“Miraculous” was a word that recently departed District 65 Superintendent Devon Horton used to describe the lease certificates that are intended to pay for the building of the 5th Ward School.
That description was ringing in my ears as I watched Monday’s special Board of Education meeting, and I thought back to another financial product that worked miracles.
That was the mortgage bonds that stacked up subprime loans and called them AAA rated investments. And they worked – up until when they didn’t, and they nearly crashed the world economy.
The good news is that the District 65 lease certificates are not going to crash the world economy, but they – and the steps being considered by the Board – are likely to crush the district’s finances for years to come.
For those who missed it, there were two major items of news that came out of Monday’s District 65 Board meeting:
- The $3.25 million in transportation savings that was supposed to result from building the 5th Ward School and not having to bus kids around Evanston isn’t actually $3.25 million. It is $750,000 – and may turn out to be less.
- The $40 million budget for new K-8 building is actually closer to $60-65 million, depending on which building option the Board selects.
This is a direct result of the backwards process the Board has followed in making decisions.
First it committed to putting up a new building without deciding what that building would look like – and they still have yet to make that decision.
Second, they borrowed money ($38 million) without knowing whether that would actually pay for the building.
As it turns out, the initial budget that was provided to the district in April 2022. less than a month after the board committed to the new school and borrowed the money, was between $46.5 million and $55.8 million.
And that number is now in the vicinity of $60-65 million.
Third, they didn’t make sure that the transportation savings that they expected were actually real.
As it turned out, they were wildly off – with the net result being that the $2.5 million differential every year for the next 18 years is going to be paid from funds that are supposed to support the operations of the district – educating our children and paying our teachers.
All of this yields a hole in the finances for the new building.
How big? $20-25 million for the differential between the budget that was approved and the final numbers on the project (and that assumes no further increases or cost overruns – good luck with that!) plus a $2.5 million per year deficit from the non-existent transportation savings every year for the next 18 years.
Despite news that there is an enormous hole in the finances of this project, the board seems prepared to plow ahead with the originally proposed K-8 building rather than a smaller K-5 building, at an estimated cost of about $45 million, which more closely matches the available financing and eliminates the need to bus 5th Ward children.
How they intend to address the enormous hole in the finances for the K-8 building is another exercise in backwards decision-making.
There were a number of items discussed including: using working capital bonds, making deep cuts to operations, and closing buildings.
These are decisions that have serious long term implications for the ability of the district to deliver quality educations to the students who attend District 65 schools or make any significant dent in the $180 million plus in repairs and upgrades that have been identified as being needed for existing District 65 schools.
Further, the steps they are prepared to take will hamstring the ability of future boards to try to repair the fallout from this board’s ill-advised decisions.
The course they seem poised to take is to make a decision to spend the money and then present the cuts, school closures and other steps as being something that was forced upon them.
Board members threw out the phrase “financial stewardship” more than once Monday night without any apparent sense of irony. Proceeding with building a $60+ million school when the board knows that they don’t have the resources to pay for it may be the living definition of poor financial stewardship.
At the meeting Monday, Soo La Kim asked when can we afford this school. It is a fair question to ask, and promises have certainly been made to the 5th Ward community.
Sadly those promises were premised on a series of falsehoods and the board’s lack of diligence in asking critical but basic questions about the plan – “Can we really get this building up for $40 million?” “Can you walk us through the numbers to make sure that the transportation savings will cover the payments on the lease certificates?” – has brought us to where we are today.
The Board is in an uncomfortable position of either breaking the commitment made to the 5th Ward or gutting the finances of the district and making it near-impossible to deliver the quality education children in this district deserve for years to come and to repair and upgrade the buildings that every other child outside the 5th Ward attends. Sadly, it is a problem of their own making.
To answer the opposite of Soo La Kim’s question, when can we not afford the 5th Ward School we want? Answer: when it costs 50% more than was expected and we have less than a quarter of the money we expected to have available to pay for it.
The $45 million K-5 building returns a neighborhood school to the 5th Ward, eliminates the need for busing, and places the cost of this building much more closely within the financial means of the district while making sure that it can deliver the quality education that all of the children in this district deserve and fund the badly needed repairs and upgrades that the district’s buildings require.
Barry, great piece. Could you explain the legality of the district using lease certificates for the building without a referendum, especially if their math is way off? Are they allowed to do this according to Illinois law?
Honestly, I don’t know the exact answer to that – I am just a humble personal injury lawyer. What I have read certainly suggests that when they are intending to issue bonds to cover new construction, a referendum is required. At every step of the way, the Board has made clear that a referendum is to be avoided at all costs. My suspicion is that they will push the legal limits on this issue and hope that there is no one who will sue and pay the social price that would go along with that in this community. Whether the Board “can” do this and whether they “should” do this are different questions, and this was intended to address the “should” side of the equation.
Great article and great journalism. We need more of this from Evanston Now.
Living within our means is wise, prudent, and responsible. A smaller school will still be a wonderful addition to the students and families of Evanston.
Good piece Barry.
I think Barry is too modest to say, “I told you so.”
So I will direct readers to his March 2022 piece which raised all of the obvious questions at the time that the Board failed to ask.
The Board, the Acting Superintendent, the voters, nobody should be surprised at the situation now.
Check out Barry’s 202 piece:
https://evanstonnow.com/unanswered-questions-about-d65-plans/
Boot them all out. These board members are incompetent, wasting our money and destroying Evanston fiscally.
Well said, Mr. Doyle. The K-5 school also would end the inequitable splitting up of 5th Ward children into 4-5 elementary schools while their 6th and 7th Ward counterparts are mostly able to attend school together. That has NEVER been a problem for the middle-school-aged students from the 5th Ward, who have always gone to school together at Haven.
A good opinion piece.
I would say that the board should start laying groundwork now to build up trust with the community for when it inevitably will need to raise taxes by more that it is allowed to in order to fund needed capital expenses without big cuts in the operation. As it stands now, I would vote ‘no’ on an referendum to raise taxes for the school regardless of what is at stake. I expect D65 will have to build trust if before it asks voters for more money.
What would it take? For starters, change board elections to even years when there is a presidential election, which will generate higher turnout. Also, have all board seats up for re-election at the same time. Holding elections in odd years and staggering the board seats over 2 election cycles gives vested interests too much power. This is basic good governance, and should be desirable to any voter regardless of their opinions on what school priorities should be.
Hi Skeptic,
For better or worse, the schedule for school board elections is set by state law.
Not something that’s within the local board’s control.
— Bill
District 65 should just cancel the whole thing and give the money back. This is a disaster.
Please for the love of our children somebody initiate a lawsuit so this financial boondoggle is stopped and District 65 doesn’t go bankrupt. Prioritize quality education!
It’s not about our children. They really are just pawns in this struggle to see whose ideology prevails. If 50 per cent of the students need remediation when they enter high school we aren’t educating them no matter what building they sit in
As a homeowner whose property taxes (most of which go for District 65) just rose 23% I am appalled that the Board does not, cannot, or will not do the math required in this case. How many other math deficiencies have there been or are there? We elect people to oversee these expenditures.
I have lived in Evanston since 1963, and I remember when ETHS was featured in Newsweek as one of the top high schools in the country. That was a LONG time ago.
I understand the terrible wrong that was done to the black community here when Evanston desegregated its schools in the early 60s…closing the Foster school and sending all the kids on buses throughout the community to achieve desegregation was wrong, pure and simple.
However, so many decades later, the 5th ward is no longer majority black. And given the state of the Dist 65’s finances, this whole project has become a huge boondoggle…it was pushed through as a result of Horton’s intense wish to be seen as the king of equity.
It is shameful to even consider building a school for 900 children ranging in age from 5 to 14 in any case…much too big. And building a smaller, k to 5 school is still way too expensive based on the terrible state of the district’s finances and the need to close multiple other schools that would be created by this project.
On top of all of this is the devastating lack of progress in actually improving the quality of the education going on within Dist 65 schools, where literacy and math achievement levels have fallen dramatically.
This project needs to be put on ice until an open, honest, responsible financial process for building it can be created. This should never have been attempted with a lease process and might actually not even be legal at this point. If the Dist insists on building a school in the 5th ward it needs to do it with a referendum BEFORE it threatens residents across the community with closing multiple schools throughout Evanston in order to attempt to right a wrong that can never really be corrected.
School board members should be ashamed of themselves for their determination to continue blindly moving forward with a project that was corrupt and irresponsible from the start.