About this site

I am currently a Governing Board Member of the San Carlos School District, elected November 2007 and again in November 2011. I created this site to keep in touch with folks who want to know more about what is happening in the District and what it's like to be a Trustee.

Please note that ANY OPINION EXPRESSED HERE IS PURELY PERSONAL AND DOES NOT NECESSARILY REFLECT OFFICIAL POSITIONS OR POLICY OF THE SAN CARLOS SCHOOL DISTRICT NOR THE OPINION OF ANY OF MY COLLEAGUES ON THE BOARD.

The blog is intended solely for the purpose of informing and communicating with constituents. It is not intended in any way to participate in discussions with fellow board members.

I encourage everyone to visit the District web site as well as attend School Board meetings.

I will not accept anonymous comments, and all persons who post comments must have a valid e-mail address. Note that I reserve the right to edit, reject, or delete posts based on spelling, grammar, readability, or my judgment of what is appropriate discourse.

 

July 2015
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Funding (Largely) Restored, Finally…

It took almost my full eight years on the school board to get really good financial news, but at last night’s board meeting we heard the almost unbelievable update that we will have enough money next year to restore most of the programs that were lost or cut since 2008, and even make some new investments. During my tenure, we had so many terrible financial years, and our district managed through the worst of them by cutting costs, reducing financial reserves, passing parcel taxes, and relying on ever-growing community support, such as that from the San Carlos Education Foundation.

Our financial good news stems from two major steps taken this Spring. The first was an increase in state funding — the acceleration of the full implementation of the new funding formula, as well as some increases in one-time funding related to Common Core implementation (all of this of course due to the more robust economy and surging State tax revenue). The second was the passage of Measure P by San Carlos voters. All of this means that we now have the ability for the first time in many years to pass a budget that is balanced, restores a healthy reserve level, and makes new investments in our students.

Essentially, the District is able to restore most of the programs cut since 2008, including reductions that were made to counseling programs, librarians, custodians, literacy, and electives. In addition, we can make a few new investments from items that were high on the priority list. Although some of the restorations will happen over time, we saw a budget proposal last night that included the following:

  • A multi-year agreement with employees for salary increases
  • Additional technology associatiates
  • Greater investments in musical instruments
  • Increased professional development
  • Increased discretionary funds at each school site
  • An additional position to support custodial, safety, and energy management
  • Greater investment in district communications
  • Increased number of counselors
  • Increased facility maintenance
  • Additional investment in literacy programs
  • Additional custodial support
  • Additional school secretarial support
  • Adding middle school electives to allow students to have a second elective option
  • Increased librarian time

The implementation details and timing of all of the above still need to be worked out. Although we have a few more meetings before we pass a budget, I suspect that the final one will be similar to what we saw yesterday. On a cautious note, it’s important to remember that our budget is currently based on the Governor’s state budget proposal, yet our revenue allocation will be based on the final budget passed by the legislature. So, there is still a risk that our revenue numbers could come in a little lower — we should have more clarity over the summer. But in general, our new financial picture allows us to see a much clearer path to executing upon most important initiatives in our Strategic Plan.

So, I don’t want to get too giddy, as we must recognize that California’s economy is cyclical and unfortunately school funding is dependent upon the State’s cyclical funding sources. That is why we will ensure that our near-term budgets have a very healthy reserve level (also, effectively back to the level it was before the 2008 recession). And we must recognize that although our financial picture has greatly improved relative to past years, SCSD is still one of the most underfunded school districts in a state that chronically underfunds education. Lastly, note that this is about our yearly operating budget — we will still face significant financial pressure in the short- to medium-term around our facilities projects, which are (ironically) negatively impacted by the good economy as the cost of construction rises rapidly in this region.

But for now, I will gladly take the good news, and it certainly gives me comfort that as I leave my school board service this year, I leave it with a renewed sense of excitement and possibilities!

2014-2015 Year End Wrap-Up

With only about three weeks of school left, it’s time for my annual year end wrap-up. This is definitely a bittersweet note for me to write. By all measures it has been a great year for the San Carlos School District, and of one I am very proud. We have made progress in so many areas, more of which I’ll discuss below. However, this will be my last year-end update as my second and final term on the school board concludes in December. It also happens to coincide with my younger child graduating from the District, ending 11 years as a parent in SCSD. Of course I will see a few months of the next school year as a Board member, but clearly things will be winding down for me. It has been one of the greatest experiences and greatest privileges of my life to be such a part of this special community, so I thank you all for the unwavering support through the years.

As most of you know, public education – and the San Carlos School District specifically – is in the middle of many changes, most of which I would argue are very positive and further our mission of serving all children in our community and preparing them for high school, college, and life. We have a new funding distribution formula in LCFF, new accountability standards in LCAP, and a new curriculum based on the Common Core State Standards. All of these I believe to be solid policy advancements, but they do present new challenges for us locally. It’s particularly heartening that the State is moving away from a reductive singular measure of success (API) and instead promoting the idea of a dashboard of indicators to both measure school and district performance and to create actionable insights. SCSD has made much progress in aligning its LCAP plans with its overall Strategic Plan and developing an information dashboard (to be unveiled soon) to better track how we are performing on multiple levels. This spring the students for the first time took the official Smarter Balanced tests aligned with the Common Core standards (and replacing the old STAR tests) – we don’t have data back on this yet, but we have anecdotal evidence that the students found these new tests much more challenging!

Our staff continues to embrace and extend the ideas in our groundbreaking Strategic Plan, delivering new and innovative ways to engage students and promote learning. I was privileged to visit the District “Day of Innovation” where so many teachers demonstrated the great project-based lessons they have introduced in the classroom. I continue to be pleasantly surprised how quickly our schools are embracing this paradigm and experimenting with different approaches to teaching and learning.

Another big focus this year has been around construction and facilities management. After the failed land swap idea (which I still contend was absolutely brilliant), the School Board decided to keep CLC on the TL campus and move it to the upper part of campus (I, personally, preferred the idea of moving CLC to the Heather campus where there was more room and future flexibility, but alas I was outvoted). In any case, this was a complex decision with many moving parts including locations of preschools, traffic issues, etc. On the subject of traffic, we made a fair bit of progress with the “Four Corners” committee, which was a task force of SCSD, the cities of San Carlos and Belmont, and the Sequoia Union High School District to improve traffic flow in the corridor around TL and Carlmont. We now have preliminary plans to re-work the roads and create a new entrance to TL from Alameda de las Pulgas. These plans still need to be finalized, and the two cities need to get a grant to fund the changes, but it’s my hope that within a year or two, we’ll see concrete (pun intended) changes here.

Of course, no discussion about facilities would be complete without recognizing the amazing construction work that has been done this year on the new Central Middle School – the building looks amazing, and it will be on time to open this Fall (as you may recall, the “old” Central will be remodeled for the new 4-5 school). The design of the new building – 2 stories with learning commons and flexible spaces – is a great example of a 21st Century Learning environment. One of the ongoing risks with our facilities plans is the ever-increasing construction costs during this real estate boom. We have to be very careful to ensure future projects can be funded – one way to ensure this will be to sell some excess property owned by the District, such as the Heather Dog Park. A committee is being created now to explore the sale or lease of surplus property.

The last big development during the year was the passage of Measure P this past month. Measure P did a few things – it renewed expiring Measure B, combined it with Measure A, and added an additional $58 per parcel per year (for a total of approximately $250/parcel/year), with this singular parcel tax now extended until 2021. With SCSD not benefiting much from the new Local Control Funding Formula, this measure was crucial to both retain our existing local funding base and to add approximately another $500,000 per year to help fuel our strategic initiatives. The residents of San Carlos continue to be both strongly supportive of our public schools and incredibly farsighted in understanding the connection between the health of our schools and the health and well being of our entire community.

Even though I won’t be directly involved in the school district over the coming years, I think there are many exciting things to anticipate. Certainly from a facilities point of view, we can look forward to the opening of the new Central Middle School, the building of the new CLC, and the renovation of existing facilities to create both 4th-5th grade schools. There has already been much community outreach in coming up with names for the 4-5 schools – I look forward to hearing that input over the next few months. Clearly there will be lots of excitement for the district as we transition to the PK-3 / 4-5 / 6-8 model of school configurations, and I particularly look forward to the new 4-5 schools being a great laboratory of innovation. Also expect to see more advancement toward the goals in the Strategic Plan, particular in the areas of classroom and grade configuration as well as staff responsibilities. As we discuss in the plan, there is much opportunity to leverage “educators, broadly defined” to promote teaching and learning, and there has also been some progress between the District and the teaching staff on new and innovative approaches to teacher mentoring and evaluations. On a State and Federal level, education policy will continue to be in the news, particularly as matters like the Vergara decision go through the legal appeal process.

One of my ongoing concerns for our school district will be to ensure it continual attracts good people to run for School Board. From the outside, the role often seems thankless, but I assure you that it isn’t. Certainly every once in a while you have to grow a thicker skin and endure ill-informed slights, but all in all, I can tell you that I have received so much support and encouragement from parents and others in this community that it dwarfs any negativity and unproductivity promoted by a small minority. And best of all, with the amazing staff we have in place in this district, combined with the incredible force of parent and community involvement, we can absolutely see real progress in how we serve the next generation, and it’s hard to get more rewarding than that. I truly encourage all of you to consider running for school board this year.

On a personal note, I wanted to thank everyone who came to watch me (as well as fellow Board Member Adam Rak and a host of other talented adults and students alike) in SCCT’s community theater production of Bye Bye Birdie. It was an awesome experience, and I appreciated all of your support!

Although it’s not an official goodbye just yet, I still wanted to say thanks again for eight great years. I don’t know how or where you’ll see me involved in this community after 2015, but you know I’ll continue to be incredibly supportive and supremely interested in our schools. And you can rest assured that the strong leadership and dedicated staff in this school district will continue to make amazing progress for years to come and keep San Carlos as a model for public education.

P is for Pass

Based on the County Elections Office updated return, the Measure P parcel tax for San Carlos schools increased its lead slightly to 68.3%, a material margin over the required two-thirds to pass. The election is not officially certified for a couple of weeks, but I think it’s a fair bet to assume the measure will pass.

This was absolutely critical for our the health of our schools and our community, so our deepest thanks to the campaign volunteers and the San Carlos voters. A very nice end to a great school year. I’ll give a fuller report on the year-end in a couple of weeks!

Yes on P

By now, San Carlos School District residents should have received their mail-in ballot for the May 5th election. This election has only one thing on the ballot, which is Measure P, the parcel tax measure for the school district.

This would affect our current two measures in force, Measure A (a parcel tax of $110.60 expiring in 2019) and Measure B (a parcel tax of $78 expiring this year). The absence of any new measure would mean the loss of approximately $750,000 from Measure B’s expiration. Measure P would combine Measures A and B into a single one, extend their term for 6 years (expiring 2021), and add $58 per parcel. If passed by 2/3 of the voters, the measure would both retain the existing local funding and also add approximately another $500,000 per year.

This is absolutely critical for both San Carlos Schools as well as the whole community. Please see my post that explains the background for this measure and why it’s so important. The measure requires a 2/3 super-majority to pass, so every vote counts.

This is a mail-only election — no going to the polls. So, please open that envelope, vote YES, and return your ballot today!
Ballot

For additional information, see Measure P’s website (including additional information on how to support the measure) and Facebook page (please like it). Thanks again for all of your support!

Crucial New Measure on the Ballot

Last night, the school board unanimously voted to place a new parcel tax measure on the ballot, to be voted on May 5th in a scheduled all-mail election. This would affect our current two measures in force, Measure A (a parcel tax of $110.60 expiring in 2019) and Measure B (a parcel tax of $78 expiring this year). The absence of any new measure would mean the loss of approximately $750,000 from Measure B’s expiration. This new measure (to be named by the elections office) would combine Measures A and B into a single one, extend their term for 6 years (expiring 2021), and add $58 per parcel. If passed by 2/3 of the voters, the measure would both retain the existing local funding and also add approximately another $500,000 per year.

As most readers know, California public schools have been underfunded for decades, and San Carlos remains one of the lowest funded districts in the state (in one of the highest cost regions). I believe that our staff has done an incredible job in creating a wonderful educational experience for our children despite this context. And naturally, this community has stepped up over and over again to create local sources of revenue for the District — primarily from these parcel taxes as well as from contributions to the San Carlos Educational Foundation. Together these two sources represent approximately 15% of our overall budget, and it would be impossible to have the caliber of teachers and programs without this local revenue. The District has also been quite enterprising in building out its pay-for-service programs, such as pre-school, after school, and camps.

Naturally, the pending expiration of Measure B started the discussion on the need for such continued funding. And unfortunately, due to the new Local Control Funding Formula (LCFF) adopted by the State, San Carlos receives less state funding that it would have under the old model (which was one of the lowest in the nation to begin with). So despite news from the state that funding for education is improving, the finances in San Carlos remain precarious, and we are in danger of running down reserves over the next couple of years without spending cuts or a revenue increase. And as parents in the District know quite well, cuts would be quite painful and detrimental for our students — we still have less funding per student than we had in 2007, and costs have gone up!

School finance is a very complicated and counter-intutive subject — if you’d like to learn more, I encourage to watch my video on California education finance — this was updated a little over a year ago to include the effect of LCFF. The parcel tax and education foundation are two of the few tools we have as a local community to control our own destiny. The parcel tax is a true “win-win” in that it helps students but also benefits taxpayers — real estate value increases from supporting the school system dwarf the small amount added to property tax bills.

However, like any measure, we need to get the word out! A group of community members is in the process of forming an independent campaign committee to lead the effort to support this ballot measure. Just as in prior campaigns, it will take a lot of work from a lot of folks to get this message out. If you’re interested in getting involved, please e-mail me and I will connect you with the right people. San Carlos has had a long history of supporting these measures and its schools, but it still required a strong campaign!

We are doing some exciting things in San Carlos – from the new schools being built to some of the incredible additions to the curriculum based our project-based learning, technology, and other “21st Century Learning” concepts – that we can’t afford to slow down and short change our students. This retained and additional funding will help us fill the gap created by the State and give us an ability to further invest in our students and our community. Please get involved, and certainly vote when you get your ballot!

To Increase or Not to Increase, That is the Question

At last Thursday’s School Board Meeting, the board heard a presentation by Godbe Research and TBWB Strategies, two firms that the District hired to help understand the options regarding (and the community’s view on) a potential parcel tax renewal and increase next Spring.

As background, the District currently has two parcel taxes in place, Measure A and Measure B, which collectively bring in about $2 million per year for the school district. Parcel taxes are flat amounts levied per real estate parcel (irrespective of appraised value), and the funds generated for such taxes go to the school district general fund. Parcel taxes must pass with a 2/3 supermajority of voters in favor and are generally in force for a specific term. This funding — along with the money raised by the San Carlos Education Foundation — has become absolutely critical for San Carlos, which is one of the lowest funding school districts in the state. Measure A was passed in 2011 for an eight-year term, and Measure B was passed in 2009 for a six-year term. Accordingly, Measure B — if not renewed — would expire next year. Therefore, the District hired Godbe and TBWB to look at various scenarios to place a measure on the ballot for May 5, 2015, which could either renew the existing Measure B parcel tax or potentially renew and increase the tax. They also looked at the possibility of renewing the tax while combining it with Measure A.

As many of you know, the new Local Control Funding Formula (LCFF) cements San Carlos’ position as a low-funded district for many years. Understanding this fact as well as the very grand goals outlined in the District’s Strategic Plan, one of the agreed-upon goals for the 2014-2015 school year is to significantly increase our financial resources to have the ability to meet all of our lofty objectives. Recently, community members may have seen a notice from the District to participate in an Ad Hoc Revenue Enhancement Committee so that we can explore multiple ways to accomplish this.

Naturally at a minimum, we need to preserve the funds by renewing the Measure B tax, but increasing it can of course be a significant way to increase our ongoing revenue. Therefore, Godbe Research conducted a survey of San Carlos voters in September and October to understand their view of the school district and their thoughts about these possibilities around the parcel tax. Overall, the sentiment was very positive both in an absolute sense as well as compared to results seen by other school districts. Here are some highlights:

  • 72% of voters (and 85% of parents) had a favorable opinion on whether SCSD is providing a quality education to students, with only 8% having an unfavorable opinion (remainder were unsure, which for non-parents was higher — 27% of non-parents were not sure)
  • 52% of voters (and 67% of parents) had a favorable opinion on whether SCSD is effectively managing public funds. 20% had an unfavorable opinion, with the remainder unsure (which was also highest in the non-parent population — 35% of non-parents were not sure).
  • When initially asked about a potential measure which would renew the existing parcel tax, combine it with the other measure, and increase it by an additional $98 per year, the “yes” votes came to 66%, just below the margin to pass. (Note also that the poll had a margin of error of plus or minus almost 5%)
  • After hearing the more specific features of the renew/increase measure as well as arguments for and against it, support increased to approximately 71%
  • When asked about different potential increase rates (e.g. $98 vs. $78 vs. $58), there was little difference in the percentage of voters that would support
  • When asked about a straight renewal without an increase, the support went to almost 77%

The conclusion of the polling firm and our consultant was that there is indeed continued strong support of the school district within our community, and most folks clearly see the importance of sustained and increased funding for schools. A straight renewal of Measure B would be considered an extremely likely measure to pass. With respect to a renewal and increase, their opinion was that there was a very good chance for such a measure to pass if it was accompanied by a very strong campaign that primarily reached non-parents who clearly had much less information than parents on the successes of the school district. (As you may recall, campaigns are not paid for or run by the district — they have to be run by an independent committee which raises private funds on its own).

Therefore, it was the consensus of the board that we have further conversations with the community to see if there is this energy and appetite to lead such a strong campaign. If there is, then going with the increase option may be the shortest route to accomplish some of our goals. If we feel there won’t be strong leadership and drive within the community (most of these efforts are led by parents and include volunteers across the community, including teachers and other staff members working on their own time), then we may go the conservative route with the straight renewal. The Board will likely have to make a final decision and place a measure on the ballot by the end of January, and in the meantime can communicate with both parents and non-parents about our current predicament and best understand the community’s perspective. I encourage folks to volunteer for the Revenue Committee as well as to share your thoughts with me, fellow board members, and Dr. Baker.

Teacher Contract Approved, Barely

At Thursday’s board meeting, the Board voted 3-2 to approve the new contract with the San Carlos Teachers Association (SCTA). This agreement included a 2% raise in the salary schedule as well as increased contributions to health benefits. Although the agreement was approved, every single board member expressed serious frustration at how the negotiating process went this year and the lack of constructive engagement by the bargaining unit. Rather than try to summarize everyone’s comments, I invite folks to watch the video of this agenda item (the discussion is about 20 minutes long — from approximately 13:44 – 34:20 on the recording), as I think there were very thoughtful comments by all board members. There was also an article today in the San Mateo Daily Journal giving a brief summary of the item.

Below I have included a transcript of my own remarks:

This is my seventh year going through the negotiating process, and I must admit it always felt like one of the strangest parts of the job, and certainly the most anachronistic. There are plenty of folks out there who are just stunned when we learn that in the 21st century, we still have this incredibly old framework for managing how our employees work and how much they get paid. Particularly in a context where otherwise we think of our staff members as professionals, it’s odd that we revert to this old factory-worker mentality for this large subset of important issues.

There’s no doubt that teachers need to get paid more. Our teachers do amazing work in this district, and I’m certain my colleagues on the board all agree that teachers are fundamentally underpaid. I’m sure most parents would agree with that too. I wish we could do something more dramatic about that, but we all know that we have so little control over our funding, and that the state had systematically underfunded education for decades. We strive to do the best we can, and supporting SCEF and putting multiple parcel taxes on the ballot gives us a little more breathing room. Is it enough? Of course, not.

But then it would be flawed logic to conclude that this District or this Board does not care deeply about its teachers or does not understand the criticality of a great teaching staff on students. Does anyone think that these five people sitting up here volunteer thousands of hours of their time because they don’t value teachers? Does the fact that our teachers get paid toward the top end of the scale of Revenue Limit districts in this county mean we don’t care about teachers? Or is more likely that making these decisions is quite difficult and complex, and that there are a lot of competing needs that need to be weighed, all under the cloud of continued financial uncertainty? Is it possible that we understand that with limited resources we cannot fully fund everything we would like?

There are many flaws in this collective bargaining process that we are required to undertake. The first is the obvious one — the assumption that the same compensation scheme and work rules would be right for everyone. I recognize this would be a challenge to change, but perhaps one day we will be able to treat our employees as individual professionals with individual needs and customized responsibilities. The second, less obvious, flaw is the application of a private sector “zero-sum” framework. In the case where the UAW is negotiating with General Motors, for example, the union may make a reasonable assumption that any money not captured by the bargaining unit goes back to the company, and hence would eventually flow to “management” or to shareholders. We don’t have this dynamic, yet the underlying assumptions and rhetoric are often similar. If the District “saves” money by not spending it on teacher salaries, for example, it’s not as if another group gets richer because of it. Rather, by definition, that same money goes right back into services for students — maybe not in the same year, but eventually it must. There is no “profit” taken out by anyone and there is no management windfall achieved by cost savings. And since 80% of our spending goes toward personnel, when that money is eventually spent it will go back to supporting our staff — maybe in not the exact same way that everyone wants, but supporting our teachers and our students nonetheless. The last flaw is the century-old assumption that the way to advance your cause is to “put pressure” on the board, rally the troops, and rally parents to your cause. I would think that we all would have learned that in 2014 in San Carlos, this technique is actually counterproductive. I suspect this administration — and I’m sure this Board — responds more positively to constructive engagement than to pressure.

In these seven years, we’ve had some more difficult and some easier ones with respect to negotiating. As you recall, we had years when we had to cut salaries because our own funding was cut so dramatically. We are fortunately not in that situation today, but as we all know, San Carlos was not a beneficiary of the new Local Control Funding Formula. Funding will continue to be very tight for many years — that is our sad reality. This is why it is crucial we renew and/or increase our parcel tax and we do everything we can to support SCEF growing.

I understand that Dr. Baker and the SCTA leads are discussing making changes in our process as well as the potential representatives on both sides of the table. I look forward to seeing such changes, but until such time, I can’t support such agreements and will vote no on this contract.

Movin’ On Up

Last night the board made a final decision on the location of CLC. As I reported a few weeks ago, the School Board voted on August 28th to keep CLC on the Tierra Linda campus (even though I was the dissenting vote). However, at that time, we wanted to get more information before deciding the specific location on that campus. At last night’s meeting, the Board agreed to locate CLC on the upper section of the TL campus, roughly in the area currently occupied by Edison Montessori and some district Special Education preschool classes. This was determined to be both the most prudent fiscal option as well as the one which best gave CLC its own campus within the campus. After the new CLC is built, the buildings currently occupied by CLC would be remodeled to be the new 4-5 school.

Certainly having a new, separate, parcel of land for CLC would have been ideal for all, but the failure of the land swap proposal with the City caused us to choose one of our existing pieces of property. Even before we passed the District’s Facilities Master Plan 18 months ago, we knew this was a likely scenario.

There are a few open issues left, including determining a new location for the Montessori school and the other preschool classrooms, and there is still a fair bit of work to do in designing new traffic circulation paths around the campus. The District has been working with the City of San Carlos, the City of Belmont, and the Sequoia Union High School District to together devise solutions to help ease traffic flow on Alameda and Dartmouth as well as inside the TL campus. You will likely be hearing about some of these proposed solutions in the coming months.

In any case, it’s nice to have this closure for the CLC community and for the rest of the District.

The Stealth Tax, Courtesy of the Rating Agencies

There is often much misunderstanding and controversy surrounding the issuance of facility bonds by local school districts. The recent flap over Capital Appreciation Bonds is one of them, but completely ignored is a real cost added on to taxpayers by rating agencies who either don’t understand, or choose to ignore, how they work.

As background, if a school district issues local general obligation bonds (which must be placed on the ballot by the school board and then approved by local voters), these bonds are funded by an additional tax levy on property owners; this tax pays the interest and principal costs of these bonds over their life. Typically, this is an “ad valorem” tax, meaning the tax levied to pay debt service in any given year is based on real estate values (generally annual debt service divided by assessed values in that year). Each property owner pays an equal percentage tax tacked onto their annual property tax bills. So, effectively the bond debt service is collateralized by the property tax stream from the property owners. This is in contrast to a standard municipal bond where the issuing agency (the one receiving the proceeds) is the same as the one servicing the bond debt.

Like any financial instrument, the cost (interest in the case of bonds) is determined by the market. While investors generally conduct internal credit analysis, the bond market still relies on rating agencies, such as Standard & Poor’s (S&P) and Moody’s, to assign a rating to each bond issuance. For S&P, these ratings go from AAA all the way to D, with gradations along the way (AAA, AA+, AA, AA-, A+, A, A-, BBB+, BBB, BBB-, etc.). The lower the rating, the higher the interest cost, on the theory that a lower rated bond has a higher likelihood of default and therefore must compensate investors with a higher return to accept that higher risk. For all bond issuers, public and private, getting a strong bond rating is key to keeping costs down.

When a school district issues general obligation bonds, it also goes to an agency like S&P to get a rating. As it does for other issuers, S&P rates the creditworthiness of the issuer on four key factors — the health of the local economy (which includes the tax base), the finances of the district, the management of the district, and the indebtedness of the district. The problem, however, is that three of these four criteria actually have nothing to do with the credit worthiness of the bonds. As school bond debt service is paid by property owners (unlike standard municipal bonds), the financial health of the district isn’t relevant at all. Even if our school district ceased to exist tomorrow, all of our bonds issued would still be paid off with no risk of default because the debt service isn’t coming from the district — it’s coming from property owners! The only possible scenario where these bonds could default would be if every property owner in the district declared bankruptcy, and did it simultaneously! Because even if the town were hit with a severe recession or if a substantial number of citizens moved away, the burden of debt service would just shift to the remaining taxpayers (who would then each pay a higher percentage ad valorem tax rate). In practice, the only conceivable — albeit farfetched — scenario to have a bond default would be some natural disaster where overnight our town literally ceased to exist!

It may be too easy to assume that this ignorance by the rating agencies is just laziness, but I would suggest this standardized approach is rather simply self-serving — the rating agencies generate business by doing this “research” on each local district when in reality no such research is necessary, because any objective analysis would conclude that all school bonds of this sort must be AAA rated almost by definition. This “rating deflation” costs taxpayers and districts real money — districts get reduced bonding capacity (given tax rate limits, a district can issue less bonds) and/or taxpayers pay more interest for no reason. For example, our district was rated AA- for its recent bond issuance, which is considered fairly strong by current methods. But even that three-step distance from a AAA rating can mean a difference of 0.35%, so for every $100 million in bonds outstanding, the taxpayers are burdened with an extra $350,000 per year (and of course, much more for districts with lower ratings).

Some bond attorneys argue that S&P has concerns about a theoretical situation where a district goes bankrupt and then looks to “sweep” money from the dedicated debt service account for general fund purposes. As this has never actually happened and is even against the law in this state, it’s a better assumption that keeping the status quo is just in the rating agencies’ self-interest. What incentive do they have to change a system so as to minimize or eliminate their “value-add”? Perhaps there are two conclusions here: (1) school bonds are probably one of the best debt instruments an investor can make given the relatively higher interest rate with no higher risk, and (2) in the absence of the rating agencies doing the right thing, maybe a state policy change can mitigate this long-standing, monopolistic power that is surreptitiously issuing an additional tax on most of our citizens.

Staying Put

At last night’s School Board meeting, the Board voted 4-1 to keep the Charter Learning Center (CLC) on the Tierra Linda campus. I was the dissenting vote. Although I think re-locating CLC to the Heather School campus would have been the more optimal solution, I’m glad that the decision is made and we can move on. As I said last night, despite the relative angst generated by this question, the truth is both of these solutions will work out fine for students, teachers, and for all of the schools involved. I had just felt that moving the school to Heather would have been a more efficient use of our land, would have given us greater future flexibility for growth, and would better disperse traffic throughout the city. My colleagues did not give as much of a weight to these arguments, and all cited the specific preference by CLC to stay on its current campus.

In the grand scheme of things, this is the last piece of the puzzle that defined how we move forward on our Facilities Master Plan. And of course, this decision faced by the School Board was the result of the City Council’s inability to bring to the voters the proposition to swap land to have a new site on Crestview for CLC — that would have been better for both the school district as well as all San Carlans for for many reasons. So, despite the fact that CLC won’t be either in the optimal location (Crestview) or in what I think was the better back-up location (Heather), the decision allows us to move forward in what is, overall, an incredible plan for the school district and its students. We will have two new 4th-5th grade schools on each of the Central and TL campuses (built for 21st century learning), and we will relieve overcrowding at all of the elementary schools.

The default assumption has been that CLC would move to the upper part of the TL campus and the new 4-5 school would be where CLC is now. But in our upcoming board meetings, we will look at specific plans which could include an alternate configuration of leaving CLC in its current location and building the 4-5 in the lower section of campus.

Now, the main challenge will be traffic mitigation measures on the Alameda/Club/Dartmouth corridor. As our enrollment grows as does the enrollment of nearby Carlmont High School, there will need to be a fair bit of work on safety and traffic mitigation measures. There is a committee of four government agencies that has been working on some recommendations, so we will likely hear about that soon. Also, the District may need to consider re-locating some of the other facilities on the TL campus, including the Montessori school as well as the bus transportation yard.