Guest Commentary: Public Comment to DJUSD School Board Last Night — Funny Money in Measure B Argument?

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by Matt Williams

The following Public Comment was submitted by e-mail to the DJUSD School Board with copy to DJUSD CFO Amari Watkins.  The Public Comment was read into the record by Superintendent John Bowes.  As noted in the text of the Public Comment, I have been dialoguing with Amari Watkins over the past three weeks.  The original question about the math in the Yes on Measure B Ballot Statement originated from a non-partisan group in Davis that asked for my help with the numbers.  What came out of that due diligence homework was a complete surprise to me.

==============

Members of the DJUSD School Board, over the past three weeks I have been in e-mail communication with your CFO Amari Watkins regarding the current and future status of DJUSD’s Community Facilities District No. 1 (CFD #1).  Amari has provided the 1989 Resolution documents that created and govern CFD #1, which I have reconciled with the numbers from the four most recent DAVIS JOINT UNIFIED SCHOOL DISTRICT MELLO‐ROOS COMMUNITY FACILITIES DISTRICT NO. 1 SPECIAL TAX REPORTs (“the reports”) prepared by DJUSD’s tax administration consultant, SCI Consulting Group.

Bottom-line … subject to Amari’s (DJUSD’s) provision of any additional legal and/or election documents … the numbers from “the reports” say that CFD#1 will have reached the point where the language from the Rate and Method Resolution, “The special tax shall be levied and collected only so long as it is needed to pay the principal and interest on debt incurred …” will reach both its logical and fiscal conclusion during or before DJUSD’s Fiscal Year 2021-2022 … possibly as early as during or before Fiscal Year 2020-21.  Said another way it appears to be clear that CFD #1 will be fully paid off at the end of Fiscal Year 2020-21, or at the latest Fiscal Year 2021-22.

The implications of CFD #1 ending for the DJUSD annual revenue stream are significant.
 
The implications for the Measure B ballot argument of “Generating more than $1.3 million annually in new revenues for the Davis Joint Unified School District, to enhance educational opportunities for our kids.” are also significant because $252,000 of the $1.3 million is CFD #1 revenue. 
 
So assuming a Year 1 revenue stream start for DISC in Fiscal Year 2021-2022,
  • There will only be one year of DJUSD revenues projected in the EPS Economic Analysis for CFD #1 rather than 25 years.  As a result the total CFD #1 revenues are reduced from $4,256,000 to $68,000.  The full buildout CFD #1 annual revenues are reduced from $252,000 to $0.
DJUSD has also provided documentation of Measure G revenues and Measure H revenues, with the Measure H revenues going to $0 in FY 2025-26 the year Measure H expires. So again assuming a Year 1 revenue stream start in Fiscal Year 2021-2022,
  • There will only be four years of DJUSD revenues for Measure H rather than 25 years. As a result the total Parcel Tax revenues are reduced from $4,795,000 to $1,335,734The full buildout Parcel Tax annual revenues are reduced from $260,000 to $59,194.
DJUSD also provided documentation of Measure M revenues, with the Measure M revenues going to $0 in FY 2042-43, the year Measure M expires. So again assuming a Year 1 revenue stream start in Fiscal Year 2021-2022,
  • There will only be 21 years of DJUSD Bond Debt revenues for Measure M rather than 25 years. As a result the total Bond Debt revenues are reduced from $13,005,000 to $9,737,000.  The full buildout Bond Debt annual revenues are reduced from $817,000 to $0.
So assuming a Year 1 revenue stream start in Fiscal Year 2021-2022, the aggregate effect of the impact of limited terms is,
  • DJUSD total revenues are reduced from $22,056,000 to $11,140,734, and the full buildout DJUSD annual revenues are reduced from $1,329,000 to $59,194.
Bottom-line, if my calculations are correct, the Measure B ballot argument of “Generating more than $1.3 million annually in new revenues for the Davis Joint Unified School District, to enhance educational opportunities for our kids.”  has overstated total DJUSD revenues by just under 100% (98%) and annual DJUSD revenues at buildout in year 25 are overstated more than twenty-fold.

That begs the question, did DJUSD “put its thumb on the scales” in support of Measure B by overstating the revenues that DJUSD will get from the project?

Respectfully submitted.

Matt Williams

====== Underlying E-mail communication attached to Public Comment

[…] I have reviewed the two documents [DJUSD has] provided me and have attached an annotated version of each in which I highlighted what I believe to be relevant provisions in:

  • The actual Measure A Ballot language on Page 2 of the 12/7/1989 Resolution document
  • The Section VIII Collection of Special Tax language on Page 5 of the cfd1 rate and method document
Those words are

“… by (1) issuing bonds in the maximum principal amount of $33,300,000 in accordance with Board Resolution 4-90, (2) levying a special tax with a maximum rate and method of apportionment as provided in Board Resolution 3-90 to pay the principal and interest on such bonds and to finance the above facilities.”

 
and
 

“The special tax shall be levied and collected only so long as it is needed to pay the principal and interest on debt incurred in order to acquire and/or construct the facilities of the CFD, or so long as it is needed to pay the costs and incidental expenses of the construction of the facilities authorized.”

 
Unless there are additional documents subsequent to 12/7/1989, I believe both the letter and the intent of Measure A placed before the voters on 11/7/1989 was to establish a CFD with a limited duration that matched the period of time needed to pay the principal and interest of bonds in the maximum principal amount of $33,300,000.
 
====== Source Documents provided by DJUSD for creation of CFD#1  — Pertinent passages highlighted in blue by me

 


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About The Author

Matt Williams has been a resident of Davis/El Macero since 1998. Matt is a member of the City's Utilities Commission, as well as a former Chair of the Finance and Budget Commission (FBC), former member of the Downtown Plan Advisory Committee (DPAC), former member of the Broadband Advisory Task Force (BATF), as well as Treasurer of Davis Community Network (DCN). He is a past Treasurer of the Senior Citizens of Davis, and past member of the Finance Committee of the Davis Art Center, the Editorial Board of the Davis Vanguard, Yolo County's South Davis General Plan Citizens Advisory Committee, the Davis School District's 7-11 Committee for Nugget Fields, the Yolo County Health Council and the City of Davis Water Advisory Committee and Natural Resources Commission. His undergraduate degree is from Cornell University and his MBA is from the Wharton School of the University of Pennsylvania. He spent over 30 years planning, developing, delivering and leading bottom-line focused strategies in the management of healthcare practice, healthcare finance, and healthcare technology, as well municipal finance.

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8 thoughts on “Guest Commentary: Public Comment to DJUSD School Board Last Night — Funny Money in Measure B Argument?”

  1. Alan Pryor

    From Alan Pryor of the No on Measure B campaign –

    We had previously reported how the estimates for income to the City were based on highly inflated estimates of property taxes based on commercial property valuations that are about 68% higher than regional averages and about 48 % higher than the same consultant made only 5 years ago when the project was called MRIC. Without thsee inflated estimates of property tax income to the City, the revenues may not even  cover the City’s cost in servicing the project leaving it as a drag on the City’s busget instead of spitting out gold nuggetts as proposed by project proponents.

    Now we see that the proposed income to DJUSD is all smoke and mirrors also. It is somewhat shocking that the proponents of the project can make these grandiose claims of a financial windfall to the City and DJUSD which , in fact, turn out to have very little substance to them. Where is the financial oversight and acumen that Dan Carson promised he will bring to the table as part of the City Council’s subcommittee overseeing the project.

    The only question here is wheteher these gross overstatements of project income are due to inadvertant “oversights” or intentially misleading the public. Either way it is not reassuring to the voters that we will get what was promised.

    1. David Greenwald

      “Now we see that the proposed income to DJUSD is all smoke and mirrors also.”

      Actually we don’t. The only issue is if the parcel tax and possibly the bond measures get extended beyond their current sunset date. That is not smoke and mirrors. The number is based on the belief that they can extend – that may turn out to be wrong, but as I point out to Hiram, if that’s the case, this is the least of the district’s problems.

  2. Hiram Jackson

     

    There will only be four years of DJUSD revenues for Measure H rather than 25 years. As a result the total Parcel Tax revenues are reduced from $4,795,000 to $1,335,734.  The full buildout Parcel Tax annual revenues are reduced from $260,000 to $59,194.

    Although a strictly conservative estimate of future school parcel tax revenues (Measure H) would understandably go only to four years, IMO it is reasonable to account for the fact that the Davis community has a positive record in extending those school parcel taxes each time they have come up for vote.

    1. David Greenwald

      I’ve pointed this out to Matt several times. In addition, if Measure H does not get renewed, the least of the district’s problems is the loss of added revenue from DISC.

    2. Matt Williams Post author

      Hiram and David,

      In putting this article together, I purposely stayed away from any political discussion of what the data might mean, and instead concentrated on putting the data out there so the voters could talk about it.

      It is worth noting that the Measure B Ballot Argument puts out the most optimistic scenario.  The data I shared illuminates the other end of that same pendulum with a scenario that is a fiscally cautious Ying to the Ballot Argument’s optimistic Yang.

      I truly believe the most important statement in the article is, “The implications of CFD #1 ending for the DJUSD annual revenue stream are significant.”  CFD #1 represents a $5.9 million a year revenue source for DJUSD … and they (or at least Bruce Colby) appear to have been operating under the assumption that that CFD #1 revenue stream was/is perpetual.  The legal/election documents do not appear to support that.

      Many moons ago Robb Davis and I agreed that the Vanguard was most importantly “a dialogue space for the Davis community.”  So … let the community dialogue begin.

  3. Don Shor

    “or so long as it is needed to pay the costs and incidental expenses of construction of facilities authorized.”

    Is it the assertion of the author and Alan Pryor that the special tax only applies to the facilities that were authorized at the time the tax was passed? And that it cannot be continued to facilities that are authorized later?

    As to the rest, I think Hiram and David have effectively responded to the core assertion. Yes, the revenue stream projection assumes the voters will approve renewal of existing taxes.

    1. Matt Williams Post author

      Don asks a very good question.  The language appears to say “the costs and incidental expenses of the construction …”

      So, the research needed is how the $33.3 million of bond-financed construction was sequenced.  I suspect, but do not know for a fact, that the last construction project financed from the $33.3 million was completed many years ago, and as a result any costs and incidental expenses of that construction have also been completely recognized and paid for in full.

      Interestingly enough, Figure 5 of the FY 2020-21 DAVIS JOINT UNIFIED SCHOOL DISTRICT MELLO‐ROOS COMMUNITY FACILITIES DISTRICT NO. 1 SPECIAL TAX REPORT shows that a total of $81.6 million of Bond Issuances for CFD #1, a total that far exceeds the $33.3 million maximum principal amount specified in the election documents and DJUSD Resolutions.  Exceeding the $33.3 million Cap may be explainable by the three bond re-issuances that appear to have taken place in 1996, 2006, and 2007.

      Regarding the very good  “authorized later” question of Don’s, I don’t believe the key issue is when any individual facility’s construction was authorized, but rather the key issue is from what pot of money the construction was paid.  That is particularly pertinent now that the voters have passed Measure M, which specifically funds facility construction.  So, a current construction authorization is more likely to be funded with Measure M dollars, especially since the most recent re-issuance date was/is 2007.

  4. Ron Glick

    “Exceeding the $33.3 million Cap may be explainable by the three bond re-issuances that appear to have taken place in 1996, 2006, and 2007.”

    They probably called the bonds after ten or twenty year lock ups and refinanced at lower rates. Its a guess but since interest rates dropped significantly over those time periods its likely a reasonable guess. If you refinanced a sinking balance of $33 million 3 or 4 times over ten or twenty years the cumulative total  might be $81 million when the actual number never exceeded the authorization of $33 million.

    If I can figure this out in about one second, Matt you should know this too, so I think you are the one who is actually deceiving the public.

    I think this article shows the depths the opposition to Measure B will sink to in order to defeat the proposal. Attacking DJUSD and accusing the school district of some sort of malfeasance for cheap political gain against Measure B runs the risk of tarnishing the reputation of the school district and its credibility with the voters.

    The sad part is that I doubt any voters will base their decision on Measure B’s impact on DJUSD.

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