Jefferson – what needs fixing?

CUSD 200 is now looking at a New Jefferson Pre-K building building (without referendum) because they tell us it is a better use of money than fixing the existing building.

I found a 2017 Jefferson Early Learning – Ten-Year Safety Survey Report.  Total estimated cost to fix all remaining Life safety issues is less than $2 million.

In the mean time the district has paid for architects to produce new building plans in

  • 2007 (decided to do a referendum for Hubble – Jefferson waited),
  • 2012 (for 2013 referendum),
  • 2016 (for 2017 referendum)
  • 2018 (they have decided to ignore the law requiring a referendum)

Why don’t we just fix the existing building?

 

Attached to the agenda for 3/8/2017 is the
“Jefferson 10-year safety survey report.pdf”
Total estimated cost to fix all Life safety issues is less than $2 million.

see it:  Jefferson 10-year safety survey report2017

“Life safety” found in old minutes:

March 2017 minutes

Acceptance and Approval of Ten-Year Life Safety Survey – … as presented.

 

There was a question with regard to the ten-year life safety survey. This was in reference to the impact of Jefferson having violations and outstanding life safety items to be addressed. Mr. Farley noted that once the items are noted, there is a timeframe that the items need to be addressed by the district. It was noted that the items listed are consistent with prior surveys. The ten-year life safety survey is a mandate in Illinois. [The estimated cost to address the life safety items for Jefferson is $1.8M.]

 

June 2013

  1. Approval of Life Safety Extension for Jefferson Early Childhood Center – This item was moved to Action Items.

Once a Life Safety Amendment has received all necessary approvals, a school district has three years in which to complete the projects identified. If the projects are not completed in that time frame an extension of time request form must be filed with the Regional Superintendents Office. These reports are due by July 1. When life safety amendments have been completed as certified by the district architect, they are also submitted to the Regional Office of Education to close the amendment items.

Legat Architects has been inspecting District 200 buildings for life safety compliance. They have compiled a list of outstanding amendments that require filing of the extension form with the Regional Office of Education. With the exception of the Jefferson amendment, all outstanding life safety amendments have been addressed through the referendum work at the schools. The following amendment is still outstanding:

June 2011

  1. Approval of Life Safety Extension – Recommend the approval of the life safety extension as requested.

 

 

June 2010

  1. Approval of Life Safety Extension – Recommend the approval of the extension as presented.

 

June 2009

  1. Approval of Life Safety Extension – Recommend approval of the life safety extension as presented.

 

 

June 2007

  1. Approval of Life Safety Extensions – Recommend the approval of the application to the Regional Office of Education for extension of the Life Safety projects at Jefferson School as presented.

 

March 2007

  • Since the last report, several FOIA requests have been received. They include the following: copier and fax bids, candidate petitions, life safety surveys, architect presentations, employee contracts, Board Meeting minutes, and the contract for the Herrick Road Property and related documents.

 

Feb 2007

  1. Approval of Ten-Year Life Safety Surveys – Recommend approval of the safety survey as presented.

 

June 2006

  1. Approval of Life Safety Extension – Recommend the approval of the application for a Life Safety Extension of Time for Jefferson School.

CUSD 200 set to approve a new pre-k without referendum.

The next Wheaton-Warrenville, CUSD 200 school board meeting is Wed. 4/11/2018.  The agenda is posted

  • https://www.cusd200.org/
  • Click on “board of education” -> meeting agenda
  • Cick on the date
  • Then click on items and attachments to see what will be approved / discussed.

Building projects approved

  • At the March meeting, the board approved $2,136,380.00 for work on several buildings (secure entrances, tuckpointing, flooring…) and
  • $1,500,000.00 for the Jefferson escrow account.
  • In April, the plan is to approve $1,148,287.00 for paving and
  • the next phase of the new Jefferson project.

 

Jefferson estimate

Under action items, Approval to Proceed to the Construction Document Phase for the Early Childhood Center Project, the attachment provided by Legat Architects includes an estimate for the planned new Jefferson pre-school.

  • total construction cost $16,727,445
  • owners’ cost (such as landscaping) $369,675
  • post construction allowance (e.g., furniture) $1,288,125
  • Total estimate $18,385,245 
  • That does not include interest on the loan.

 

Can CUSD 200 afford it?

Last year, at the end of May 2017, CUSD 200 had less that $7 million in the bank.  At the rate the district is spending this year, what do they expect the balance to be at the end of May 2018?

 

Last year the $132 million referendum to cover maintenance on the other 19 school buildings as well as a new Jefferson failed.  Now they claim they can pay for a new Jefferson out of reserves and current revenue – without raising taxes.  How can that be?

 

Law? What Law?

Furthermore the law clearly state that a new building requires a referendum.

“Sec. 10-22.36. Buildings for school purposes. To build or purchase a building for school classroom or instructional purposes upon the approval of a majority of the voters upon the proposition at a referendum held for such purpose…”

Somehow, they have been convinced that the law does not apply.

So what will they decide at Wednesday’s meeting?

CUSD 200 video: board approves lease certificates and $1.5 million to an escrow account

School districts have decided that if they call the funding a “lease” then the part of the school  code requiring a referendum for each new building can be ignored.  If you haven’t been following this, see:

dupagewatchdog.org/2018/03/cusd200-plans-to-build-new-jefferson-against-taxpayers-will/ and

dupagewatchdog.org/2018/03/cusd-200-approves-financing-taxpayer-opinions-dont-matter/

Note: This is happening in Lisle as well

Lisle CUSD 202 is planning a new $39 Million PK-5 School. It was acknowledged by District as a clever scheme to avoid a ballot referendum.  They expect to break ground in June and finish in August 2019.   Their scheme sounds like CUSD200’s scheme, even includes the same players: PMA & Zion Bank.

My goals

  1. STOP CUSD 200 from going ahead without a referendum!
  2. Stop this for the entire state (the law is the law)

 

CUSD 200 Feb. 14, 2017 Board video

33:30 new early learning center (Jefferson) discussion starts

37:00 Bob Lewis of PMA starts presentation on how lease financing works and the documents the board will be approving.

39:00 can enter into a lease according to school code and mentions the ability to lease (no reference to need or lack of need for a referendum)

He gave the board sample agreement (also attached to the agenda)

44:00 when lease is complete, you can buy the building for a $1.

49:00 Bond Counsel (Chapman and Cutler) draft of legality of bonds Note: it avoids the question of  referendum

49:35 Bob “the first one I worked on was back in 2010, that was not the first one done.  The law was amended, I want to say back around 2000… the deals that have been done the last couple years, no need…

53:00 Jim Gambaiani asked, “can we lease something before it exist?”

Bob Lewis rambles… does not really answer.  Does note that he is not a lawyer.

54:00 Jim Vroman: “we have control over… the building”

55:50 Dr. Schuler – Says he will be asking our own general council to look as well.

57:00 Chris Crabtree: where do we get the authority to do this?

Dr. Schuler – school code…. “a court can make a determination on the law, how the law is applied.”

You can tell by the discussion that they are concerned about their authority to do this without a referendum.

 

CUSD 200 March. 14, 2017 Board video

 

22:50  Harold Lonks ask the board to table the vote on the new building until they have  an opinion on its legality.  He points out that the exception had to do with building the building – not the financing of that building.  And he read the floor discussion when the bill was passed.  A lease cannot be used to avoid referendum.

“…I want to make sure, Representative, that we’re not circumventing the right of the voters to say, ‘I don’t think that you ought to buy that building.’”

And Rep Crotty (bill sponsor) replied

“That is not in the Bill….When we’re talking about leasing, many school districts lease a building maybe for a dollar an hour just to be sure that that is not something that needs to be done with referendum.  So, we’re not changing that part.  And if there are added dollars needed for a school district, they most definitely have to still go through referendum.”

42:38 The board’s discussion and approval of the lease certificates

46:00 Dr. Schuler reads the beginning of one paragraph from 10-22.36

“Notwithstanding any of the foregoing, no referendum shall be required if the purchase, construction, or building of any such building (1) occurs while the building is being leased by the school district or (2) is paid with (A) funds derived from the sale or disposition of other buildings, land, or structures of the school district or (B) funds received (i) as a grant under the School Construction Law…”

The key phrase they are counting on is “occurs while the building is being leased by the school district.”  But, how can they lease a building that does not yet exist?  Furthermore, the “lease certificates” are being structured like bonds not a lease.  the only thing that is different is the name.  And the clear intent when the term “lease” was put into the law was NOT to circumvent the need for a referendum.  In Feb. the board members were clearly concerned about this.  In March, they all were OK with it.  What happened between meetings?

Notice the district never has legal counsel at the meetings.  Everyone is taking Dr. Schuler’s word that he has checked with the district lawyer and that the lawyer actually looked at the law.  They have nothing in writing!

On March 27 I received the following reply to my FOIA:

Ms. Shaw,

On March 20, 2018, you requested the following information:

a copy of the legal opinion regarding section (105 ILCS 5/10-22.36) of the school code substantiating Dr Schuller’s claim that a referendum is not required if a new building is “leased” for 20 years including an initial payment made in advance of the building being built, then purchased for $1.00 at the end of the lease. 


There are no documents responsive to your request.

Regards,

Robert A. Rammer, Ph.D.

Assistant Superintendent
Wheaton Warrenville Community Unit School District #200
P: 630-682-2015
F: 630-682-2326

51:00 they discus the initial lease payment. (Dr. Schuler & Jim Mathieson) The Initial lease payment of $1.5 million will be made in the next 30 days and will be held in escrow. If we do not go ahead with the project, any money not spent out of the escrow account will come back to the district.

Does not commit us to go forward until we have final numbers [Cost of the building].

53:30 Jim Mathieson – “…I just to be clear, we have our legal attorney, we have two banks involved, or at lest one, Zion Ban…  the lease holder  and in addition… each one of those parties is looking at this for legal purposes…”

Jim Vroman and Chris Crabtree have quick comments.

At 58:00 Jim Mathieson “…if this is challenged and delayed… if we don’t do it now there will be inflation and higher interest rates.” Justifying why they are in a hurry.

 

1:01:28 Rob Hanlon mentions that he feels comfortable with the legality.  “We seem to be the target of commentaries”

1:03:40  Brad Paulsen has a question about the payments that go up incrementally

1:04:33  Bob Lewis, PMA – “what you see there in the lease payments are the principle components. The interest component as is increases the overall.”
[Is that normal in a lease?]

JIm Mathieson

1:05:20 Brad Paulsen – runs through some history, feedback … says he’s excited about this solution.

1:09:00 Jim Vroman – He mentions the school code, and that he is comfortable with this

1:11:27 vote passed 7-0.

 

Final thoughts

1. What good are laws if there if public bodies choose to ignore them?  The LAW matters.  And the Law clearly requires a referendum for new construction.

2. They have yet to determine how much the new building will cost or if they can afford it.  Yet they have authorized placing $1.5 million in escrow that can be spent by PMA and Zion Bank to set up this agreement.  If they choose not to go forward, they will be refunded moneys not spent.

3. The district has  been spending everything they receive every year (no surplus).  What is in reserves comes from a state grant received about 5 years ago that was set aside for capital improvements.

4. They have not made any spending cuts, in fact gave Dr. Schuler a raise and new perks in his recent contract.  In justifying the 2017 referendum, they had estimated a need for $6.5 million per year to maintain all buildings.  When that expense is put into the 5-year plan the district will be in the red every year.

5.  I have told the district that if they cut enough from the salary and benefits to afford this (at least $2 million the first year) then I will help pass a referendum.

 

CUSD 200 approves financing – Taxpayer opinions don’t matter

Last night, March 14, 2018 at the CUSD 200 school board meeting the Board of Education voted 7-0 to approve the resolution authorizing and providing for a ‘lease and escrow agreement for the purpose of building and equipping a new early childhood center in and for the district’.  When the video of the meeting becomes available, I will post a link to it, listing key time points.  Apparently the board members decided to trust that this is “legal.”  I am NOT a lawyer, but, I can read English.  And this doesn’t sound legal to me.

Take a look at what the Edgar County Watchdogs wrote about it:

  • CUSD 200 – Laws? What Laws? – SCHOOL Districts using “Lease” to avoid the legal requirement for referendum to build new school edgarcountywatchdogs.com/…

 

Building Schedule

On Nov. 8, 2017 the Board of Education approved 6-1 Legat Architects’ schedule for the new Jefferson Early Learning Center – a new building WITHOUT taxpayer approval.  Key days according to it:

  • 04/06/18          Nicholas completes 90% D.D. Cost Estimate
  • 06/25/18          95% Construction Documents Complete – Start Final Comments Final Review & Coordination/ Scope of Work Summaries
  • 07/09/18          Issue Bid Documents
  • 08/15/18          Board Meeting: Award Construction Contracts [by then, the project & financing must be approved]
  • 08/16/18          Start Construction: Mobilization – 12 Months [for construction to start, financing must be secured]
  • 06/05/19          Start of Abatement, Demolition, Site Work and Parking
  • 08/21/19          Occupancy

 

Most likely in August 2018, the Board will  approve the project and sale of the Lease Certificates.  They can still decide not to go forward with the project if the cost is too high, they do not have the money to do this, or they become convinced that a referendum is required.

 

Financing Option – from Sept 2017

We found this presentation about financing options (with pros and cons for each) from PMA that was given last fall – September 2017.  Why did the district pursue building the new pre-k facility as a wing on an existing school last fall if they were so sure they could legally build a brand new Jefferson at the current location without a referendum?

https://www.cusd200.org/cms/lib/IL01001538/Centricity/Domain/12/091317%20Wheaton%20200%20Funding%20Presentation.pdf

 

Cut other spending first

I have told the board in public comments that if they go for another referendum after cutting enough from the bloated salaries and Benefits (starting with Dr. Schuler setting a good example) so that the district can actually afford this new building, while still maintaining the other 19 schools and without raising taxes… then I will help pass it. But, cutting the bloat comes first!  If the staff won’t give anything, then it must not be that important.

CUSD200 plans to build new Jefferson against taxpayers’ will

It is on the agenda for the next board meeting.

  • DATE:  3/14/2018 TIME:  7:00 PM
  • LOCATION:  WWSHS (1920 S. Wiesbrook Road, Wheaton, IL 60189)
After asking via Referendum twice,
And being told “NO” twice,
Wheaton-Warrenville, CUSD200 is looking to build a new Jefferson pre-school WITHOUT a referendum.
On Wed, 3/14/2018 the board plans to approve the issuance of “lease certificates.” The “lease certificates look, walk & act like bonds (not more than $14 million, not less than $10 million).  They are justifying this based on Section 10-22.12 of the School Code, which allows a school district to lease a building.
They are totally ignoring and avoiding Section 10-22.36 of the School Code which requires a successful referendum for any new construction unless paid for by donations, grant, or sale of other property. Their plan is to pay for the whole thing with the lease, and make the final $1.00 with money that is donated or comes from a grant.
This is obviously not in keeping with the intent of the law, and based on the verbatim discussion of the Illinois House when Section 10-22.36 of the School Code was last changed, is not in keeping with the intent of the law makers.  I have brought this to the attention of the board and the administration via email, and via public comments at the January 17, 2018 board meeting.  I also spoke at the March 7, 2018 finance committee meeting.
The community has said “NO” to the referendum twice, came out en mass to say “NO!” to adding an entire pre-school wing to Monroe Middle School (and gutting Graf Park).  It is time to tell them that they must do this via referendum.  And if they want the referendum to pass, they must cut the bloat from salaries and benefits so that the district can afford to do it out of current funds – starting with the Superintendent setting an example by agreeing to remove the recently added perks to his contract.
If I am the only one saying “NO!” they will proceed in authorizing the Initial Rental Payment of $1,500,000.
Please, if you live in the district, and believe the LAW should be followed, contact the D200 school board at board@cusd200.org or better yet, show up at the board meeting at make your public comments.

At the Last Finance Meeting 3/7/2018

 On 3/7/2018 I attended the CUSD 200 Finance meeting.Bob Lewis of PMA presented the lease agreement – sounds just like a Bond or financing agreement, except

  • they call it a lease
  • the district does not take the title for the new building until they pay $1.00 (with grant or donated money) after all “lease payments are made”
  • The district cannot raise taxes to pay this one.

When asked what part of the school code gives them permission, PMA referenced 10-22.12.  I asked why 10-22.36 does not apply.  Bob  responded “I don’t know what that is.”

 

During public comment I asked our superintendent, Dr. Schuler if he has something in writing from a lawyer as to why the district does not need a referendum.  He assured everyone that he spoke with the district lawyer and this is legal – nothing in writing.

In the pursuing discussion, it was implied that bond council looked at the legality.  But, bond council simply looked at the legality of issuing lease certificates.  The district’s general council should look at the requirement for referendum.

Did anyone actually look at the legality of leasing a yet to be constructed school, on school property, using “lease certificates” for funding without taxpayer approval as required by 10-22.36?

 

(105 ILCS 5/10-22.36) 

Sec. 10-22.36. Buildings for school purposes. To build or purchase a building for school classroom or instructional purposes upon the approval of a majority of the voters upon the proposition at a referendum held for such purpose or in accordance with Section 17-2.11, 19-3.5, or 19-3.10. The board may initiate such referendum by resolution. The board shall certify the resolution and proposition to the proper election authority for submission in accordance with the general election law.

The questions of building one or more new buildings for school purposes or office facilities, and issuing bonds for the purpose of borrowing money to purchase one or more buildings or sites for such buildings or office sites, to build one or more new buildings for school purposes or office facilities or to make additions and improvements to existing school buildings, may be combined into one or more propositions on the ballot.

Before erecting, or purchasing or remodeling such a building the board shall submit the plans and specifications respecting heating, ventilating, lighting, seating, water supply, toilets and safety against fire to the regional superintendent of schools having supervision and control over the district, for approval in accordance with Section 2-3.12.

Notwithstanding any of the foregoing, no referendum shall be required if the purchase, construction, or building of any such building (1) occurs while the building is being leased by the school district or (2) is paid with (A) funds derived from the sale or disposition of other buildings, land, or structures of the school district or (B) funds received (i) as a grant under the School Construction Law or (ii) as gifts or donations, provided that no funds to purchase, construct, or build such building, other than lease payments, are derived from the district’s bonded indebtedness or the tax levy of the district.

Notwithstanding any of the foregoing, no referendum shall be required if the purchase, construction, or building of any such building is paid with funds received from the County School Facility Occupation Tax Law under Section 5-1006.7 of the Counties Code or from the proceeds of bonds or other debt obligations secured by revenues obtained from that Law.

 

You can find these portions of school code by  starting at ilga.gov/

  • Click on “Illinois Compiled Statutes”
  • Click on “CHAPTER 105   SCHOOLS”
  • Click on “105 ILCS 5/ School Code.”
  • Press <ctrl-f> and Search for “10-22.36”

 

2001 modification to the law

The original law (105 ILCS 5/10-22.36) prior to 2001 stated that no referendum was required if the district used funds from the sale of other buildings or funds received as gifts or grants, provided that no funds were derived from the district’s bonded indebtedness or tax levy.  That was clear.  However, in 2001 the language was changed to add subsection (1) “while the building is being leased by the school district” as well as the clause “other than lease payments”.

The change was made by

  • Public Act 92-0127
  • Bill number: SB1035 of the 92 general assembly
  • Passed in the General Assembly May 01, 2001.
  • Approved July 20, 2001

In the transcripts for the House on 5/1/2001,

ilga.gov/house/transcripts/htrans92/t050101.pdf

on pages 49-52 Rep. Black asked

“…I want to make sure, Representative, that we’re not circumventing the right of the voters to say, ‘I don’t think that you ought to buy that building.’”

And Rep Crotty (bill sponsor) replied

“That is not in the Bill….When we’re talking about leasing, many school districts lease a building maybe for a dollar an hour just to be sure that that is not something that needs to be done with referendum.  So, we’re not changing that part.  And if there are added dollars needed for a school district, they most definitely have to still go through referendum.”

Those who passed it understood that it does NOT allow lease to own in order to avoid the referendum!

 

(105 ILCS 5/10-22.12)
Sec. 10-22.12. Lease of property for school purposes. To lease, for a period not exceeding 99 years, any building, rooms, grounds and appurtenances to be used by the district for the use of schools or for school administration purposes; and to pay for the use of such leased property in accordance with the terms of the lease. The board shall not make or renew any lease for a term longer than 10 years, nor alter the terms of any lease whose unexpired term may exceed 10 years without the vote of 2/3 of the full membership of the board.

 

See previous articles:

Pension recipients should want to fix pensions

top all

I have several neighbors who are are afraid, that if Illinois touches anybody’s pension that they  could loose their own.    First let me say

 

DON’T PANIC!
No one will take your modest pension

We can change pensions going forward, for new employees with legislation.  However, any modification to the  already promised pensions requires negotiation, the legislature placing an amendment on the ballot and the voters approving it.

Take a look at these top pensions.  Can you justify raising taxes on the working poor & middle income folks to fund these?  Will you be willing to make small changes now, in order to avoid a total collapse?

 

Taxpayers United of America – 2017 Pension Report

Starting at taxpayersunitedofamericaorg/items-of-interest/11th-annual-report-illinois-state-pensions and clicking on the reports for each of hte state-run pension funds, we find the top few state pensions are all for retirees in the State University Retirement System (SURS)

Top SURS

Top TRS

Top SERS

Top GARS

Top JRS

Top IMRF

  • Nearly 17,000 Illinois Government Pensions Exceed $100,000 as of 2017
  • Nearly 100,000 Illinois government retirees collect annual pensions totaling $50,000 or more.
  • The average annual Social Security retirement benefit for taxpayers is less than $17,000 and the maximum benefit is $32,000 if working until 66.

Comparing to census data

According to the US Census 2017 data for Illinois:  Bureauhttps://www.census.gov/quickfacts/IL

Median household income (in 2016 dollars), 2012-2016 was $59,196.
Per capita income in past 12 months (in 2016 dollars), 2012-2016 was $31,502.

And their state income tax went up last summer so that all pensioners can continue to get a 3%  compounded COLA (Cost of living allowance), including those receiving pension well in excess of the median family income.

 

Ives’ Statement of pensions:

ivesforillinois.com/ives-leads-the-charge-on-transformational-pension-reform/

 

Jeanne on the House floor

Watch Jeanne argue and kill a bill allowing a pension holiday

Jeanne Ives on FB-Live

If you are on Facebook, you can watch the FB-live video of Jeanne Ives at The University of Chicago Institute of Politics on 3/5/2018
UChicagoPolitics/videos/1234999409966504/

She says

  • “In the state of Illinois, when you look at the cost of our pensions, it is 23% of our income.  The average in other states is 3%.”
  • “Illinois has become one big Ponzi schemes.”
  • “The  police and fire in Chicago… are just one down-turn short of insolvency. “
  • “We are number 3 in the nation in terms of state support for full time equivalent student… it’s just that half of that goes to pensions…”
  • “In the last 30 years pension costs have grown over a 1,000%. In the same time, personal income has grown just over 100%… ten times!”
  • “We are number 1 in supporting pensioners. We are number 48 in supporting developmentally disabled.”
  • “If you had understood, how these pensions were ballooning, you would have had a decrease in the salary acceleration…”
  • “If we still had the same tenants in our pension plan, as we had in the 1970’s we would not even have a crisis.  They went from a 1.5 multiplier to a 2.2 multiplier.  They went from you have to be 62 or over 60, to you can retire with 2 years of sick leave accrual and retire before you are 55.  And then they went from a 1% COLA to a 3% compounded COLA…”

We need to have the discussion.  We need to find a way to ensure that pensions will be here for years to come while still providing state services and without chasing the taxpayers out of the state.

CUSD 200 can’t afford a new Jefferson Pre-school

Last year CUSD 200 produced a serrries of videos about the referendum.  This one discusses what happens if the referendum fails (which it did).

In it, Dr. Schuler says that if the referendum fails the model shows the board would need to set aside $6.5 million per year to maintain existing buildings.

 

At the Financial meeting on 1/31/2018 the staff presented a five year financial forecast

Wheaton 200 5Cast Presentation 1-31-18.pdf

On page 4 it says “Revenue by Source – Operating Funds Budget Total = $163,442,000” for FY 2018 Budget.  On page 10 “Expenditures by Object – Operating Funds Budget Total = $162,953,842.” Looks good, Revenues exceed expenditures.

But, one major omission – They did not include $6.5 million for anticipated capital expenditures that would be needed if the referendum failed.  It shows 1.94% (of $163 million) which is about $3 million for capital outlay. The predicted $6.5 million per year to maintain the buildings will result in a negative $3 million rather than surplus $0.5 million.

The district does NOT have the money to build a new Jefferson (financed by reserves and future revenues), maintain the other 19 schools and give the staff their anticipated annual raises without cutting any benefits and without raising taxes.  And yet, that is what district staff is recommending the board of education approve.

The next board meeting is Wed. Feb. 14, 2018.  Let’s see what the board decides.

School districts use “Lease-to-Own” as a huge – Illegal – Loophole to avoid Referendum

My goal is to make sure that CUSD 200 follows the LAW.

CUSD 200 has decided they can fund a new pre-K (after 2 failed referendums) with a lease-to-purchase agreement, without a referendum.   The school statute clearly contains language that allows the district to lease an existing building.  However, it also contains language that requires a referendum for any new building, with a possible exception.  Lease-to-own is not in that exception.  In the transcript when referendum exception passed in the House, the sponsor assured his fellow Reps that it could not be used to avoid referendums.  This gaping lease-to-own “loophole” has been used at least three times according to PMA in the last few years.  We fear that when school districts see others doing this, it will catch on like wildfire!

Wheaton-Warrenville, CUSD 200 plans to build a new Early learning Center (pre-k) at the existing site for $17.3 million without asking taxpayers and without raising taxes.  The new plan calls for the district to pay for a new Jefferson by dipping into reserves and borrowing money through so-called lease certificates for a term of up to 20 years.

This newly discovered loophole is inconsistent with the school code (105 ILCS 5/10-22.36) . The first paragraph says that all new building require a referendum.  The fourth paragraph lists exceptions.

Changes2 proposed to make law clear

The original law prior to 2001 stated that no referendum was required if the district used funds from the sale of other buildings or funds received as gifts or grants, provided that no funds were derived from the district’s bonded indebtedness or tax levy.  That was clear.  However, in 2001 the language was changed to add subsection (1) “while the building is being leased by the school district” as well as the clause “other than lease payments”.

The change was made by

  • Public Act 92-0127
  • Bill number: SB1035 of the 92 general assembly
  • Passed in the General Assembly May 01, 2001.
  • Approved July 20, 2001

We found the House transcript for the day that the school code in question was passed with the term “lease” added.

In the transcripts for the House on 5/1/2001,

http://ilga.gov/house/transcripts/htrans92/t050101.pdf

on pages 49-52 Rep. Black asked

“…I want to make sure, Representative, that we’re not circumventing the right of the voters to say, ‘I don’t think that you ought to buy that building.'”

And Rep Crotty (bill sponsor) replied

“That is not in the Bill….When we’re talking about leasing, many school districts lease a building maybe for a dollar an hour just to be sure that that is not something that needs to be done with referendum.  So, we’re not changing that part.  And if there are added dollars needed for a school district, they most definitely have to still go through referendum.”

Those who passed it understood that it does NOT allow lease to own in order to avoid the referendum!

 

CUSD  200 school Board meeting on 1/17/2018

Watch key points of the video.

Jan Shaw comments (start at 17:47):  https://youtu.be/wC9gRv3tTVM?t=17m47s

I questioned the legality of Lease Certificate and told them that they must cut something (starting with Dr. Schuler… admin… and teachers – end-of-career bonuses… & admin making their own pension contributions) then I will support a referendum for Jefferson.

 

PMA presentation for lease certificates…(starts at 1:57:00)  https://youtu.be/wC9gRv3tTVM?t=1h56m35s

Note: about 2:01:30 Jim Matheisen (a banker & school board member) asked “are we unique to doing this in the state of Illinois?”  … “so it is pretty clear in the law that a lease can be entered into before the building is built?”

PMA Rep listed districts that used these – all in the last year or two.  (about 1:58:00)

  • Sunset Ridge
  • Huckster (?)
  • Airoway schools (?)

Not finding the last two (please, comment if you recognize the names)

He made this sound like to the district, this is as if building with bonds, except they cannot raise taxes, they must sign a lease agreement, and the funding organization sells “lease certificates” rather than “bonds.”  He said the bank is just a “conduit.”

Current schedule shows interest starts accruing Aug 2018, and payments around Aug 2019.

Jan Shaw spoke again at the end https://youtu.be/wC9gRv3tTVM?t=3h1m

We found one of the districts PMA mentioned.

Sunset Ridge

Located in the Village of Northfield approximately 20 miles north of downtown Chicago, District 29 consists of two schools. Middlefork School serves students in kindergarten through 3rd grade, while students in 4th through 8th grade attend Sunset Ridge School. District boundaries include a large portion of Northfield, as well as a small section of Northbrook.

500 children

Feeds New Trier High School

Letter: Sunset Ridge: Demolish Or Renovate? Oct 27,2015

http://jwcdaily.com/2015/10/27/sunset-ridge-school-demolish-or-renovate/

We noted that this letter mentions Wight & Company – the firm CUSD 200 Board member Brad Paulsen works for.

PMA did the lease certificates for Sunset Ridge – the same firm CUDS 200 uses

http://www.pmanetwork.com/files/bondsales/Sunset_Ridge_SD_29_GO_LT_Lease_Certificates_2016A_POS.pdf

 

From D29 board meeting minutes and notes…

Sunset Ridge apparent timeline

  • Fall 2015:  district newsletter = a “capital lease” option to finance =
  • Oct 2015: LTE Demolish Or Renovate
  • Oct 13,2015: board authorized lease certificate agreement
  • Nov 10,2015: Board discussed the wording of the contract agreement with Chapman & Cutler
  • Fall 2015:  $9.7 million lease certificates issued
  • Feb 9, 2016: PMA presentation
  • Feb 2016: issued $15.3 million of lease certificates
  • April 12, 2016: reported that they had a ground breaking ceremony
  • July- Aug 2017 old build demolished
  • August 2017: temporary occupancy certificate for the new building

Who was involved

  • Wight & Company, Brad Paulsen works for them – Paulsen also serves on CUSD 200 school board
  • PMA financial – sold the Lease Certificates (also CUSD 200)
  • Pepper Construction (another one I recognize from CUSD 200)
  • Chapman & Cutler, the law firm that would serve as bond counsel (also CUSD 200 past bond issues)

Sunset Ridge lease agreement

Via FOIA, we obtained a copy of the lease agreement.  It refers to 105 ILCS 5/10-22.12 (Lease of property for school purposes).  Nowhere in the agreement does it reference the portion of the school code that details acquisition of a new building (105 ILCS 5/10-22.36).

Item 10 on page 24-25 details the purchase of the building for 1 dollar after all payments of principle and interest have been made (scheduled for 20 years).

D29 Lease Agreement-2016 page 24_25

This Lease, and all  real estate interest  transferred hereunder, shall terminate upon the earlier of(a) the 7th day of December, 2114, (b) the date on which the construction of the Building is completed; provided that (i) all of the lease payments required of the District by this Lease have been fully paid or provided for and (II) Illinois law then provides that title to the Building may be lawfully transferred to the District without the holding of a referendum or the doing of any other act by the District, or (c) the earliest date on which the District is then authorized by Illinois law to take title  to the Building; Provided that all of the lease payments required of the District by this Lease have been fully paid for  If this Lease terminates pursuant to the provisions of (b) or (c) above, the District shall have the option to acquire title to the Building from Lessor upon payment of One and No/100 Dollars ($1.00).  Upon such payment by the District, title shall immediately transfer to and vest in the District.  The Lessor agrees to take any and all action necessary to cause such transfer of title to District to be effectuated.  If the Lease terminates pursuant to the provisions of (a) above, title to the Building shall not transfer to vest in the District. [emphasis added]

D29 Lease Agreement-2016 page 26

p26 item 18. Opinion of Counsel.  The District agrees to supply the Lessor the opinion of Chapman and Cutler LLP, Chicago. Illinois, that there is statutory authority for the District to enter into this Lease, that the Lease and the Certificates have been duly authorized, Executed and delivered by the District, that the Lease and Certificates constitute valid and binding general obligations of the District in accordance with their terms payable from any funds… [emphasis added]

I have requested via FOIA a copy of “Chapman and Cutler LLP, Chicago. Illinois, that there is statutory authority for the District to enter into this Lease.”

School Code – what it says & does not say

While it is true that, the statutory language is clear that school districts can purchase a building that is being leased.  What we contend is not legal is what Sunset Ridge did and CUSD 200 is planning:

  • signing a lease for a building yet to be built to district specifications without referendum
  • Having the entire purchase price of the building paid in 20 years via the lease with the district taking title for $1.00 at the end of the lease period without referendum.
  • Having all money raised to pay for the construction via “lease Certificates” that look/act just like bonds to avoid a referendum. 

The only difference they claim is they cannot raise taxes to do it.  But, we all know money is fungible.  If they spend all reserves on a new building, they can borrow more via working cash bonds (without taxpayer approval) or cry poor and leverage the taxpayers for needs of other buildings.

If the interpreted of the existing law was to allow a lease-to-own for a building not yet even built, it would make the first section of 105 ILCS 5/10-22.36 moot & therefore that is not a correct interpretation.

From a friend who is an attorney:

As I read the statute, the lease exception would swallow the referendum requirement because any type of lease could be used to circumvent the referendum requirement as long as the district had funds on hand to pay the money. …

In reading the Chapman opinion, they write it very narrowly. They specifically do not opine as to the validity of doing the transaction without a referendum. They only opine as to the ability to enter into a lease, which is found in the school code; the ability to issue lease certificates, which is also clear; and the ability to pay the certificates.  They essentially assume authority for the underlying transaction.

Remember, Illinois is a Dillon’s rule state

That means the School boards only have the powers that are expressly granted in the school code.  Lease-to-own for school buildings is not granted and in fact conflicts with 105 ILCS 5/10-22.36.  All districts that have already done this, have broken the law. Not certain what to do about them especially if the new building is complete and the old one demolished.  We certainly should STOP any and all districts who are contemplating this.

Is the Haymarket Decision Final? Remember the ICWS

On Monday 2/5/2018, the Wheaton City council voted to not change the zoning law.  In so doing, Haymarket’s zoning request to allow them to open an in-patient & out-patient substance abuse center in the Danada are is being turned down.  That should end this request.  Residents still need to remain vigilant.

We have memories.   In 2014, after telling the Islamic Center Western Suburbs (ICWS) “NO” to their use of a house in unincorporated DuPage as a prayer center, the board suddenly changed their mind and voted yes to give ICWS the zoning change.  Hopefully, that will not happen this time in Wheaton.

 

As long as I’m thinking about it, here is how that vote went with a note of which of these people are up for election this year.

See: http://dupagewatchdog.org/2014/03/islamic-center-western-suburbs-icws-is-the-law-the-law/

 

Voted “aye” – for the ICWS and against the laws and rules of the county

Chaplin District 2 still on Board running for re-election
Curran District 3 In July 2017 he was appointed to IL Senate running for election 41st IL Senate
DiCianni District 2 still on Board running for re-election
Eckhoff District 4 still on Board running for re-election
Fichtner District 1 still on Board term expires 2018
Healy District 5), still on Board term expires 2020
Michelassi District 5
Nowak District 6
Puchalski District 1 still on Board term expires 2020
Tornatore District 1 still on Board running for re-election

 

voted “nay”

Grasso District 3 still on Board running for state AG
Khouri District 5 still on Board running for IL state House
Krajewski District 3 still on Board term expires 2020
Larsen District 6
McBride District 4 RIP
Noonan District 2 still on Board term expires 2020
Zay District 6 still on Board running in 2018

 

Did not vote

Grant Disrtict 4 still on Board running for IL House D 42