Tag Archive for Measure Q (Sacramento City Unified School District November 2012)

Voters Approve Selling Bonds to Borrow Huge Amounts of Money for Construction in Four Educational Districts that Use Project Labor Agreements

All four of these school districts require contractors to sign Project Labor Agreements, and the San Diego Unified School District has already approved a resolution requiring contractors to sign a Project Labor Agreement for certain future construction funded by Proposition Z.

  • At the Sacramento City Unified School District, 69% of voters approved Measure Q and 67% of voters approved Measure R. These authorize the school board to borrow $414 million through bond sales for construction.
  • At the Solano Community College District, 62% of voters approved Measure Q. This authorizes the governing board to borrow $348 million through bond sales for construction.
  • At the West Contra Costa Unified School District, 63% of voters approved Measure E. This authorizes the school board to borrow $360 million through bond sales for construction.
  • At the San Diego Unified School District, 60% of voters approved Proposition Z.  This authorizes the school board to borrow $2.8 billion through bond sales for construction.

Who’s Paying to Convince Sacramento Voters to Take On $414 Million of Additional Debt – Plus Interest – with Measures Q and R?

Measures Q and R on the November 6, 2012 ballot ask Sacramento voters to let the Sacramento City Unified School District Board of Trustees borrow a total of $414 million for construction by selling bonds to institutional investors. Sacramento taxpayers must pay this money back to the investors – with interest! It will cost at least $734 million – perhaps more if the district is lured into selling Capital Appreciation Bonds.

The opposition web site to Measures Q and R: www.fairandopencompetitionsacramento.com

Here are a couple of my observations about contributions to the campaign, based on the Sacramento City Unified School District – Yes on Q and R Campaign Form 460 – through September 30 2012 and the Sacramento City Unified School District – Yes on Q and R Campaign Form 460 – through October 20 2012.

1. This Campaign Is a Sitting Duck for Accusations of “Pay-to-Play”

Here’s a list of all of the campaign contributors through October 20, 2012, with links to the company web sites, the amounts contributed, and the business interest of the contributor.

DONOR INTEREST AMOUNT
Plumbers and Pipefitters Local Union No. 447 Construction trade union $25,000
Lozano Smith Law firm for school districts $10,000
Cumming Construction management $5,000
California Association of Realtors Selling houses and protecting interests at the state capitol $5,000
Landmark Construction Construction company – built past SCUSD schools without and then with a Project Labor Agreement $5,000
Lionakis Architect $5,000
Orrick, Herrington & Sutcliffe Bond counsel $5,000
Sacramento-Sierra’s Building and Construction Trades Council Construction trade unions $2,500
[Central Valley Sheet Metal Industry] Labor Management Cooperation Trust Union-affiliated labor-management cooperation committee $2,500
DLR Group Architect $1,500
Northern California Carpenters Regional Council Construction trade union $1,000
Operating Engineers Local Union No. 3 District 80 Construction trade union $1,000
Kronick, Moskovitz, Tiedemann & Girard Law firm for school districts $500
Loan from Patrick Kennedy for SCUSD Board of Education School board member’s political campaign fund $528
Williams + Paddon Architects + Planners Architect $500
Bricklayers and Allied Craftsworkers Local Union No. 3 Construction trade union $250
Other $25
TOTAL $70,303.00

2. Another Labor-Management Cooperation Committee Contributes to a Campaign

How many people in Sacramento know about the Central Valley Sheet Metal Industry Labor Management Cooperation Trust? There’s only one place on the web where you’ll read about labor-management cooperative trusts, and you’re reading it now. These trusts are arcane entities authorized by the obscure Labor-Management Cooperation Act of 1978, a law signed by President Jimmy Carter and implemented by the Federal Mediation and Conciliation Service. There are no federal or state regulations specifically addressed toward these trusts, and these trusts do not have any reporting requirements to the U.S. Department of Labor’s Office of Labor-Management Standards.

Sacramento City Unified School District Superintendent Latest School Official to Use Public Resources to Campaign for $414 Million Bond Measures Q and R

The Fair and Open Competition – Sacramento committee – the primary organized opposition to Measures Q and R in Sacramento – submitted a complaint this afternoon (October 22, 2012) to the board of trustees of the Sacramento City Unified School District objecting to the latest example of using school district resources to campaign for Measures Q and R on the November 6, 2012 ballot. The letter demands that the school district cease and desist from use of school district resources to campaign for these bond measures.

According to the email, “Superintendent [Jonathan P.] Raymond is illegally using school district resources to campaign in favor of Measures Q and R.” The letter refers to and includes an email received at 11:23 a.m. on Friday, October 19, 2012 from Superintendent Raymond to “All SCUSD Users” entitled “Letter to Staff – October 19, 2012.”

Superintendent Raymond writes that schools need updating, and Measures Q and R would provide the funding to upgrade and renovate the facilities. He claims that “The cost of failing to make a move in the direction of the future is huge.” He then urges recipients to “learn more about Measures Q and R” and “remember to vote on November 6.” Just in case staff cannot figure out the subtle message, the superintendent happens to mention that the Sacramento City Teachers Association and the Service Employees International Union (SEIU) endorsed Measures Q and R. (Do the will of your union!)

I’m sure the school district will defend the email with the same argument it uses on the Sacramento City Unified School District web site page for Measures Q and R: “SCUSD cannot tell people how to vote, and SCUSD employees are precluded by law from using tax-supported resources, time or equipment to lobby either for or against any ballot measure. SCUSD can, however, share factual information about a ballot measure’s impact.”

The FACTUAL INFORMATION is that the measurable cost for the future will be huge if voters approve Measures Q and R, while the measurable cost if the voters reject Measures Q and R will be nothing beyond how much the district has already spent to develop the bond measures and place them on the November 6, 2012 ballot.

These two measures authorize the school board to borrow $414 million by selling bonds. To its credit, the Sacramento News & Review, in its pro-bond measure article Homework Improvement, actually informed its readers how a bond works and provided an estimate of the interest that taxpayers will pay on these bonds:

Each requires 55 percent approval by voters. And each would be paid back over time by additional taxes on area homes and commercial property. The district says the measure will cost the average homeowner about about $7 a month on their property taxes.

As with any financing, there’s interest, and the amount of money that has to be paid back is much higher than the amount borrowed. The district estimates that the bonds will ultimately cost taxpayers $734 million over 25 years, in exchange for $414 million borrowed today.

This is not the first time the school district has been accused of using public resources to promote Measures Q and R. I’m hearing reports from Sacramento voters that officials of the Sacramento City Unified School District are testing the limits and exceeding the limits of the use of public resources to promote a Yes vote on Measures Q and R. In addition, the California Taxpayers Association reported the following campaign antics at the Sacramento City Unified School District in its article “Public Education Officials Using School Resources to Campaign for Tax and Bond Measures”:

In the Sacramento City Unified School District, School Board Member Patrick Kennedy addressed a mandatory meeting for parents at Leonardo da Vinci K-8 School on September 12, and used his entire presentation to urge support for Proposition 30 and two local school bonds. He did not mention Molly Munger’s tax initiative, Proposition 38, which is focused on directing more money to schools, nor did he discuss how the local bond proposals (Measure Q and Measure R) would increase taxes for property owners in the district. The school’s September 4 newsletter, distributed by the school to all parents, also included a message urging support for the two bond measures, with no details to educate parents about the proposals.

I suspect the school district’s use of public resources to promote Measures Q and R are an indication that supporters of the bond measures (and their political consultants) are concerned that voters might reject them on November 6, 2012. For the official, comprehensive arguments against the bond measure, see the web site Vote NO on Sacramento’s MEASURES Q and R: Borrowing $414 Million from Investors, Paying It Back with Interest.

An Overlooked Feature of Bond Measures for School Districts: Fees to Underwriters and Financial Service Firms

Under contract to Fair and Open Competition – Sacramento, I’ve developed a modest web site presenting an argument against Measures Q and R, two proposed bond measures at the Sacramento City Unified School District. It’s not a pretty web site, but it’s packed with information obtained from primary source material – information not available anywhere else. See Vote No on Sacramento’s Measures Q and R.

If voters in the school district approve these ballot measures at the November 6, 2012 election, the school board of Sac City Unified will have authority to borrow up to $414 million for construction by selling bonds to investors. Property holders in the district will pay that back – with interest – through taxes. Current debt for the school district’s two previous bond measures totals $522 million. Basically, these proposed new bond measures will create a billion-dollar debt for this school district.

During my research, I decided to investigate how much the district has paid in fees to underwriters (bond brokers) and other financial service firms that assess fees when bonds are prepared and sold. The total comes to almost $6 million.

Bond Issue Financial Transaction Fees
Official Statement – Sacramento City Unified School District – $50,000,000 – General Obligation Bonds, Election of 1999, Series A 2000 $404,375.42
Official Statement – Sacramento City Unified School District – $52,310,000 – General Obligation Refunding Bonds 2001 $592,524.77
Official Statement – Sacramento City Unified School District – $45,000,000 – General Obligation Bonds, Election of 1999, Series B 2001 $394,463.50
Official Statement – Sacramento City Unified School District – $45,000,000 – General Obligation Bonds, Election of 1999, Series C 2002 $486,543.56
Official Statement – Sacramento City Unified School District – $80,000,000 – General Obligation Bonds, Election of 2002, Series A 2003 $483,000.00
Official Statement – Sacramento City Unified School District – $64,997,966.35 – General Obligation Bonds, Election of 1999, Series D 2004 $615,158.17
Official Statement – Sacramento City Unified School District – $80,000,000.00 – General Obligation Bonds, Election of 2002, Series 2005 $737,700.00
Official Statement – Sacramento City Unified School District – $64,997,966.35 – General Obligation Bonds, Election of 2002, Series 2007 $757,134.42
Official Statement – Sacramento City Unified School District – $79,585,000 – General Obligation Refunding Bonds 2011 $522,897.60
Official Statement – Sacramento City Unified School District – $113,245,000 – General Obligation Refunding Bonds 2012 $849,939.95
Total Fees $5,843,737.39

Supporters of Measures Q and R might defend these fees by pointing out they only comprise 1.4 percent of the total amount of $420 million borrowed under the authority of Measures E (1999) and Measures I (2002), and the fees paid for the sale of the three refunding bond series were offset by the resulting reduced cost of interest payments. Fair enough, but don’t claim in your ballot arguments for Measures Q and R that “Every penny from Measures Q and R will stay in our community” and “ALL of the money raised by these measures will stay in our community.” That’s just not true. Set aside the issue of interest payments to wealthy individuals and institutional investors in New York City and other financial centers – the $5.8 million in transaction fees is proof that some of the money did NOT stay in the community.

I suspect such statements from proponents reflect a lack of understanding of municipal bonds or a cynical recognition that ordinary voters don’t understand municipal bonds.

One thing I did not research was whether or not the underwriters who assessed these fees were donors to the campaigns to pass Measure E (1999) and Measure I (2002). Here is another excerpt from the Vote No on Sacramento’s Measures Q and R web site:


Learn How Bond Brokers, Bond Dealers, Bond Underwriters Spend a Little Money to Make a LOT of Money Selling Bonds for California School Districts.

Not all bond brokers improperly influence school boards. In fact, some have high integrity and are speaking out against the inappropriate conduct of some underwriters in their industry.

But clearly things have gotten out of control since California voters narrowly approved Proposition 39 in November 2000. Borrowed money began gushing into California school districts, and everyone wanted a piece of the action.

In fact, a September 13, 2012 letter to the Municipal Securities Rulemaking Board from the California Association of County Treasurers and Tax Collectors urged the Board to consider a complete prohibition on brokers, dealers, and other municipal finance professionals from making political contributions to campaigns of local governments (such as the Sacramento City Unified School District) to get voter approval to borrow money from investors by selling bonds. The letter identifies the origin of the problem as Proposition 39.

The issue of bond brokers being major donors to campaigns to pass bond measures has not gained much attention, but it should. A specialty publication –The Bond Buyer – and a news service – California Watch – have been the leaders on investigating this obscure but significant scheme. Here are some articles that reveal the problem:

Brokers’ Gifts That Keep Giving – The Bond Buyer – January 13, 2012

When broker-dealers give money to California school bond campaigns, it appears to be money well spent. A review of campaign finance records by The Bond Buyer found a nearly perfect correlation between broker-dealer contributions to California school bond efforts in 2010 and their underwriting subsequent bond sales…

With Campaign Donations, Bond Underwriters Also Secure Contracts –California Watch – May 3, 2012

Leading financial firms over the past five years donated $1.8 million to successful school bond measures in California, and in almost every instance, school district officials hired those same underwriters to sell the bonds for a profit, a California Watch review has found…

Critics Struggle to End ‘Pay to Play’ in School Bonds – California Watch – May 14, 2012

Critics of the practice in which financial firms help pass school bonds that they profit from are continuing to push for reforms, but so far have faced resistance and failure. In California, underwriting companies hired by school districts to sell bonds often make campaign contributions to help convince voters to pass the bond measures…

Some California FAs [Financial Advisors] Use Pay-to-Play Tactics, Critics Say –The Bond Buyer – May 24, 2012

Firms that work as financial advisors helping California school districts issue bonds after serving as campaign consultants on the preceding bond measure have a conflict of interest and are engaged in a form of “pay-to-play,” critics say. Such firms, a small subset of the financial advisor sector in California, walk the school districts through the bond election process, then help the them select and negotiate prices with underwriters and bond counsel for the subsequent sale. In many cases, they are paid both by the political action committee formed to pass the bond measure, which receives contributions from underwriters and the bond counsel, and then by the district…

Underwriters Paying to Pass Bond Issues Face Scrutiny – Business Week – May 24, 2012

Over the past five years, underwriters gave $1.8 million to successful school-bond campaigns in California and got almost all the work selling the approved bonds, California Watch reported earlier this month.

Underwriter Bought Meals For Poway Board – San Diego Union-Tribune – September 1, 2012

The underwriter of Poway Unified’s controversial $105 million bond deal hosted $2,200 in dinners for the school district’s officials in recent years — most of which they accepted and initially failed to report on state-mandated disclosure forms. In March, the officials belatedly disclosed the meals dating back several years, as the District Attorney’s Office prosecution of South Bay school board members for failing to report such meals made the news…

Muni Groups Urge More Action on Bond Ballot Campaigns – The Bond Buyer – September 18, 2012

Municipal analysts and other muni market participants are urging the Municipal Securities Rulemaking Board to strengthen a proposal to tighten bond-ballot campaign contribution reporting requirements for dealers. In comment letters filed in recent days, several participants urged the board to do more to attack corruption and protect the voting public, with some suggesting there should be an outright ban on such contributions rather than disclosure requirements.

California Capital Appreciation Bonds Have Unintended Consequences – The Bond Buyer – September 20, 2012

The recent controversy over the way some California school districts use capital appreciation bonds may reflect the law of unintended consequences…

Feds Urged to Crack Down on Donations to Bond Measures – California Watch – September 21, 2012

Critics of political donations to school bond campaigns from companies that profit from the bonds are urging federal regulators to take bolder steps against what they call a “pay to play” practice.