BISD VACANCY: BREEDEN ELEMENTARY, UNFURNISHED, UTILITIES NOT INCLUDED

By Juan Montoya
Back in 2009, when the Brownsville Independent School District administrators were pushing for the construction of Dan Breeden Elementary next to the existing Ruben Gallegos Elementary School off Dana Road, some trustees questioned whether there would be enough money to operate the new school.
"There is plenty of money," they were reassured by Superintendent Brett Springston, usually aided and abetted in this reassurance by Chief Financial Officer Tony Fuller.
Guess what?
The school, scheduled to open this fall, will probably remain closed as the district, along with other entities and school districts across Texas, tighten their belts and continue the Legislature-mandated cost cutbacks to meet the state's budget shortfall.

Even as workers tweak the last parts of the construction of the $16 million school (it was scheduled to cost $14 million, but change orders and cost overruns fluffed it up a bit) the district now finds that it can't afford the furniture, personnel and maintenance costs, never mind the utilities to open it.

Furniture alone, it is estimated, could come at a $3 million price tag.

Breeden was one of those schools constructed with the aid of the Obama Administration's Stimulus package. The BISD had projects totalling $39.9 million and was able to borrow the money from the federal government and pay it back through Qualified School Construction Bonds (QSCBs).
And, as a property-poor school district, BISD qualified for Instructional Facilities Allotments — state aid for bond payments — at a rate requiring the district to pay back just 27 percent of the cost and the state to pick up the remaining 73 percent, Fuller said then.
That first round of federal stimulus-IFA projects provided the financing for Breeden Elementary that would cost the BISD only about $4 million, Fuller said.
Board members didn't know it at the time, but with the budget crisis looming in the coming years, they got a rude awakening when financial consultants Estrada and Hinojosa and the BISD administration pushed to fund an additional $25 million in construction projects relying on the same funding formula.
However, the state, interpreting the financing methods used by districts suchas BISD to construct Breeden, nipped the double-dipping scheme in the bud. As a result, BISD, despite public denials by Sprinsgton and Fuller and former board members, had to raid the district's reserve fund.
Money that would have been available to the district to weather the biennial storm they're facing now is no longer available after those funds decreased from $128 million in 2008 to less than $80 million in 2011.
the issuance of $25 million in bonds that were supposed to be easy money but then the plan backfired and is now going to cost the district $1.5 million annually for the next 18 years instead of the $841,093 initially promised the board by its financial advisers.
Officials within the office of the financial advisers knew potential trouble loomed with the bonds when he emailed TEA representative of the State Funding Division Lawrence Crockett as early as March 30, 2010, telling him that the BISD had sold QSCB bonds in 2009 and asking him whether the same rules applied for bond sales of QSCB bond in 2010.
Crockett, in his reply to Estrada-Hinjosa replied March 31, 2010, that: "According to current IFA rules, the entire debt service is considered eligible for funding; however, specifically those bonds such as Build America Bonds (BABs) that receive a federal tax benefits, the rules may change to reflect that only the net debt service is eligible for funding. Districts will be notified once the change goes into effect."
Now, Estrada&Hinojosa, knowing this, relayed the information to Springston and the former board majority and apparently decided to go ahead with the application despite Crockett's warning that the rules would change. In the application made then, they used the gross debt service instead of the net as specified by Crockett in March.
That June, the district made application to the TEA to receive the IFA s on the basis of a lease-purchase financing structure in which the district would make a local share contribution without accounting receipt for the federal subsidy.
Even back then, application amendments had to be made.
In August 13, 2010, the TEA wrote Springston that the district's IFA applications "has been approved contingent on the receipt of additional information as described in the official notice of allotment and other attachments," apparently referring to the TEA's warning that it would fund only the net and not the gross debt service.
In the last paragraph, it warned again: "We will not process payment of the 201--2011 state share until your district resolves these issues."
It then asked that the district submit an amended application that "excludes the non-qualified expenses."
Unless the BISD administration did so, the TEA warned that: "If we find that your district maintained non-qualified expenses in the application, we will request full recovery of the related state funds."
On Nov. 4, the BISD board majority changed as a result of the elections. Rick Zayas and Ruben Cortez were gone, and in their place, Luci Longoria and Christina Saavedra came on board.
The dark clouds looming on the horizon notwithstanding, the financial advisors and the administration placed the issuance of the bonds on the Dec. 7, 2010 agenda. Suspicious of getting any "free money" from anyone, Longoria, Saavedra and Presas-Garcia voted against the issuance of the bonds. Rolando Aguilar, Joe Colunga, and Minerva Pena were joined by Enrique Escobedo in approving the issuance.
From there on, things went from bad to worse, according to Springston's letter to TEA Commissioner Robert Scott Jan. 24, 2011.
Less than one week after trustees voted on the issuance, on Dec. 13, Hinojosa delivered the district's amended IFA applications to Crockett in Austin, still containing the gross debt service. On Dec. 22, the bonds were sold.
The thunderbolt struck on Jan. 6 when Hinojosa got a phone call from Crockett "during which time Crockett "informed... (Hinojosa) that the debt service schedules submitted with the IFA application were incorrect because they did not deduct the federal subsidy from the debt service on the bonds."
But in spite of this, Fuller – in recommending that trustees approve the transfer of $25 million from the general fund to the bond construction program – assured them they would recover the funds from the state program during their Jan. 11 meeting fully aware of the situation.
Now, with a brand-new, unfurnished school that the district cannot afford to open because it went to the reserve fund too often and counted on the state money to save them, the chickens have come home to roost.
"We don't have that safety cushion which would have allowed us to weather this storm," said vocal trustee and administration critic Catalina Garcia-Presas. "When I questioned the administration in 2009 and then again on the bond issue last year, they assured us the money was there. Now we are having to cut back on personnel and on almost every other thing to make ends meet. Can you call what happened fiscal mismanagement? I think you can make a pretty good case that it was."