Tuesday, March 27, 2012

The Pigeon Comes Home To Roost

The message at the March 21, 2012 school board meeting was that the district does not have the money to fund all of the current educational programs. There are possible staff cuts and the reclassifying of full time teachers to part time.

Typically, board and the administration point the finger at the state for the financial problems. They claim the state does not properly fund education.

The truth of the matter lies in how the board wastes millions in non-academic pursuits.

The board spent $2,500,000 on an athletic complex. They incurred legal fees of $500,000 defending the non-payment to a middle school contractor.

The contractor not only received the $1,400,000 due, but with fines and interest the court awarded Amthor Steel another million.

Most recently, the district approved another refinancing scheme in order to hide the $6,000,000 buy out of an interest rate swaption. The board thought they could predict interest rates over a period of time and they lost.

The new arrangement tucks the $6,000,000 into debt, but leaves the prospect of another buy out nightmare in the next few years. They used another interest rate swaption to finance the swaption that went sour.

If school directors and the administration managed taxpayer funds in a judicious manner, they would not be facing the prospect of eliminating educational programs.

Saturday, November 19, 2011

Taxpayers Bailout $waption Gamble

In 2004, the board majority voted to enter into a derivative with Wachovia Bank called a swaption. Some citizens attending the meeting and one board member familiar with intricate financial arrangements were against the motion.
Financial derivatives are the instruments that banks concocted that ultimately brought this country to its economic knees. In 2010, the Pennsylvania Auditor General called for the ban of swaps.
The swaption involved the district paying a fixed rate to the bank while receiving a variable rate of return. In addition, the bank gave $819,000 as an inducement. The deal would end in February 2012.
The board gambled that in 2012, the variable interest rate would near the same as the fixed rate and that the value of the option would be one in which they could afford to buy out if they choose.
For those who follow market fluctuations, it is nearly impossible to predict what rates and options will be in six months much less in eight years.
The roll of the dice turned into a $6,000,000 bill for the taxpayer. $6,000,000 is the cost to buy out the option before it expires in February 2012. Otherwise, the bank will exercise the option, and the district will be forced into paying 5.03% interest on millions of debt until 2028.
The current board is left to scramble on how to pay this potential bill and not raise the current debt service of the district.
If they choose to participate in another swaption to mitigate the damage, they would be kicking the can down the road.
Bottom line, at some point, the community will be bailing out a gamble that should not have happened in the first place.
Add this to the $500,000 legal expense and the $2,400,000 judgment against the district for an unpaid bill to a contractor for the Middle School, and it calls for sitting board directors who voted for these debacles to step down.
We cannot afford the same people to continue to make the same mistakes.

Thursday, June 30, 2011

The OVSD 2011-2012 Budget

The board voted 8 to 1 to approve the 2011-2012 budget. The total expenditures will reach $28,034,974.00. The Real Estate Tax will be 24.15 mills or $2415.00 per $100,000 of assessed value. Other taxes will be a Per Capita Tax of $5.00, a Residence Tax of $5.00 , a 1% Earned Income Tax, and a 1% Realty Transfer Tax.

The school board struggled to balance this year's budget. The administration indicates the next two years will be more difficult.

Board President Robert A. Heckman pointed the finger at Harrisburg. However, the finger should be pointed at the district. Local decisions regarding, salaries, benefits, and building construction rest in the hands of the board. The state does not mandate generous pay and benefits. Nor do they require Taj Mahal buildings or spending $1,000,000.00 to "repair a track" or $500,000.00 in legal fees defending the non payment to a contractor.

In 2012, the swaption gamble on school debt will mature. It could mean, the debt service will increase by over $100,000.00. How many programs and teachers will be laid off to cover this increase because the district speculated with finances?

Most school boards have shown they are unwilling to harness wish list spending. The state should toughen Act 1 by eliminating spending exemptions and requiring referendum votes on budgets exceeding the rate of inflation.

Thursday, February 24, 2011

Political Humor in Time of Turmoil

Steve Bridges is a comedian that imitates Presidents.

Steve Bridges

Thursday, January 20, 2011

Preliminary 2011-2012 Budget - 7.98% Increase !

The Oley Valley School District Proposed Preliminary Budget has a 1.9 Mill real increase for 2011-2012. This would increase current millage from 23.82 to 25.72 mills, a 7.98% increase. A property that is assessed at $100,000 would pay $2,572.00 in school property taxes.
Salaries and benefits are the major factors in the increase. 2010-2011 salaries of $13,605,762 will increase $273,625 to $13,879,387. Benefits of $4,900,211 will increase $431,491 to $5,331,702.
The local revenue of earned income continues the trend of declining wages. It is expected to decline 3% this year.
Federal and state revenues will also be lower.
The inflation index the state allows for millage increase is .40 mills for 2011-2012. However, the district is applying for exemptions totaling 1.50 mills.
$22,382 of that exemption is for the PSERS retirement fund reimbursement.
The issue of a budget being calculated from budget to budget figures rather than actual to budget was raised. There is a concern that using budget to budget numbers does not accurately reflect spending, especially since there have been continued significant budget surpluses over the years. These annual surpluses suggest taxes were raised too much.
A 7.98% property tax increase is excessive. The 2011-2012 budget needs to be brought in line with current economic realities. Major cuts are needed to be make the cost of education reasonable.

Wednesday, December 15, 2010

Commonwealth Court Rules Against OVSD

The Commonwealth Court of Pennsylvania upheld the lower court ruling that the Oley Valley School District owes Amthor Steel $2,187,089.35 for work performed on the Middle School.
The case was heard by a three judge panel, the Honorable President Judge Bonnie Leadbetter, the Honorable Judge P. Kevin Brobson, and the Honorable Senior Judge Jim Flaherty.
According to court documents, the district had three contentions. First, they did not receive a fair hearing from an arbitration panel. Second, the arbitration panel’s reward to the contractor was the result of misconduct and irregularity. Finally, there was a failure to adhere to procedural rules and a failure to rule on pending objections.
President Judge Bonnie Leadbetter, wrote a detailed opinion that concluded the district’s reasons in their petition to vacate the award to Amthor Steel was without merit.
She affirmed Amthor Steel’s lawsuit the district owes the contractor for their work.
At the onset of the construction project, the board set aside only $1,400,000 in the Capital Projects Fund to pay the company. There has been no public explanation how the nearly $700,000 shortfall will be covered.
The district has spent nearly $500,000 defending this lawsuit. The board never publicly voted on the expenditure of funds for legal expenses associated with the case. The Sunshine Law requires a public vote on all expenditures by a school district.

Saturday, October 30, 2010

VOTE

Vote on November 2, 2010

* Smaller Government
* Lower Taxes
* Fiscal Responsibility
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* Constitutional Government