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.

 

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