LovelandPolitics
| 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
approval.
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 “financing
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.
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
approval.
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 “financing
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 |
SOURCE OF FUNDS 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 guaranteed. Only a few hours before Wednesday's board meeting which was being reported live by Reporter-Herald staff via Tweets, was the following statement: "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 expenses. 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 Centerra. 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 projections. 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 schools. 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. |