Sold with a Capital S

The News Journal has a relatively new education reporter, Jessica Bies. I met her at one of Colonial’s referendum forums and she seems intelligent, nice, and genuinely wanting to learn and cover the educational landscape in Delaware which means the News Journal absolutely won’t let that happen. She’s done a pretty good job thus far though, given who she works for. Let’s take an example, by now I’m sure you’ve seen this article:

And before I go any further, let me get this out of the way right now: the purchase of that building by Superintendent Joe Wise and his Band of Merry Morons in 2005 was a complete turd sandwich and total screw up on all fronts.

Joseph Wise, district superintendent when Christina purchased the building, in 2015 said the school district followed correct procedures when buying the building.

Of course they followed correct procedures, except for one nitpicky thing: actually having the money to turn it into a school. It was an industrial building that had to be completely gutted, cleaned up, and renovated from the inside out. Tell me why the District didn’t opt for purchasing land and building another school if they needed it? Who knows.

The actual content of this article is okay, it’s missing some key context though and the tone is standard-fare News-Journal-Hates-Christina, but overall when it comes to a News Journal piece about Christina School District, it could have been much worse. Moving on.

Things I feel are quite important that were left out of or not made clear in the article for one reason or another:

  1. The district didn’t just finally decide to sell the building, it’s been on the market for years. Someone finally decided to buy the damn thing. It was purchased by the District for more than it was worth, so the asking price was more than it was worth. So no one wanted to buy with a price tag that high. It wasn’t until the State (which controls the sale of school buildings, since they own 60% or more of them) cut the price that there were buyers that expressed legitimate interest.
  2. The building was never finished being renovated (this is where actually having the money to do the things you say you’re going to do is kind of important)
  3. The cost of $22 million is over 12 years (~$1.3 million/year).
  4. There actually was a true need for a 4th middle school. The district was completely overcrowded at the middle school level. Bayard was an elementary school and there was no middle school in the City. So the need for another school or some sort of reconfiguration was there. Buying and renovating this building should have been on no one’s radar, though.
  5. Had the Neighborhood Schools Act lawsuit never occurred and the district went on with renovating that building, it still would have been a disaster in the making. The District would have had to go back out for a referendum to raise more cash to finish the renovation, and it still didn’t solve the issue of having all middle-school age children in the City of Wilmington being bused to the suburbs on a daily basis to go to school.
  6. Since Mr. Wise’s tenure and nuking of the District’s financials, the District has changed Superintendents 5 times (if memory serves), CFO’s twice, had the General Assembly create financial oversight committees (of which I am a member) that all Districts must have and use, and no one is left in the Senior District Administration that was there when this building was purchased. The District was bailed out by the State in 2006 after Mr. Wise left, the loan was paid back on time years ago, and Christina has been running true ever since. Minor details, am I right?

One of the big things I am glad Ms. Bies addressed was the classic anti-operating referendum theme of “If the District needs more money, sell that building!” I am glad she explained it. You cannot take profit made on a building sale and use it to pay operating expenses. That’s illegal and would severely chafe Tom Wagner’s office. You can only use the proceeds to pay off the bond debt, either relating to the building you just sold if there’s any debt left over, or to other bonds the District holds with the State. Capital Costs & Capital Revenue | Operating Costs & Operating Revenue. That line separating each side is impenetrable.

The only, and I mean only, place the District can now save operating money is through not paying for utilities for that building. Given that the damn thing sat nearly empty for 12 years, that savings will be miniscule.

Major capital projects for School Districts go like this.

You’re overcrowded and need more space. No matter what option you choose to expand your district, the money to pay for it comes from both the State and your local residents’ property taxes. In Christina’s situation, the split between State and Local money is about 60/40 for major capital projects.

When you establish the costs of whatever you decide to do, let’s say build a new school, you enter into bond negotiations with the State. After cutting through the red tape, it essentially reduces down to this: if your project costs are say, $10 million, the State says “Christina School District, you must go to your residents and gain their approval to recover $4 million of that cost (40%) by raising a component of your school taxes called the Debt Service Tax enough to generate that $4 million over 20 years.” The District then goes out for a Capital Referendum. If a majority of supports vote for the additional tax, the District enters into a bond agreement with the State, and your $10 million project is started. The District then recovers its side of the costs incurred (the 40%) by the project over 20 years (usually) through revenue raised by the voter-approved increase of the Debt Service Tax.

What you cannot do with ANY of the money raised through the bond and capital referendum processes is use it to pay for ANYTHING OTHER THAN COSTS INCURRED BY THE PROJECT. Stated another way (redundant, aren’t I?) if the District needs more money to pay for teachers, it cannot sell a piece of prime real estate and use the profits to pay teachers. Say it with me: That. Is. Illegal.

So Ms. Bies, a genuine thank you for even putting that in your piece. And to the former Astro Power building: GOOD RIDDANCE. May Del Monte prosper with their purchase.

About Brian Ess

Taking it one day, one hour, one minute, one second at a time. Dad, data dork, recoverer, public education supporter, developing policy wonk. per aspera ad astra

4 comments on “Sold with a Capital S

  1. minnehanh

    We may be on our third CFO. There was a Karen Thorpe, then a Patrick O’Bourne and then, I think, Bob Silber who has his hands on the checkbook now. Maybe Thorpe left just when Wise came in. She’s still around DE someplace. I remember her with Lillian Lowery.

    • Wise was well before my time so I’m probably missing a CFO and/or Superintendent in my tally. I think your right about 3 CFOs though now that I read Karen’s name.

  2. Pingback: Sold With a Capital S – Those In Favor

  3. This…

    “What you cannot do with ANY of the money raised through the bond and capital referendum processes is use it to pay for ANYTHING OTHER THAN COSTS INCURRED BY THE PROJECT. Stated another way (redundant, aren’t I?) if the District needs more money to pay for teachers, it cannot sell a piece of prime real estate and use the profits to pay teachers. Say it with me: That. Is. Illegal.”

    … cannot be said enough.

    Probably because I find myself pointing this fact out every time I’m discussing financing our schools with someone (a lot of someones) who says, “Sell something and pay for more teachers.” Say it with Brian: That. Is. Illegal.

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