About 50% of the $220 million Bond Program should be Operating & Maintenance funded, not funded with bonds. There is a reason they have structured the needs this way. And the reason adds to their consistent intellectual dishonesty I’ve already talked about a few blogs ago. It is bad and manipulative that MISD is bundling $200 million, including $50.3 million for a football stadium. Take it all or leave it all is their deal.
However, they are duping the taxpayers and deputizing the naive parents to help sell the whole package lest their children be held hostage for basic needs. Don’t buy it. They are including O&M items that should be paid out of the either the General Fund or a Repair & Replacement Fund set aside for known things that wear out. In fact, roof and HVAC lives can be predicted with a high amount of certainty.
There are $62.5 million in Comprehensive Upgrades. What are those? HVAC replacements, Roof Replacements, Plumbing & Electrical, Digital Marquees, Playing Service Replacements, and Equipment & Furniture Refresh. Why would MISD be selling 20-25 year bonds for things they know are going to wear out? Those items have been wearing out over the last few years. Why didn’t they spend $6.25 million for the last 10 years to take care of routine business? It would have been a drop in the bucket for their enormous budget?
There are $6.5 million for Security Cameras as well as Fire Panels & Fire Alarms. Those items could have fit into the previous category. But he oldest trick in the book is to put a little safety fear into your hearts. Oh, please! We are too intelligent for that kind of manipulation. That was a dead giveaway.
Then there is another $35 million for Technology. Much of that money is for student computers and related that by their very nature has a 4-7 year life.
I fully understand serial bonds. These bonds will be issued such that some mature in 1 year, 2 years … up to 20-25 years. But with such a huge load of O&M and small items, it is clear to me that there is a high likelihood of a mismatch between the bond payments and the useful life of the items purchased by the bonds. And that mismatch is a cardinal sin of debt financing.
My guess is that some of the other items listed under Additions and Renovations are really questionable as appropriate bond items. MISD gives us plenty of reasons to be suspicious.
MISD goes a step further in their carefully masterminded bond program pitch. They sprinkle every one of these O&M items to every single school. That gives the impression everybody gets something. Worse, you don’t get an defibrillator replaced in your kids’ school unless you vote for the football stadium. Check out the details at http://www.mckinneyisd.net.
But there is nothing I’ve said so far that even holds a candle to my last point. If you pay for O&M items out of the annual budget, it’s done. Keep it up properly and maintenance is slower to turn into repairs and repairs delay rehab and rehab delays replacement. And, as I’ve said, known replacement dates can be accurately calculated to set aside reserves to minimize debt.
But here’s the hidden part of debt. It’s not the interest paid. That is shown in debt schedules. However, the issuance of debt itself is not free. Not at all. The players that make that happen are: financial advisors, bond attorneys, underwriters, underwriters legal council, bond rating agencies, bank paying agents and more.
If there are $100 million of things being put into a bond issue that should have been paid out of an O&M budget, how much more money does that add to the issuance of debt? It can easily be 5-7% or $5-7 million. That exact number won’t be known until the bonds are sold. But an estimate can be made today, and the final amount will be very, very close.
Ask them. You should know the full story before you vote.
It makes sense to issue bonds for new schools, major additions and, yes, football stadiums for certain.
I’m not against the football stadium. If it were on a separate ballot and if MISD said in their promotional materials the cost is the tax rate equivalent of 4-cents, I’d vote for it.
But I don’t like all or none. And I don’t like blackmailing parents by adding in O&M so that every school gets a few crumbs, labeled as safety or critical needs, that have no business being part of long-term debt.
How a Board can either be so misled or, worse, complicit in this intellectual dishonesty is beyond me. LFM.