In November, the school board approved $6.8 Million in a new kind of bond structure that utilizes both federal grant money as well as adding to the total bond obligation, essentially raising the overall debt service of the district, already pegged at more then $300Million. This particular issue has lots of moving parts. As such, it also raises a great deal of questions. So what are the facts? Here’s a number of them:
1. The total cost to GPS is $340,000 every 6 months for the next 10 years to pay the debt service principle on $6.8 Million. This is the total cost to a company called Climatec that is retrofitting every GPS campus with new light bulbs, climate control sensors, and HVAC systems where applicable.
2. The interest payments on the $6.8 Million over the 10 year term are covered by the federal stimulus program to states called the “American Recovery and Reinvestment Act” or ARRA. That’s right!!! Federal stimulus money is being used to pay interest on debts incurred by the school district. That’s somewhat like borrowing money to pay credit card payments.
3. Bank of America is the holder of the bonds and also happens to also be one of the financial institutions to receive federal stimulus monies. Is it interesting to anyone how stimulus funds are given to a financial institution at the cost of taxpayers, then transfers those funds into interest bearing instruments such as construction bonds for a school district which pays these monies back via tax dollars, and the interest expense is covered by a federal grant to the State of Arizona, which also comes at the cost of tax payers? The bonds are QSCB or Qualified School Construction Bonds.
4. All this is done for the purpose of saving energy and associated costs. Total energy savings is calculated at roughly $950K annually once the work is complete. However, with $680K in debt service, only about $270K is left as an annual benefit. This is certainly better than nothing, but begs the question: Why can’t these energy saving steps be taken over time with normal maintenance and equipment replacement? It’s our older facilities that are having the most done to them, and it’s these same facilities that are scheduled for a maintenance make-over… Meanwhile, we continue to go further into debt for the sake of energy savings and creating jobs on the backs of tax-payers and “free grant money” that must be growing somewhere on the white house lawn.
5. The annual energy savings is “guaranteed” by Climatec. KX2 Holdings LLC is the parent company of Climatec. The contract with the school district is between GPS and Climatec. No statement of assets, holdings, or security has been provided by Climatec to the school board to ensure they are able to ‘make good’ on their guarantee. Furthermore, no specific arrangements have been provided for to ensure savings are indeed a result of project efforts, nor is there a way of telling which efforts to save on energy are a result of Climatec’s efforts or additional efforts on the part of GPS. Again, no proof of collateral or security for guarrantees has been offered and NO process defined for claiming the guarantee in event of a shortfall.
6. No questions or clarifications were discussed in open meeting by board members pertaining to contract specifics. How is it possible that 5 intelligent board members are all able to digest pages and pages of information, proposals from a vendor, and deliberate any potential issues without actually uttering a word? If this was done, when? If it was done, how was it done without violating open meeting laws? There certainly was no discussion of this in public.
7. Projected financial details of the debt service are available on page 112 of the Nov. 23rd School Board Meeting disclosures. Click HERE for the PDF of the school board packet. Check out various meeting packets anytime by clicking on the MTG PACKS tab at the top of the site.
All in all, prudent planning and energy savings is to be applauded. However, one has to wonder if the means to the end is as sensible as an alternative way of accomplishing the same thing. Too many unanswered questions, not enough data, and a complete lack of disclosure in many areas leaves this particular decision open for criticism and the liability for the general picture largely in question.