Leander ISD Doubles Down on Debt

Although one might think a downgraded bond rating and a whopping $2.7 billion in debt, the caretakers of the Leander ISD might be doing the Dave Ramsey thing and trying to exercise some measure of fiscal restraint.  Alas, four of the seven school board members decided that $2.7 billion is no big deal, and last week voted to double-down on that debt burden for future generations. 

In voting to sell even more bonds, the ISD will use the funds to build a 6th high school at a cost of $106 million, but that's only the initial cost.  By utilizing even more of the highly controversial Capital Appreciation Bonds, LISD will defer payments for 15 years (Merry Christmas, Kids!) so that even with a 5.85% rate, the total cost of the high school will rise to $614 million.

The move is certainly shocking, especially considering the devastating impact of Capital Appreciation Bonds.  "CAB"s have been banned elsewhere and were nearly banned by the 2013 Texas Legislative session.  The 2015 session will certainly re-engage on this issue and hope to reform this dangerous borrowing procedure, but in the interim some folks are willing to continue to spend like drunken sailors. 

Debt apologists on the LISD Board, along with the oft-fined and censured loan shark bond salesmen at Southwest Securities, argue that 1) everyone is doing it, and 2) they must keep building since they are the "second-fastest" growing district in the nation.  The only problem is that neither 1 nor 2 is actually true, but what is true is that Leander ISD continues to be a poster-child for poor fiscal government.  (Pardon the poor pun.)

Here's who voted to party on increase the LISD debt with CAB's:

Pam Waggoner
Don Hisle
Russell Bundy
Grace Barber-Jordan

Board members who voted against (and for fiscal restraint):

Lisa Mallory
Will Streit
Aaron Johnson

The Board graciously allows you to contact them through this page:  http://www.leanderisd.org/default.aspx?name=abt.board.communicate

Take Action to Support Crucial CAB Reform

UPDATE:  Texas Public Policy Foundation's David Guenther has interviewed Representative Dan Flynn on HB 3416 and CAB abuse.  The discussion will be available online tomorrow, April 15, as a TPPF Policy Cast here.  

As I've written previously, a bipartisan group of state leaders have proposed CAB, or Capital Appreciation Bond, reform.  The Senate version, (SB 449 authored by Sen. Juan Hinojosa) passed by a resounding vote of 28-3.  Now the House version, (HB 3416) is languishing in the Ways and Means Committee. 

Last week Leander ISD Trustee Pam Waggoner skipped the district's board meeting to attend a hearing on the House bill and argued that her district could not live without CABs that would allow them to defer debt for 30-40 years (and lead to a monstrous total debt burden of $2.7 billion).

Below is a communication I received from a concerned resident asking for help with this issue: 

Last Thursday in a public hearing LISD told the Texas House Ways and Means Committee that they couldn't live without CABs, that LISD kids would be stuck in portable buildings!  The brokers and some of the school districts turned out in droves to fight House Bill 3416  which would severely limit CABs, both to 20 years length instead of 30 or 40years and to 20-25% of the debt ratio per student for a district.  Not perfect, BUT WE NEED THIS BILL to slow LISD's insane spending.   It's our ONLY hope as LISD looks at issuing another $173 million bonds using CABs to drive our debt toward $4 BILLION.  The Bill is "pending", according to Rep. Flynn's office (the author) it is being tweaked and if we want it voted on and not languishing to die, we need to call and let them know they've been mislead by LISD and the Wall Street interests that are making millions off these CABs. 

I told them that a group of citizens here has worked for 2 years begging LISD to stop using CABs, and that they refused to listen.  I told them that virtually no voters in LISD actually know about the CABS, much less understand them, since LISD did absolutely NOTHING to tell voters in advance about their decision to incur the CAB debt before they issued them.  Then they used them to build lavish, extravagant facilities that would rival a private college campus, not just to replace portables. 

Please call or fax Chairman Hilderbran's office TODAY and talk to his staff. Let them know what you think about CABS! The more calls they get, the sooner it will be voted on. If you can think of anyone, please ask them to call to. Let's get this bill out of committee before LISD and Wall Street kill it!

Rep. Hilderbran, Harvey
District 53
(512) 463-0536
(512) 463-1449 Fax

Rep. John Otto (R) Vice Chair
(512) 463-0570
(512) 463-0315 Fax

Rep. Dwayne Bohac (R)
(512) 463-0727
(512) 463-0681 Fax
Rep. Angie Chen Button (R) Angie Chen
(512) 463-0486

Rep. Craig Eiland Craig (R)
(512) 463-0502
(512) 936-4260 Fax

Rep. Allan Ritter (R)
(512) 463-0706
(512) 463-1861 Fax

Rep. Mark Strama (D)
(512) 463-0821
(512) 463-1199 Fax

Rep. Trey Martinez Fischer (D)
(512) 463-0616
(512) 463-4873 Fax

Rep. Naomi Gonzalez (D)
(512) 463-0622
(512) 463-0931 (Fax)

Please note:  At this point, calls are more effective than emails.  

Leander ISD Staff Proposes "Cuts" That Include $25 Million In Spending Increases

While leaders in the Leander Independent School District are struggling to cope with the poor financial management of the past, LISD staffers don't seem to understand the concept of budget 'cuts.'  At an April 22 budget workshop, the administration presented a plan that was billed as featuring 'serious cuts,' but proposes annual spending increases.  While the 2012-2013 budget was approved at $237 million, the 2013-14 budget jumps to $250 million.  

One LISD trustee, Lisa Mallory, has shared a graph of proposed increases on her Facebook page:

Proposed "Cuts" to the LISD Budget.

Wow.  Presenting a budget that climbs significantly for three years in a row as a 'cut,' is pretty audacious.  Intellectually insulting to both the board and taxpayers, too. 

Part of the proposal includes draining the LISD reserve funds by some $19 million to cover deficit spending. (If Leander wants to follow in Round Rock ISD's footsteps, those funds could yield as many as oh, six classrooms.) 

If you're not going to cut the budget, fine.  But don't call spending increases 'serious cuts.'  It's positively Obamaesque.  

Related Posts:
LISD Trustee Pam Waggoner Skips Board Meeting to Lobby Legislature
LISD Financial Advisor Censured and Fined
LISD Trustee Pam Waggoner Endorsed by Far-Left State Rep Donna Howard
LISD's $2.7 Billion Debt a Factor in May Elections

Leander ISD Trustee, Staff Skip Board Meeting to Lobby State Legislature: UPDATED

It seems that several key players were conspicuously absent from last night's Leander ISD Board meeting.  Board President Pam Waggoner, along with Superintendent Bret Champion, Assistant Superintendent Ellen Skoviera, and Executive Director of Community Relations Veronica Sopher, decided to skip the board meeting in order to attend a hearing on the state proposed ban on Capital Appreciation Bonds.

Waggoner et al, went to Austin to lobby against local debt restraint.  They claim that if legislators ban use of CABs (already proven to be quite toxic and banned elsewhere in the nation,) the state should also eliminate the "50-Cent Debt Test."  Current law does not permit school districts to incur debt that would raise the I&S tax rate above $.50 per $100 per valuation.  The 50-Cent limit was designed to keep school districts from taking on unsustainable debt, but with CABs Leander and other districts had found a way around the cap.  (Leading to LISD's $2.7 billion in debt obligations.)  Waggoner & crew fear that without the CAB option of deferring debt payment to their children and grandchildren, they won't be able to continue to borrow and spend like there's no tomorrow.

Essentially this crew skipped the board meeting to lobby for the ability to dig the district deeper into debt. 

Just a reminder from the State Comptroller's report "Your Money and Education Debt,"

In fiscal 2011, public school districts combined had one-third of outstanding Texas local government debt – $63.6 billion or $13,530 for every student in a district with debt. Of Texas’ 1,024 school districts, 854 have outstanding debt. From 2001-2011, public school districts’ total debt outstanding rose by 155.2 percent, far more than the increase in inflation. This debt is incurred locally, meaning that each district’s taxpayers are responsible for paying it back

Rather than lobby against restraint, perhaps school board trustees and staff should be looking at how to better manage finances going forward.  Again, Pam Waggoner refuses to debate her electoral challenger Jim MacKay, which is unfortunate since the taxpayers would benefit greatly from some frank discussion of the current situation.  I'm sure Leander parents want great schools with great programs, but if the district doesn't change course soon, debt service will prevent future progress.

Early Voting begins April 29, and Election Day is May 11.  See the Williamson County website for more information.

UPDATE:  A quote from Representative Dan Flynn regarding the hearings last week:

"I was disappointed by the number of hostile witnesses, including bond salesmen, testifying in support of large debts of over 2 billion for some ISD's," Representative Flynn stated after the hearing. "You have to wonder what voters would say once the transparency portions of this bill are implemented and voters are notified of this massive debt placed upon them, their children, grandchildren, and future grandchildren."

Ouch.

Related Posts:
Leander ISD's Financial Advisor Censured and Fined
Leander ISD Trustee Waggoner Endorsed by Far Left State Rep
State Leaders Move to Ban Leander ISD's Dangerous Borrowing Practices
LISD Debt a Major Factor in May Elections
Making Education a Priority:  Leander Football!
Leander ISD:  Storm on the Horizon

Leander ISD's Financial Advisor Repeatedly Censured and Fined

It is no secret that Leander ISD has some pretty scary financial 'issues:' Overbuilding, overspending, $2.7 billion in debt obligations, questionable use of Capital Appreciation Bonds, etc.  Now there are questions surfacing about the District's financial advisor Southwest Securities.  Leon Johnson, Senior Vice President at Southwest, is frequently on hand to provide 'everything is peachy' presentations to the board and upbeat quotes to the mainstream media, but he hasn't really mentioned some of the problems his firm has faced over the last decade.

According to a report from the Financial Industry Regulatory Authority, Southwest Securities has 41 documented "incidents."  These incidents include fines and censures for various infractions.  Most recently the firm was fined $77,500 on March 15, and has been fined more than $900,000 over the past 2 years.  Many of these charges involve illegal actions surrounding the sales of "municipal securities."

One cannot help but wonder if anyone in leadership at LISD has bothered to check the status of the district's financial advisor and leading debt cheerleader. Instead, Southwest Securities' Leon Johnson  is repeatedly invited to present regular dog and pony shows to the board and public, and no one seems willing to question Mr. Johnson's credibility on fiscal soundness.  No wonder Fitch has substantially downgraded LISD's bond rating.   

While this and other aspects of Leander ISD seem like great debate fodder for the upcoming school board elections, long-time trustee Pam Waggoner has refused to debate her opponent, Jim MacKay.  Perhaps she does not relish answering questions about the financial state of the district she has long governed. 

Related Posts:
Leander ISD Trustee Waggoner Endorsed by Far Left State Rep
State Leaders Move to Ban Leander ISD's Dangerous Borrowing Practices
LISD Debt a Major Factor in May Elections
Making Education a Priority:  Leander Football!
Leander ISD:  Storm on the Horizon

Resource:  FINRA Report on Southwest Securities

Municipal Bankruptcy: Coming to a Government Near You?

Great news: A U.S. bankruptcy judge has ruled that the city of Stockton, CA can declare bankruptcy.  News reports have called Stockton "emblematic of government excess."

Its salaries, benefits and borrowing were based on anticipated long-term developer fees and increasing property tax revenue. (Emphasis mine.)

Like numerous other municipalities across the country, Stockton leaders relied very heavily on borrowing and obviously weren't very good at saying "no" to anyone.  The most prominent issue of course is the city's pension obligations, but we should not discount the role of massive debt; this is a cautionary tale for Texas. 

"But that's just those crazy liberals in California!" you say. 

Not so fast, Pardner, we've got plenty of local debt right here in Texas.  In fact, according to the Comptroller's office, local debt has more than doubled over the last decade.  And for us Williamson County folks, we should note that while Stockton's debt burden was just shy of $1 billion, Leander School District taxpayers are now on the hook for $2.7 billion. 

Sadly, there are folks in local government who are adamantly defending these local debt burdens.  Leander ISD, and have even gone so far as to claim the Texas Bond Review Board numbers are, er, misleading.  LISD Board of Trustees President Pam Waggoner has been trying to assure everyone that the ISD debt isn't really such a bad thing, and, after all it was voter approved.  (By 6-8% of the registered voters.)  Surprisingly enough, she also seems to blame the State Legislature for Leander ISD's bad CAB practices:

CABs are one of several ways we handle debt . The answer to this problem is for the State Legislature to not punish us for going over the 50-cent test.

Um, say, how about not spending and borrowing so much?

Waggoner suggests that her board is 'fiscally' conservative, but as candidate Jim MacKay has pointed out, the district has essentially played a fiscal "shell game" to make it appear as though the debt were below state-approved levels. 

MacKay, who is challenging Waggoner in the May elections, has written an explanation of the LISD financial shell game, and notes that the bond writers sure are making a nice living on all this district borrowing and refinancing. 

Sadly, Ms. Waggoner has refused to meet Jim MacKay for a public debate, and hasn't even bothered to accept invitations to speak to local conservative groups.  I guess she is hoping this will all just go away?  Perhaps she's right; if things get too bad, Leander ISD could, like Stockton, declare bankruptcy.  

And we thought it was only in California.

Note:  The state legislature is taking action on the growing problem of local government debt- House and Senate Bill 5 would create greater transparency and a bipartisan coalition of lawmakers are proposing an outright ban on the CAB practices defended by Waggoner.

State Leaders Move To Ban Leander ISD's Dangerous Borrowing Practices

Apparently Leander ISD has become the Texas poster-child for poor financial leadership.  Not only did LISD borrow & build excessively, the district further exacerbated their financial woes with the use of Capital Appreciation Bonds, or CABs.  CAB financing allows borrowers to 'kick the can down the road' with bond maturity dates 20, 30, or even 40 years after issue.  Furthermore CABs increase total payoff significantly, leaving taxpayers to pay back as much as 10 times the amount initially borrowed.  Consequently, Leander taxpayers are now on the hook for $2.7 billion dollars in local debt. 

The alarming CAB trend has prompted legislators of both political parties to act.  Democrat Senator Juan "Chuy" Hinojosa and Republican Representative Dan Flynn have filed bills to prohibit local governments from using CABs to finance debt.  The companion bills are SB 449 and HB 3416.  If approved, the measure will prevent any future districts from 'becoming Leander ISD.'

Sadly, the measure comes too late to protect Leander taxpayers.  Years of poor financial management have created a quagmire for the school district (which features empty schools but plenty of impressive football facilities.)  While the district is ripe for new leadership, only one school board member has been challenged.  Trustee Pam Waggoner has served intermittently since 2002, and has been challenged by Jim MacKay.  Waggoner, who is endorsed by Democrat State Representative Donna Howard, has served as an apologist for LISD debt.  In stark contrast, Jim MacKay has been endorsed by former Republican Party of Texas Chair and Reagan Administration official Tom Pauken.  MacKay has launched his campaign with some serious questions about the finances of the district. and the CAB problem is huge factor in the upcoming election. 

Leander ISD's financial future is uncertain, but hopefully the State Legislature will act to prevent other districts from the same fate. 

Leander ISD Trustee Can't Remember Own History, Is Endorsed by Far-Left State Rep UPDATED

 Awkward Campaign Moments...

Apparently Leander Independent School District Trustee Pam Waggoner has met the approval of far-left Democrat State Representative Donna Howard.  Waggoner is touting Representative Howard's endorsement on her campaign website.

Howard, who is herself endorsed by the AFL-CIO, has received 100% ratings from NARAL Pro-Abortion America and environmental groups, and garners ratings of 45% from the Texas Association of Business, 6% on Personal Liberty issues, and 0% on 2nd Amendment Rights.   Howard makes a habit of endorsing lefty Democrats, and in the past threw her support to Diana Maldonado and Matt Stillwell.  (Both lost in 2010 and 2012 respectively.)

Trustee Pam Waggoner also seems to mix up her own political history.  According to her website, she was:

"Leander ISD Board of Trustees, 2002-2008. Re-elected to the board 2009 to current."

The truth is that Waggoner was defeated in the 2008 election by Trustee Will Streit, but ran again and was re-elected in 2010, not 2009 as her website states.

Yikes, that's almost as bad as forgetting that you were born in New Mexico, not Texas.

In case you missed it, Jim MacKay of Cedar Park has filed to run against Waggoner, and the major campaign issue at hand is the horrific state of the Leander ISD's financial affairs.   Waggoner has been on the board intermittently since 2002, and doesn't seem too concerned about the $2.7 billion debt owed by Leander/Cedar Park taxpayers.  Maybe she thinks Obama will pay it out of his stash.?

UPDATE:  Oh my, it seems Ms. Waggoner scrubbed her website over the weekend.  Representative Donna Howard's endorsement has disappeared, and Waggoner's dates of service have been corrected.  Still no mention of the 2008 defeat.  

Leander ISD Debt A Major Factor in May Elections

Although it pales in comparison to the national debt, the Leander Independent School District's $2,676,639,982.00 in total debt is nothing to sneeze at.  Yep, you read that right; Leander ISD is now nearly $2.7 billion in debt.  Even worse is that LISD has been exploiting use of Capital Appreciation Bonds, or CABs, to the point of being called out in the Austin American Statesman.  (Use of CABs will result in LISD taxpayers having to pay $9 for every $1 borrowed.)  And it's not just us meany-cow Conservatives sounding the alarm on CABs; even the New York Times is voicing concern over CAB debt, and one state has already outlawed CABs.

LISD's deplorable debt is rapidly becoming an issue in the upcoming Board elections.  Jim MacKay of Cedar Park has filed for Place 3, and is questioning the poor leadership decisions that landed the district in such a financial mess.  He notes that as a result of poor financial decisions, the LISD's Fitch Bond Rating dropped from "AAA" to "AA," and most recently to "AA-".  To cope with these issues, LISD residents now pay one of the highest school property tax rates in Texas.  ($1.51187 per $100 of valuation.)  And don't forget, while Leander touts some pretty awesome and awesomely expensive football stadiums, they also have at least one empty school building they don't know what to do with.  (How about leasing them out to someone who can use them?)

Mr. MacKay is well known in the community for his volunteerism with the school district (he is "The Voice" of the Vista Ridge Football program, and since moving to the District has become a member of the Vista Ridge high School Campus Site-base committee as well as two advisory councils).  A former air traffic controller with the U.S. Air Force, MacKay continues to serve with the Air National Guard as a firefighter and medical first responder.  Some current board members are very upset with MacKay for challenging the cozy status quo, and have begun a whisper campaign claiming that they've never seen him before.  Of course this is a little awkward since the LISD School Board presented him with the Demonstrating Acts of Heroism Award just last November.

LISD leadership has been in place for a long, long time.  Trustee Don Hisle has enjoyed a seat on the board for 18 years now, and despite the district's desperate financial situation, allegedly he is very upset with Jim MacKay for asking too many pesky questions.  Unfortunately, Hisle's hegemony over the district won't be challenged this year; his current term doesn't end until 2015.  Pamela Waggoner, Russel Bundy, and Grace Barber-Jordan are all up for re-election this year.  MacKay is challenging Waggoner, who has served on the board intermittently since 2002.

I look forward to hearing more about Jim MacKay's campaign, and hope to keep readers updated until the May 11, 2013 Elections.  In the meantime, check out MacKay's website to learn more.

 Jim MacKay, Candidate for LISD Place 3.