is quality: we're going to be forced to provide a lower standard of education to our students because we won't be able to afford anything better.
What we're really talking about, then, isn't the high-school project but the sustainability and effectiveness of our school district. The high-school project is just a "teachable moment" – an example whose flaws are so large and close to the surface that maybe, just maybe, if enough people point them out, our community can learn something.
So I hope you can understand why I won't be able to "just get behind" the project. It's not that the idea has fallen upon deaf ears; it's just that I've got my eye on the bigger problem.
I've tried to avoid posting too often on this site as I'm often confused with the other James Cannon (the elder). But I'm done.
Regarding what to do in response to all of this, there are only a few options. Yes, we can demand the school board members resign. That, of course, won't happen as their collective arrogance prevents them from any display of humility. Ego trumps the common good.
Another option is, as mentioned, to simply get behind this whole sordid idea and at least try to stave off even more associated costs/reckless spending. I have to say, that would leave such a sour taste in my mouth I'm not sure I would be able to sleep. And really, those of us holding to principles on this matter wouldn't respect ourselves.
The third option is rather extreme and may sound ridiculous but at this point, it would appear nothing is out of bounds. After all, we have a school board that feels it is no longer accountable to the community. So I say let's do everything possible to run the table. Let's bankrupt the township. Oh, you chuckle? Really? Well, let me put this another way. Would you rather have a slow bleed where taxes have to be increased, more lawsuits fly, public services erode over time...or would you rather just front-load all the pain? Personally, I'd rather we go all out in the beginning. That way, our township can be level-set and recovery can begin faster. I haven't gotten as far as really developing a plan for this so if you have any ideas let me know. But as I said, I'm done.
I'm done watching a handful of selfish and closed-minded individualas have an adverse impact on our community. I'm done hearing about public money being spent on frivolous legal action. I'm done reading about the lack of leadership on the school board. I'm done being minimized for my views and shoved aside by people who refuse to listen to reason. I'm done watching this school board operate with such contempt for the community that they REFUSE to consider input from actual experts on planning, building, finances and the like.
It's time to start over. Erase The Board, Lebo. And while you're at it, tell James Fraasch thank you, for his time, strength, integrity and willingness to be honest.
I've considered JE Cannon's idea myself. Simply put, the only way to kill a snake is to cut it's head off! I'll admit that it's an interesting idea, but I'd rather try to manage the change so that it is sustainable. Another helter-skelter crisis isn't going to help the community longer-term.
Nevertheless, the Board members need to resign. We need new leadership immediately. The new leadership needs to make decisions that are based on the guiding principles that our community shares - like smaller government and lower taxes; and the school directors need to understand that the community and the Board are each other's stakeholders. It's time that the District formulate policies that enhance the quality of the community instead of bleeding it dry!
Just realized the District has the document the Board was given for the bond vote. The first page is the summary of the difference between the Build America Bonds and the traditional muni bonds.
Total estimated cost difference was:
$4,246,830
The the link at http://www.mtlsd.org/highschoolrenovation/stuff/hsprojectedfinancingsummary.pdf
Thanks for locating this, James. It seems the important documents are always stored in the District folder called, "stuff." And James, thank you for all you do. The younger Cannon said it best. Thank you for your time, strength, integrity and willingness to be honest.
Elaine Gillen
Correction, that should have read:
$3,246,830
Sorry about the fat-fingering.
James
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