This statement by Sergio on behalf of the Board makes no sense:
“It is no secret that there are many aging buildings in D65 which need over $188 million in repairs and improvements. The district's average building age is 77 years, greatly outpacing the anticipated average life span of 50 years. Having a state-of-the-art facility in a centralized location will allow for greater flexibility as the District addresses declining enrollment and the substantial capital investments needed to update our buildings.”
If I have $100, and I need $80 to fix up my dilapidated schools, if I spend $50 on a brand new school, I don’t have enough money left to fix up my old schools. Right?
Correct. Yes lease certs can’t be used for capex of existing bldgs but that doesn’t mean 1) the lease gets can’t be repaid, 2) as Tom mentions it doesn’t cover anticipated soft costs of $7m which would mostly accrue as the project moves forward (think C&C fees, attorneys, furniture for school)- most of which would be saved and would not add additional burden to the district as they have no plan for how this gets paid.
Because “ they will have a state of the art facility in a centralized location……as the district addresses declining enrollment and the substantial capital investments needed to update our buildings” Please tell me how those two ideas connect. Can anyone draw a line connecting them ?
I thought the same. How state-of-the-art is it going to be when we won't have the budget to fill the school so we will need to move old desks and furniture and equipment from all the closed schools instead.
It's easy -- the enrollment will decline so much that the entire elementary population will soon fit in that centrally located new building and they will be able to offload everything else.
I read it to mean a new building in a centralized location gives them the flexibility to close schools with significant capex requirements rather than fix them up. Consolidate students at the new school.
To me it is obvious that building a new school in the face of declining enrollment requires you to close at least one old school for it to make any sense. But it is politically easier to tout the ribbon-cuttings instead of the subsequent closures. Maybe they are right that greenfield is easier but it shows a lack of candor and transparency.
Sergio is patently wrong. It might not be the “cause” of the structural deficit today but it is certainly going to add to it. This statement gives me zero hope this board will be able to figure out how to reduce the budget by $15 million a year when they don’t even see how a new school contributes to expenses. Further what about the huge financial risk of finishing on time and on budget?
The fact that are board isn’t able to acknowledge that the school adds a $3 million annual cost to debt plus adds around 10 million of projected costs needed to be paid in 2025 that are not covered by lease certs and could be used for something else - this is basic finance. If you can’t understand it, step aside. You are spending taxpayer money that was never approved by taxpayers. This is NOT a sunk cost!
President Hernandez loses me with his logic that proceeding with the new school does not have an impact on the current structural deficit, because the deficit previously existed.
I tried to translate this to a hypothetical personal situation. An individual decides to build a new home. During the process of construction, he/she/they learn that their financial advisor cheated them and they now have significantly less money than they thought. No, the new house is not the cause of their financial
problem, but the decision to keep it makes the problem worse.
For the record, I think the new 5th ward school is an important issue, and I hope we can proceed. What I resent the most is the tortured logic that its expense isn’t adding to the deficit. It is. Sadly, everything has to be on the
The whole thing is like lying on a mortgage application to buy a million dollar house but then only getting a mortgage for half the money and then not buying the house for two years but also now you can't make the payments or live in the house
1. I love how Sergio send this to staff and carries on with the party line about being open and transparent without mentioning that the plan in January is to give somewhere between 15-25% of them their walking papers. That would seem to be pretty important.
2. Anyone who thinks there is any interest or will to consider pausing or canceling the project needs to be realistic about it. It may be awful financial practice, but they are going to plow ahead with it, so saying they should cancel it is an exercise in wishful thinking. Not gonna happen.
3. I agree with finishing the project. There have been millions of dollars spent and millions yet to be spent and we might as well get something out of it. Flip side is that millions of dollars set on fire and a giant empty hole where kids used to play would be a fitting endnote for Dr. Horton's time in our community.
4. If they are short dollars to actually complete the building, I don't know why issuing more lease certificates isn't an option. Clearly, actually having transportation savings wasn't the basis for issuing the original set. That was all bullshit from the word "go". If Raymond James didn't see right though that fraud during the underwriting process, they have the worst set of underwriters in the business. I had a Zoom call with Obafemi and Horton after I wrote my first letter to the editor, and they indicated from the standpoint of the bankers, what counted is the amount of taxes collected and since Evanston was close to 100%, we were considered a good risk. I of course recognize that both those gentlemen are liars of the highest order, so take that with a grain of salt.
5. The issue of what to do with the problem of the "soft costs" is a problem that I fear will be be solved by closing more schools faster. For all of Biz Ryan's talk about "making 50 year decisions" for the District, they are really making 2 year decisions to get out from under the effects of the necessary spending for the new building and the deficits brought about by poor management and total lack of oversight.
6. The real solution for this would be to have a referendum but that is an unrealistic option for a number of reasons starting with the fact that no one trusts the people on the Board to do the right thing and their demonstrated inability to manage the money they have already been given. Maybe it will be an option with a new Board, but that will be too late to save the day.
7. It continues to anger me that no one on the Board has had the courage to have a public discussion about Cordogan Clarks role in this mess. They knew that Horton was continuing to say that the new K-8 building would costs $40M when that was a total lie but never blew the whistle on it. The net result has been the trauma inflicted on the BR families and the generation of future D65 students who will have $3.25 million less in resources available to them because the District get neck deep in this project before the truth came out. The community deserves an explanation, but the Board doesn't have the courage to ask questions that would show their lack of diligence and common sense in approaching this project.
Cordogan Clark is a very expensive architecture firm. “ Construction is well underway “. Excuse me while I laugh. Transparency for Foster School but not for BR school.
Your bullet point recap of the numbers is astounding. So we all know that Horton and his CFO, Obefami, were crooked as the day is long but where is the CFO's support staff and do they still work for the district? The board always talks about trying to find out who was accountable but we never get answers. Given they were "lied" to (insert eyeroll) with false numbers, I would think they would be very curious. Then what happened the next year under Turner's control? That is the year we didn't have a CFO but someone had to pull the report. It's mind boggling the lack of basic math. I would suggest that anyone in the community with CFO expertise volunteer to help but they hired Grossi to do that and they aren't listening to him. OMG.
P.S. Is anyone writing a screenplay about this? Ha. The movie Bad Education on HBO, starring Hugh Jackman and Allison Janey, is about a corrupt superintendent in NY. The screenplay writer was a former student in that district. It is definitely worth a watch.
This is why Secret Superintendent Search 2.0 was so egregious. If we had a competent board--or one with any semblance of responsibility or shame, they would have said last year: "We messed up with hiring Horton. We didn't think that his lack of experience or the fact that he couldn't keep his personal finances straight would impact his job performance. This time we are going back to precedent by having a public, open search and we are going to prioritize bringing in candidates with a proven track record in managing a district turnaround."
Of course they did the opposite: another closed search that wound up hiring another inexperienced person with a problematic record (e.g. "Do Not Hire" Turner).
Yes. I finally have an answer to what they can do: put the $40m in an escrow account with some fixed interest rate product (rates are higher now than 2022 when they took the loan) and just pay it back from the escrow fund over time. But yeah, over the span of the lease cert, they will still pay something like $58m
I've said this before and I'll say it again - the language in the resolution the board passed does not match the language in the lease certificate. The language in the resolution says they can redeem it all back at any time and just pay interest up until the present. The certificate says they have to wait 10 years to do that kind of redemption. This seems like a big issue to me!
I think that’s unnecessary. You just do a tender offer on the bonds - the bond or lease cert holders (same thing). The prices of the bond payoff all-in is a function of rates and time to maturity. Given rates have gone up, that works in the favor of the prepayment cost.
This statement by Sergio on behalf of the Board makes no sense:
“It is no secret that there are many aging buildings in D65 which need over $188 million in repairs and improvements. The district's average building age is 77 years, greatly outpacing the anticipated average life span of 50 years. Having a state-of-the-art facility in a centralized location will allow for greater flexibility as the District addresses declining enrollment and the substantial capital investments needed to update our buildings.”
If I have $100, and I need $80 to fix up my dilapidated schools, if I spend $50 on a brand new school, I don’t have enough money left to fix up my old schools. Right?
Correct. Yes lease certs can’t be used for capex of existing bldgs but that doesn’t mean 1) the lease gets can’t be repaid, 2) as Tom mentions it doesn’t cover anticipated soft costs of $7m which would mostly accrue as the project moves forward (think C&C fees, attorneys, furniture for school)- most of which would be saved and would not add additional burden to the district as they have no plan for how this gets paid.
Enough w the simple math and logic! No place for that here.
Because “ they will have a state of the art facility in a centralized location……as the district addresses declining enrollment and the substantial capital investments needed to update our buildings” Please tell me how those two ideas connect. Can anyone draw a line connecting them ?
The already cut most of the "state-of-the-art" things from this building like the robotics lab and such.
I thought the same. How state-of-the-art is it going to be when we won't have the budget to fill the school so we will need to move old desks and furniture and equipment from all the closed schools instead.
The State of the Art will be Value Engineered!
We got it scrambled, I think actually Sergio's future biography is entitled "The Art of the State Takeover"
It's easy -- the enrollment will decline so much that the entire elementary population will soon fit in that centrally located new building and they will be able to offload everything else.
Oh now I get it. Thanks
Yeah- then they can bus all the students into the school! Of course, we can afford that once all the school buildings are sold.
I read it to mean a new building in a centralized location gives them the flexibility to close schools with significant capex requirements rather than fix them up. Consolidate students at the new school.
To me it is obvious that building a new school in the face of declining enrollment requires you to close at least one old school for it to make any sense. But it is politically easier to tout the ribbon-cuttings instead of the subsequent closures. Maybe they are right that greenfield is easier but it shows a lack of candor and transparency.
Sergio is patently wrong. It might not be the “cause” of the structural deficit today but it is certainly going to add to it. This statement gives me zero hope this board will be able to figure out how to reduce the budget by $15 million a year when they don’t even see how a new school contributes to expenses. Further what about the huge financial risk of finishing on time and on budget?
The fact that are board isn’t able to acknowledge that the school adds a $3 million annual cost to debt plus adds around 10 million of projected costs needed to be paid in 2025 that are not covered by lease certs and could be used for something else - this is basic finance. If you can’t understand it, step aside. You are spending taxpayer money that was never approved by taxpayers. This is NOT a sunk cost!
President Hernandez loses me with his logic that proceeding with the new school does not have an impact on the current structural deficit, because the deficit previously existed.
I tried to translate this to a hypothetical personal situation. An individual decides to build a new home. During the process of construction, he/she/they learn that their financial advisor cheated them and they now have significantly less money than they thought. No, the new house is not the cause of their financial
problem, but the decision to keep it makes the problem worse.
For the record, I think the new 5th ward school is an important issue, and I hope we can proceed. What I resent the most is the tortured logic that its expense isn’t adding to the deficit. It is. Sadly, everything has to be on the
table.
I posted this on the other thread from yesterday
The whole thing is like lying on a mortgage application to buy a million dollar house but then only getting a mortgage for half the money and then not buying the house for two years but also now you can't make the payments or live in the house
A few thoughts:
1. I love how Sergio send this to staff and carries on with the party line about being open and transparent without mentioning that the plan in January is to give somewhere between 15-25% of them their walking papers. That would seem to be pretty important.
2. Anyone who thinks there is any interest or will to consider pausing or canceling the project needs to be realistic about it. It may be awful financial practice, but they are going to plow ahead with it, so saying they should cancel it is an exercise in wishful thinking. Not gonna happen.
3. I agree with finishing the project. There have been millions of dollars spent and millions yet to be spent and we might as well get something out of it. Flip side is that millions of dollars set on fire and a giant empty hole where kids used to play would be a fitting endnote for Dr. Horton's time in our community.
4. If they are short dollars to actually complete the building, I don't know why issuing more lease certificates isn't an option. Clearly, actually having transportation savings wasn't the basis for issuing the original set. That was all bullshit from the word "go". If Raymond James didn't see right though that fraud during the underwriting process, they have the worst set of underwriters in the business. I had a Zoom call with Obafemi and Horton after I wrote my first letter to the editor, and they indicated from the standpoint of the bankers, what counted is the amount of taxes collected and since Evanston was close to 100%, we were considered a good risk. I of course recognize that both those gentlemen are liars of the highest order, so take that with a grain of salt.
5. The issue of what to do with the problem of the "soft costs" is a problem that I fear will be be solved by closing more schools faster. For all of Biz Ryan's talk about "making 50 year decisions" for the District, they are really making 2 year decisions to get out from under the effects of the necessary spending for the new building and the deficits brought about by poor management and total lack of oversight.
6. The real solution for this would be to have a referendum but that is an unrealistic option for a number of reasons starting with the fact that no one trusts the people on the Board to do the right thing and their demonstrated inability to manage the money they have already been given. Maybe it will be an option with a new Board, but that will be too late to save the day.
7. It continues to anger me that no one on the Board has had the courage to have a public discussion about Cordogan Clarks role in this mess. They knew that Horton was continuing to say that the new K-8 building would costs $40M when that was a total lie but never blew the whistle on it. The net result has been the trauma inflicted on the BR families and the generation of future D65 students who will have $3.25 million less in resources available to them because the District get neck deep in this project before the truth came out. The community deserves an explanation, but the Board doesn't have the courage to ask questions that would show their lack of diligence and common sense in approaching this project.
Cordogan Clark is a very expensive architecture firm. “ Construction is well underway “. Excuse me while I laugh. Transparency for Foster School but not for BR school.
Until the foundation gets poured, what they have done is super minimal.
Your bullet point recap of the numbers is astounding. So we all know that Horton and his CFO, Obefami, were crooked as the day is long but where is the CFO's support staff and do they still work for the district? The board always talks about trying to find out who was accountable but we never get answers. Given they were "lied" to (insert eyeroll) with false numbers, I would think they would be very curious. Then what happened the next year under Turner's control? That is the year we didn't have a CFO but someone had to pull the report. It's mind boggling the lack of basic math. I would suggest that anyone in the community with CFO expertise volunteer to help but they hired Grossi to do that and they aren't listening to him. OMG.
P.S. Is anyone writing a screenplay about this? Ha. The movie Bad Education on HBO, starring Hugh Jackman and Allison Janey, is about a corrupt superintendent in NY. The screenplay writer was a former student in that district. It is definitely worth a watch.
This is why Secret Superintendent Search 2.0 was so egregious. If we had a competent board--or one with any semblance of responsibility or shame, they would have said last year: "We messed up with hiring Horton. We didn't think that his lack of experience or the fact that he couldn't keep his personal finances straight would impact his job performance. This time we are going back to precedent by having a public, open search and we are going to prioritize bringing in candidates with a proven track record in managing a district turnaround."
Of course they did the opposite: another closed search that wound up hiring another inexperienced person with a problematic record (e.g. "Do Not Hire" Turner).
The fact is that the Board is writing checks that they can’t hope to cash. Will Evanston be the first muni in Illinois to reach junk bond status?
Yes. I finally have an answer to what they can do: put the $40m in an escrow account with some fixed interest rate product (rates are higher now than 2022 when they took the loan) and just pay it back from the escrow fund over time. But yeah, over the span of the lease cert, they will still pay something like $58m
I've said this before and I'll say it again - the language in the resolution the board passed does not match the language in the lease certificate. The language in the resolution says they can redeem it all back at any time and just pay interest up until the present. The certificate says they have to wait 10 years to do that kind of redemption. This seems like a big issue to me!
I think that’s unnecessary. You just do a tender offer on the bonds - the bond or lease cert holders (same thing). The prices of the bond payoff all-in is a function of rates and time to maturity. Given rates have gone up, that works in the favor of the prepayment cost.
You typically don’t have full participation in a tender offer but you can do it in tranches over time.