WCCUSD Can Retire State Debt

The following article is from the Tom Butt E-Forum

From: Butt, Tom
Sent: Sunday, August 21, 2011 10:06 AM

Subject: TOM BUTT E-FORUM: Explosive Financial News from the WCCUSD –
State Debt Can Be Retired Now!

Twenty years after the State of California unfairly saddled
future generations of children in the WCCUSD with penalties for the sins of a
former superintendent, the current school board, along with Superintendent
Harter, has found a way to finally jettison what has been a staggering debt and
the burden of a state trustee.

When what was then the Richmond Unified School District went
broke in 1991 and closed the schools early, several parents successfully sued
to keep the schools open. The California Supreme Court decision in the
resulting litigation, Butt v.
State of California
, was wildly successful in opening schools back up and
setting future constitutional issues regarding educational policy in
California, but it also resulted in a vindictive and punitive financial burden
imposed by the losers, in this case former Governor Pete Wilson.

Butt
v. State of California, 842 P.2d 1240 (Cal. 1992).

The
California Supreme Court ruled that the state was responsible for the
fundamental educational rights of students and that the state must take action
to address a local district’s inability to provide an education basically
equivalent to that provided by other districts in the state. In so ruling, the
Court stated that the California State Constitution makes public education “a
fundamental concern of the State and prohibits maintenance and operation of the
common public school system in a way which denies basic educational equality to
the students of particular districts. The State itself bears the ultimate
authority and responsibility to ensure that its district-based system of common
schools provides basic equality of educational opportunity.”842 P.2d at 1251.

Millions of dollars have been siphoned off
the WCCUSD budget every year to repay the $35 million loan, and the children of
West County have suffered mightily. Now the WCCUSD board, led by Charles
Ramsey, has found a way to not only throw off that oppressive debt but to use
the savings to increase this year’s instructional budget.

The remaining balance on the state loan is
$9 million, and the District had budgeted $1.5 million for debt service this
fiscal year (The interest rate charged by the state is also usurious and
vindictive). It turns out that the District had been required by the state
trustee to maintain a $9 million Debt Service Account. Adding that $9 million
to the $1.5 million already budgeted for interest, the District has $10.5
million available to pay off a $9 million debt! The $1.5 savings can go back
into the classroom.

The only condition is that State
Superintendent of Public Instruction, Tom Torlakson, must approve. The
District will soon be making this request, and it is hard to imagine reason why
Torlakson would not consent.

In a related matter, the District also pays
the $75,000 annual salary of the state-appointed trustee. Once the debt is paid
off, the trustee should also go away, along with his $75,000 compensation,
but this also requires Torlakson’s approval.

Ramsey will soon be looking for widespread
support from District residents and City Councils within the District to
petition Torlakson to let WCCUSD finally end this travesty.

Ramsey is also looking at restructuring the
Districts debt on some old Certificates of Participation (COPs), which could
save another $100,000 annually
.

Despite the burden of the loan debt and
devastating state funding shortfalls, the WCCUSD remains in remarkably good
fiscal health, particularly in its capital program.  The District’s bonds
are currently rated at higher levels on an aggregate basis than at any other
time in the past twenty years. This is a reflection of the relative strength of
the District’s tax base, the relative wealth levels of District residents, the
relative strength of the District’s financial performance, and the relatively
high debt burden.

In another financial coup for the District,
on August 10, the District took a bond refunding bond deal to market, a
culmination of a great deal of planning and work by our Bond Finance
Team.  The market conditions were very favorable for Municipal Bonds , and
this refunding has saved the local taxpayers over $7 million. Part of
what drove increased investor interest was the improvement in ratings.
The upgrade from Standard & Poor’s leaves the District’s bonds with ratings
of “Aa3” from Moody’s and “A+” from Standard & Poor’s and Fitch.

The refunding bond transaction was a
tremendous success from a variety of perspectives.  Taxpayer savings
achieved were nearly twice the levels targeted and discussed just two weeks
previous to the sale.  Tax rates on the 2002 Measure D bonds will remain
at least close to targeted levels for the next two years.  The possibility
that tax rates on the 2000 Measure M bonds will increase greatly within the
next five years has been significantly reduced (though not
eliminated).   Perhaps most importantly, the District’s bond program
continues to move in the right direction with regard to bond ratings and appeal
to investors.

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One Response

  1. Great news. Thank you Thomas Butt and Charles Ramsey!

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