Home > Uncategorized > McK USD Superintendent on their bond bombs

McK USD Superintendent on their bond bombs

mckAt the LCO: http://lostcoastoutpost.com/2012/dec/5/mckinleyville-union-superintendent-its-capital-app/

The Superintendent confirms that $7 million of CAB bonds were issued, not $4 million.  Four million could have been issued without going this route, but would not have been enough to complete the intended projects.  Total debt service for the bonds issued in 2011 (according to either the Superintendent or the LCO) is as follows:

Series B Bonds

  • Authorized Amount:  $7,000,000
  • Term:  25 Years
  • Interest Rate: 8%
  • Debt Service Total: $71,626,331
  • Debt Repayment Ratio:  10.2:1

(Earlier in the LCO statement, these are called 40 year CABs, so I don’t understand the statement that the term is 25 years. It is also unclear to me how the bonds can be restructured, and whether their legalese prevents early buyback. It appears that a link I’d posted earlier is not an early attempt at the bonds, but the actual bonds:

http://www.royceprinting.com/jobs/FOSarchive/2011FOS/02_17_11_McKinleyvilleFOS.pdf

–Mitch)

The Superintendent, Michael Davies-Hughes, explains:

“McKinleyville Union School District intends to be a responsible steward of the monies generated through the passage of Measure C and its tax burden on the residents of McKinleyville. To this end, it will seek restructuring of the bonds to stop the accretion of interest and reduce the debt service payments in the long term.”

  1. A pesky fact
    December 5, 2012 at 7:17 am

    And the holders of the bonds make a nice payday, and the consultant and financial advisor make a nice payday.

    Tar and feathers.

    Then, recall.

    Then, make the rubble bounce.

  2. December 5, 2012 at 7:23 am

    pesky,

    Do you live in McK? I don’t. I guarantee you the local press, left to their own devices, will either minimize this, let it drop into history’s sleepy bit bucket, or (my personal guess) find a way to shift the blame onto those not actually responsible.

    If you are annoyed, it’s on you, baby.

  3. December 5, 2012 at 7:29 am

    Here’s the redemption information from the link above. To someone like me, who only speaks English, it sounds like redemption can take place as early as 2021 for some, after ten years of 8% interest has accumulated, roughly doubling the indebtedness. Other redemption dates are set at 2026 and 2031. Perhaps someone who speaks legalese can comment further:

    Redemption
    Optional Redemption. The Series B Bonds maturing on or before August 1, 2034 are not subject to redemption prior to their respective stated maturities.
    The Series B Bonds maturing on August 1, 2035, August 1, 2036, August 1, 2039 August , 2046 and August 1, 2050 are subject to redemption prior to their respective stated maturity dates, at the option of the District, from any source of available funds, in whole or in part as
    designated by the District, on any date on or after August 1, 2021, at a redemption price equal to the principal amount to be redeemed, plus accrued interest to the date fixed for redemption, without premium.
    The Convertible Capital Appreciation Bonds maturing on August 1, 2040 are subject to redemption prior to their respective stated maturity dates, at the option of the District, from any source of available funds, in whole or in part as designated by the District, on any date on or after August 1, 2031, at a redemption price equal to the principal amount to be redeemed, plus accrued interest to the date fixed for redemption, without premium.
    The Convertible Capital Appreciation Bonds maturing on August 1, 2041 are subject to redemption prior to their respective stated maturity dates, at the option of the District, from any source of available funds, in whole or in part as designated by the District, on any date on or after August 1, 2026, at a redemption price equal to the principal amount to be redeemed, plus accrued interest to the date fixed for redemption, without premium.

    (Emphasis added.)

  4. Sobo
    December 5, 2012 at 7:33 am

    So these are convertible bonds? What can they be converted to and on what terms?

  5. Anonymous
    December 5, 2012 at 7:36 am

    Mitch, as I read the statement, the district originally planned to do 25 years, but due to [list of stuff that came up] the trustees later decided on 40 years.

    I suggest calling the district. I’m sure Davies-Hughes is flooded with calls and this is sidetracking his normal work, but I had interactions with him in his prior job and found him to be an upstanding person. I expect he would return your call. He doesn’t mention it in his statement, but he walked into this mess coming on the job this summer.

  6. December 5, 2012 at 7:51 am

    #5,

    As unlikely as it may sound, I actually have real work to do, and now’s one of the times I need to devote some energy to it. So I welcome commenters contacting the new Superintendent and passing information along here, just as I would welcome the new Superintendent commenting directly, but I have my own work to do and I don’t live in McKinleyville. So it’s on you folks who actually have a financial interest in this matter.

    I feel sorry for anyone in Mr. Davies Hughes position, arriving after the decision had already been made. My advice to him would be to watch his back, not try to protect the board members responsible, tell the public EVERYTHING he knows before they even ask, not try to whitewash anything, and not believe a word anyone he deals with has to say.

    As an example of whitewashing, just look at the statement at the LCO where the 2011 debt is mixed with the 2008 to make it smell mildly less bad. That’s not going to inspire trust except in morons.

    One last thing from me. As I understand what was said at the LCO, this $70 million in potential debt service is all about getting just the last $3 million of the authorized $14 million. Unbelievable.

  7. Anonymous
    December 5, 2012 at 8:04 am

    As an example of whitewashing, just look at the statement at the LCO where the 2011 debt is mixed with the 2008 to make it smell mildly less bad.

    #5 here. Whitewashing? If you think he has deliberately concealed the trustees mistakes or faults, explain how. He plainly stated the situation and made no excuses. He did explain a little of their rationale, but didn’t make excuses. I didn’t have a problem understanding the sequence of events he laid out.

  8. December 5, 2012 at 8:08 am

    Maybe whitewashing is strong.

    But there were decisions in 2009 and decisions in 2011. The decisions in 2009 look fine. At the bottom, where the bullet points are, the very last item is “program as a whole,” where the two decisions are blended to give a 6/1 ratio rather than a 10/1. That may not be whitewashing, but it is the sort of spin that in my opinion just misleads.

  9. December 5, 2012 at 8:17 am

    And, of course, more information about the promised restructuring would be helpful for those of us who, attempting to read the legalese, just see redemption dates starting in 2021.

    If the board had or has restructuring in mind, what are the total fees involved, when can it take place, and what are the guarantees that the numbers offered are solid and not speculative? What are the total sums that have been given out by the district for services in connection with the 2011 offering? Were they contributors in 2008? And which construction companies have been hired? Competitive bidding? Competitive bidding on the bond assistance?

    When the decision was made to go for $7 million of junk rather than $4 million of legit, what was the $3 million of construction that would otherwise have been postponed? Did the district have any alternatives — perhaps property that it could have sold, or aspects of the project that could have been postponed, even if that might have meant another vote at some point in the future to reauthorize the last $3 million that had already been authorized?

  10. PlunderZ
    December 5, 2012 at 8:52 am

    The taxpayers of McKinleyville paid $475,000 in fees to issue these bonds. Will they have to pony up another half a million or more to unwind this abuse?

    The original fees need to be clawed back….thats just for starters.

    This is in your face corruption. WAKE UP!

    The taxpayers of Humboldt County, ALL OF THEM, will be called upon one day to bail out McKinleyville USD. Bet on it.

  11. PlunderZ
    December 5, 2012 at 9:05 am

    It should also be noted that it is discoverable who owns these bonds. The reason is that no physical paper bonds were printed and sold. All the bookkeeping is electronic, kept at a central database in NYC. It will probably take a court order to do it, no doubt they will claim confidentiality, but it can be done. There will no doubt also be a history of all transactions in them as well. These records must be maintained by Federal Law.

    On an aside, if the Times-Standard is looking for an investigative reporter, I am available.

  12. Larry H. Parker
    December 5, 2012 at 9:05 am

    I speak legal. The document simply sates that the doctrine of race zips the loquedoor of the resubital presumption.
    Larry H. Parker.

  13. Plain Jane
    December 5, 2012 at 9:11 am

    Can we get a translator for legalese to plain English?

  14. December 5, 2012 at 9:21 am

    lol!

    Larry H. Parker got me 3.1 million dollars, and man, Im enjoying it!

  15. Anonymous
    December 5, 2012 at 9:24 am

    Low Info Media (LIM) spawns Low Info Voters (LIVs)

    There is a news vacuum in Humboldt County that is being imperfectly filled by ambulance chasers.

    How about a news co-op broadly representative of the whole community?

  16. December 5, 2012 at 9:27 am

    Dear Anonymous,

    Your $100,000 would be welcome.

  17. Anonymous
    December 5, 2012 at 9:28 am

    On a brighter note, Citigroup is cutting 11,000 employees and the Dow is up over 100 today.

  18. December 5, 2012 at 10:18 am

    I’ve put up an item on Trinidad’s 2012 bonds. Notice that Trinidad chose to finance the vast majority of their issue in a more conventional way, but found it necessary to “sweeten the deal” — my phrase — for bond buyers with a small amount of CABs. The overall Trinidad debt ratio on its 2012 issue is 2.5, whereas McKinleyville’s 2011 debt ratio is 10.2.

    In other words, a borrowed dollar that cost Trinidad USD $2.52 will cost McKinleyville USD $10.20, as the deals are currently specified.

  19. Anonymous
    December 5, 2012 at 10:29 am

    Query: would the financial burden of these bonds create pressure for McKinleyville to undergo further development?

  20. December 5, 2012 at 10:32 am

    Excellent point, #19. Excellent point.

  21. Larry H. Parker
    December 5, 2012 at 11:29 am

    Creating pressure is the point. Who cares about a contract to re-roof a school when you get contracts to build new houses. And when MCSD cries lack of infrastructure, BAM. Instant rate increase (to pay the bonds for more plumbing).

    Now that’s a resubital presumption!

  22. Anonymous
    December 5, 2012 at 2:36 pm

    Because admittedly, I’ve only lived up here for about 5 years now, but from what I understand companies like Security National, Hooven & Co., and Mercer-Fraser — companies represented on the McK school board — would probably benefit from McKinleyville being pressured to yield to the subdivision knife.

  23. tra
  24. Anonymous
    December 5, 2012 at 4:35 pm

    There’s a little bit of McKinleyville in all of us, and a McKinleyville in every county.

    We salute you.

  25. brian connors
    December 6, 2012 at 4:57 am

    The next time you hear some neo-con complaining about the unions, tell them to “shut the hell up”!

  26. Just Watchin
    December 6, 2012 at 7:05 am

    Anonymous :There’s a little bit of McKinleyville in all of us, and a McKinleyville in every county.
    We salute you.

    Not sure how a video about a meth cookin, cousin humpin hillbilly relates to a school bond fiasco, but it’s seven minutes of my live I can’t get back.

  27. Anonymous
    December 6, 2012 at 7:19 am

    JW – you’ve spent hours trolling this blog, just to provoke the other posters. Your time appears to be cheap.

  28. Just Watchin
    December 6, 2012 at 7:55 am

    Anon…..still haven’t figured out a name for yourself? I can see your interest in this video though, given the cousin humpin reference. Bet it make you feel right at home. Family reunions must be like speed dating !!

  29. Anonymous
    December 6, 2012 at 9:11 am

    Ignore my comments, I just troll and try to provoke. I don’t have any real interest in the thread or anything of value to add. Sincerely, JW

  30. Just Trolling
    December 6, 2012 at 9:13 am

    Here’s a name.

  31. Just Trollin
    December 6, 2012 at 9:19 am

    I forgot to drop the g. Another good name would be, “Just Wankin'”

  32. Just Watchin
    December 6, 2012 at 9:25 am

    Excellent choice JT !! But Just Wankin might be descriptive of your personality. Are you going to stick with it??

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