Loveland's Independent News Source
Loveland, October 3, 2014

The Thomson R2-J Board of Education abdicated its own legal authority to provide oversight of the
High Plains Academy financing plan Wednesday night by approving
a resolution not apparently
understood by the majority of board members voting in the affirmative.  

The High Plains Academy is a K-8 school to be built in Centerra using an elaborate scheme to avoid a
violation of TABOR (Taxpayer’s Bill of Rights) by financing up to $13.5 million of debt using
Certificates of Participation (COP’s) to build a portion of the school through a shell (dummy
corporation) instead of financing the construction with Bonds. (
read how COP's work).  

In this case, the dummy corporation, Thompson Schools Facility Corp., consists of three former Board
members, Jerry Westbrook, Jack Wilson and Marsha Venzke.  The three are used to create the
superficial appearance of a real company to raise the funds/debt through COP's while leasing the
school building back to the District.  In reality, they serve only as a rubber stamp for the District so
the public entity can argue in court it has not violated TABOR by incurring debt without voter

TABOR, a constitutional amendment passed by Colorado voters in 1992, prohibits local governments
from raising taxes or debt beyond population growth or inflation unless they receive permission from
voters through a ballot referendum.    A decade ago, Colorado’s Supreme Court ruled complicated
schemes using COP's can indeed serve as a legal loophole around TABOR with one caveat; the elected
officials must appropriate the funds annually instead of committing to a multi-year lease.

This caveat creates additional risk for investors who expect higher returns ultimately costing
taxpayer’s significantly more money than a bond approved by referendum would cost.  Bond brokers
earn more commission with Certificates of Participation so actively lobby elected officials to go this
route instead of putting the question before voters.  In the case of the High Plains Academy, an
increase of interest charges from 3% to 4% if amortized over 16 years of $10 million will cost
taxpayers an additional $1.2 million for a total of $4,5 million of interest paid.

Local Media Misleads Public Regarding Board Action

Contrary to what is being reported in local media, the actual resolution passed by the Thompson
Board of Education on a 5-2 vote does not establish the terms for financing the High Plains Academy.

The resolution authorizes the Superintendent to determine the key cost elements of the agreement
like the interest rates paid and lease payment obligations of the District.  The resolution also
authorizes a lease purchase and sublease agreement, a site lease, official statement, and “
the construction of the High Plains School and retiring the financing for the Dirstict’s
Administration building
” all without  providing the actual documents or terms being approved.   

Three documents referenced in the Board's packet are completely blank while others attached are
only templates where most or all of the figures and terms are left blank.  Board member Lori Hvizda
Ward, who apparently tried to read the package, is reported to have sent an email the day prior to
the meeting asking Superintendent Stan Scheer why certain documents were left completely blank
except for the titles.  In his response to the entire Board, Scheer confirmed those documents were  
left intentionally blank.   The only financial figure authorized by the Board in the resolution is the
limit of $13.5 million total debt using the following phrase,

“substantially the same content as the form thereof presented to this meeting of the Board, and
approves the amount of $13,500,000 as the maximum principal amount of the Certificates that
may be executed and delivered thereunder.”

The word “substantially” is used 27 times in the resolution to qualify the attachments as
substantially" what the final documents will look like even when the attached document contains no
numbers or is completely blank except for the title.

It is likely in a less politically charged atmosphere, Ward would have asked to see such documents in
final form before voting to approve blank documents.  Ward said nothing during Wednesday’s Board
meeting as her political ally and fellow Board member Pam Howard chastised another colleague for
asking questions claiming the “
professional” bond counsel and staff went through the documents or
figures “
with a fine tooth comb.”  Apparently, Howard was unaware she was actually voting on a
resolution empowering the staff to create the documents and later fill-in the blank figures she
thought they already reviewed with "
a fine tooth comb.”

Normally, a board of directors with fiduciary responsibility approves large debt and funding projects
in several phases but will always reserve the right to approve or reject the final price and terms.  In
this case, Superintendent Stan Scheer sought final board approval before those terms or prices are
even negotiated thus eliminating any further oversight by the Board except for the President's final
signature which the document contemplates will happen automatically without a review by Board.

Conflict of Interest?

George K. Baum & Company, a privately held Denver based investment firm, which submitted the
higher cost bid to finance the Certificates of Participation COP's, was chosen by a District committee
including Board Vice-President Bryce Carlson and Board Treasurer Denise Montagu.  K. Baum’s bid
was the highest received by the District’s bond committee, coordinated by the Superintendent,
exceeding the second qualified bidder by over $20,000 in fees alone.   The interest rate to be charged
is not yet determined.

Bryce Carlson and Denise Montagu would have already been familiar with K. Baum & Company while
reviewing their bid since they have both enjoyed free meals at the CASB (Colorado Association of
School Boards) annual retreat at the Broadmoor in Colorado Springs paid for by the bidder.  

K. Baum invites school board members and their spouses to a fancy meal and open bar during an
annual event in Colorado Springs.  LovelandPolitics inquired as to whether elected officials or staff
receiving gifts from K. Baum last December disqualified themselves from serving on the source
selection committee according to school policy.  Information provided to LovelandPolitics indicates
most all Board members and senior District staff regularly partake in free dinners hosted and paid
for by K. Baum during CASB events.

The lower-priced bidder, upon hearing the results of the bid, was disappointed to learn K. Baum was
chosen despite proposing $20,000 higher fees for performing essentially the same work.  Maybe next
time they can raise their fees by $10,000 and instead of giving taxpayers a better price to win invest
the difference in free meals for public officials who will be reviewing their bids.
School Board Votes Final Approval of
Blank Financial Terms
To Fund High Plains Academy


Another developer talking point that
has found its way into the reporting of
Loveland Reporter-Herald newspaper
falsely conveys the idea no tax money
is being used to build the High Plains
Academy and the funds are

Only a few hours before Wednesday's
board meeting which was being
reported live by Reporter-Herald staff
via Tweets, was the following

"The proposed financing structure
for the High Plains school won't
come from a mill levy or bond on
residential property taxes, and
taxpayers won't vote on an increase
in taxes to fund it."

Approximately $5 million of the $17
million being spent on the school is
coming from Centerra property taxes
(property taxes are collected through a
mill levy) which are currently being
diverted into Centerra's URA (Urban
Renewal Authority).  The term TIF (tax
increment financing) refers to that
money diverted which in Centerra's
commercial and industrial URA areas is
up to 97% of each Mill Levy including
the one for funding local schools.

According to a 2004 agreement
between the Thompson School District
and Centerra, McWhinney agreed to
return some of the taxes collected for
schools being diverted into their Metro
District that doesn't provide local
citizens any educational services.

The $5 million represents current
account balances which are
inadequate to pay for the school as
originally promised in the original
agreement.  Instead of McWhinney
paying the $12 million shortfall, the
Thompson School District is borrowing
the funds via the COP's and taking full
risk with the understanding
McWhinney's Centerra will earn and
divert sufficient future school mill levies
to cover the District's debt repayment

Unlike a regular contract that has
remedies in case one party fails to
perform, McWhinney's Centerra
agreement with the schools fails to
provide a bank letter of credit or surety
bonds if McWhinney's Centerra fails to
cover the District's loan repayment
using more TIF revenues.

The same year McWhinney arranged
the funding agreement with Thompson
Schools to repatriate a small portion of
the school tax revenue the Urban
Renewal Authority is diverting for 25
years, McWhinney also borrowed $116
million to develop Promenade Shops at

By 2009, McWhinney and their partner
in the Promenade Shops foreclosed on
the shopping center leaving a number
of banks holding the bag for $113
million note on a shopping center
valued at only $85 million.  In addition,
McWhinney's Centerra has failed to
fund the promised transportation
improvements in the 2004 agreement
and fallen short on sales tax revenue

Similarly, if McWhinney's Centerra fails
to pay the future TIF revenue to the
District for whatever reason, the near
$1 million annual lease payments on
the High Plains Academy could force
the District to lay-off significant
numbers of teachers or close other

McWhinney was unable to issue public
bonds for the Bass Pro Shops due to
an IRS ruling regarding a Florida case
where the developer, like McWhinney,
intends to perpetually control the
public's money.  McWhinney is
currently attempting what one City
Councilman called a "legal mirage" to
legitimize Centerra again as a
"quasi-public entity" eligible to issue
tax free municipal bonds.

Unknown to the Centerra residents
clamouring for the District to borrow
funds to build a school in Centerra, is
the fact the IRS has already
determined Centerra cannot continue
operating as "public" entity unless
McWhinney gives the public (those
residents) a voice in how their local tax
dollars are spent.

No word on any "taxation without
representation" movements in
Centerra anytime soon to change
McWhinney's tight fisted control of the
tax dollars from property they no
longer own.