“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.