• Emily Berry

Laying the groundwork for a big pile of debt

I'll start this post with a positive: a room full of people showed up last week to hear about the district's facilities plan and the role of its Facilities Advisory Community Team (FACT). Hooray! It was about 300% the size of crowd that usually comes to school board meetings. I'm optimistic that most of them, and maybe some new people, will show up to the first official FACT meeting, June 20 (if you missed the kickoff, you can still attend the June 20 meeting). It was great to see so many people interested in serving on this group, and heartening to hear that they came from a variety of backgrounds and perspectives, including former school board members, parents and other taxpayers.


To help bring the room full of attendees up to speed, board members and Business Manager Patrick Miller reviewed some of the same information they have been sharing for months. Unfortunately this included a graph that gives a misleading look at our district's past and future debt payments by year. The intent seems to be to show how the district's required debt payments will fall off after next year, leaving lots of room for us to borrow more money and schedule repayment for the next two decades plus, without ever raising the district's tax rate. I've talked about why this is a misleading proposition before (I'll wait here while you read that old post). The basic problem, if you don't have time to read it, is that we are at a historic high in our debt repayment. It's not been the norm for us to pay down $4 million in debt each year -- it's what we've chosen to do as a way to save on interest payments later on, because we conveniently have been taxed enough to leave a surplus in our debt service fund.


[Time out while I note something important that I didn't do a great job explaining in my prior post: the district can't just take that debt fund surplus and renovate bathrooms or fix old plumbing with it. That kind of upkeep has to come from our general fund, or else be explicitly included in what the district told taxpayers their borrowing was coming from when they originally approved the referendum authorizing borrowing.

In order to spend more on operations and maintenance, as I understand it, the district has two choices: 1) ask taxpayers to vote and give the district permission to spend above the state-mandated revenue limit on an annual basis, or 2) ask taxpayers to approve a big chunk of borrowing, then tax to repay debt to fund a specific set of projects.Because of revenue limits, to spend more money on facilities would mean spending less on teacher pay, instruction, or other general fund expenses. Many Wisconsin school districts have passed referenda simply to authorize exceeding the revenue limit]


OK, back to debt. Tomorrow night at the board' regular meeting, Mr. Miller will ask the board to sign off on using $1.68 million in the district's debt service reserve -- money it levied and can only use to repay debt -- to pay down some debt early. This serves a couple of purposes, from what I can tell. First, it helps Mr. Miller and the administration continue to suggest that the district usually pays about $4 million in debt every year, even though again, we're at historic highs of debt repayment. That level of debt isn't some kind of norm that we would maintain without any consequence, nor would it be without consequence to commit ourselves to that level of debt service for decades into the future.


With the proposed $1.68 million early repayment authorized tomorrow, we'd be using about half of our debt repayment reserves. the rest, as Mr. Miller notes in his executive summary to the board, could be used to take a slice off the top of any future referendum -- for example, a potential one up for a vote in 2019, as it would be under the district's potential timeline as presented to the FACT members and other facilities meetings. I'm assuming a $53 million debt referendum would have an easier time passing than a $54.6 million question.


To be clear, paying debt early does save long-term interest payments, and borrowing a bit less for our next round of capital improvements wouldn't be that bad. However, I'm not sure most taxpayers -- or even the people in the room at the FACT kickoff meeting -- fully understand the background or history of our district's debt strategy, nor do they have all the information they need to be able to know whether to support the idea of more long-term borrowing. Mr. Miller couldn't tell the attendees exactly how much debt we have today, and professed not to be sure how much we paid each year in debt service in the years prior to those on his graph. It was frustrating, to say the least, to hear the same questions about our debt that I heard in 2017 come up an be met with an "I'll have to get back to you with that number."


District leadership promised to come to the next FACT meeting with answers to some of these questions, and judging from the specific and thoughtful questions that came up last week, I trust that these issues will continue to come up. I hope we hear complete and transparent answers, not just what fits with a narrative and makes taking on more debt feel more palatable.


I would feel more comfortable with the idea of a huge new round of debt if we desperately needed to build an entirely new school, or even an expansion. I would understand if we needed it to pay for pensions and retirement, as was our last referendum-approved debt issue. But at the FACT meeting, as at past meetings about facilities, it was clear that the administration would like to use any authorized borrowing at least in part to fund "maintenance."


Hopefully you know that we already report spending more than most nearby districts on maintenance and operations, yet our schools continue to look increasingly shabby as district leadership insists that their hands are tied, or sometimes that problems don't exist. Thanks to social media posts about school bathrooms and other facilities problems, the gaslighting has stopped, but no one has ever explained how the maintenance and facilities spending reported to the state continues to be higher than our neighbors, high as measured by nearly every metric (by square footage, by student, by percentage of average property tax ), and yet our schools have a long list of unmet needs, from the daily maintenance and cleaning to the latches on windows, to security systems, door locks and accessibility of our buildings. Is the answer to these unmet, recurring and entirely predictable needs to borrow money that we will be required to repay until my kids are (hopefully) settling down into their careers and thinking about giving me grandkids?


I would feel better if I knew that the district was adopting an entire, top-to-bottom maintenance plan that accounted for the expected lifecycle of every building, every roof, every brick, every piece of pavement, every piece of playground equipment. I would like to know that we have a plan for upkeep, cleaning, maintenance, repairs and eventual replacement for everything we plan on constructing, buying, renovating or repairing with the next debt issue. I would like to know how much will need replacing before we've paid for it. I would also like to know how our annual maintenance spending might be affected if we for example, renovate bathrooms to be ADA compliant. Bathroom square footage takes longer to clean and new plumbing will need maintaining and eventually, replacement again.


It's OK if we don't know the answers to all of these questions yet -- my worry is when administrative leadership answers too easily or dismisses concerns, as well as when we hear reassurances that borrowing millions of dollars won't be noticeable to us, since the district is already paying so much in debt service. That's like saying a $300 car payment won't matter because we've paying down our credit card that much every month anyway. In keeping within that analogy, I think we might be forgetting about the cost of insurance, gas, and maintenance on the new car. We also haven't been taking great care of our current ride, and it's limping along overheating every few miles, with no bumper and rusted wheel wells. Maybe that new car and car payment are really or best option, but let's at least have an honest conversation and more than numbers on the back of a napkin.


© 2018 by Emily Berry

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Emily Berry

Shorewood, WI 53211

emily@berryschoolsblog.com