D211 finances


District 211 school board member Bill Lloyd blogs in response to a reader’s questions about the financial condition of D211.

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Readers: Please be sure to read all the comments on this post. The bottom line is that our taxing entities locally, not just District 211, have legal ways to raise our taxes without a vote and get around any spending or tax limitations imposed by the legislature. We all need to understand how this works. Please add comments or ask questions in that comments thread.

Or email me. I protect your confidentiality. There’s a culture in this district where teachers, parents and others are concerned about social reprisals and being stigmatized and until that changes, at least by emailing me you can raise your questions and concerns without fear.

And thank you, Bill Lloyd, for being patient and forthcoming as we try to figure all this out.

I’m hoping someone out there can help with this information requested by a reader:

In the late summer or autumn of 2006, the Daily Herald ran a very informative series of 3 articles on the subject of restructuring long-term debt, with a focus on local schools. The article mentioned how a school might do this to save money in the short term by lowering payments– for instance, they might take a 10 million-dollar debt originally financed over 10 years and stretch it out to 15 million over 20 years. The lenders for such debts, who will make more money in the long run, will give the borrower a bonus for agreeing to such a contract. District 211 participated in such a re-finance.

This matters a lot. This practice is actually illegal in about a dozen states (not ours) because basically, a debt is financed (on the taxpayers) at an agreed amount, and then this re-finance is NOT what taxpayers originally agreed to and actually costs MORE in the long run. Plus, the district may have entered this agreement under the worst possible terms, similar to going on an ARM when you buy a house.

I’m sending a link to this to Bill Lloyd, the school board member who actually communicates with his constituents.What the reader is saying is that apparently, District 211 re-negotiated the terms of one or more long-term debts to spread the payments out over more years. The voters agreed to the debt, but did not agree to the re-negotiated payment terms.

If I understand the question correctly, this would be like if you and your spouse agreed to take on a $200,000 mortgage on your house to be re-paid over 15 years. One day you find out that your spouse has re-negotiated the terms of the loan, turning it into a 30-year loan. The monthly payments will be lower but you’ll end up paying a lot more in the long run. The lender gave your spouse a bonus to do that (the lender will make more money from the 30 year loan than from the 15 year loan) which your spouse promptly spent on a new boat.

The questions are: When we approve a bond issue at the polls, do we also vote on the repayment terms? (Sorry for my ignorance.)

If we do vote on the repayment terms (such as approving a debt to be repaid over 10 years) and not just on the amount of the debt, it appears that our District 211 board, in Illinois but not in some other states, is legally allowed to re-structure the repayment terms later on, and that they did so.

Let’s get some clarity on what happened. Who can help? Email me or post a comment below.

Read this comment in response to this post.

The cloud over Superintendent Roger Thornton’s claim that the District saved money on electricity by buying it from the Illinois Energy Consortium becomes darker every day.

D211 board member Bill Lloyd posted a very informative short essay on his new D211 blog over the weekend about the impact of the 2005 referendum.

In the short essay, Mr. Lloyd notes that what the district projected it would have in the education fund cash reserve at the end of each fiscal year if the referendum passed, and what it actually has, are two very different things.

The District estimated it would have $19,500,000 as of June 30, 2006.

It actually had $46,300,000. 

At the end of January 31, 2007, it had $61,000,000 in the education fund cash reserve (EFCR).  The District has tens of millions more in the account already than it projected it would have in 2010.

And yet, as Mr. Lloyd points out, the stratospheric and growing levels in the EFCR did nothing to temper the board’s hunger for a huge new “working cash” bond issue of $53 million approved in mid-2006. The bulk of that $53 million is being spent on construction projects in schools whose enrollment is expected to decline, according to the district’s own projections.

Mr. Lloyd writes:

When it was raised at the board table, the majority of the board was unwilling to discuss the need for borrowing the full $53 million given the revenue windfall the district is taking in through the education fund. Further it did not stop to consider the relationship of the declining enrollment projections and the scope of the construction project, i.e. was the entire project needed or could it have been scaled down given the enrollment projections.

The majority of humans fear conflict and will go to great lengths to avoid it. Mr. Lloyd has to regularly sit around a board table with the other six board members.

We all know that when you state your disagreements in a public forum, you risk various kinds of social ostracism. A situation usually has to be pretty dire before someone will take that risk.

I strongly commend Mr. Lloyd for his courage.

And, of course, for his commonsense ideas of what long-term responsible fiscal stewardship would look like in D211.

Congratulations to Districts 211 and 15 for achieving the desirable rank of recognition from the ISBE for their financial position.