Not only do the District’s numbers not add up, but the use of the very specific term “Deferred Maintenance” is just wrong and inaccurate. “Deferred Maintenance” has a very specific meaning in the financial, accounting and business world. The Federal Accounting Standards Advisory Board defines “Deferred Maintenance” as maintenance and repairs that were not performed when they should have been or were scheduled to be and which are put off or delayed for a future period.
What Jason Glass and Ali talk about when they talk about “Deferred Maintenance” is not “Deferred Maintenance” at all!
First, Jason Glass, as the CEO of a $1B organization should know better and SHOULD know what that term means. Second, the use of the key word “Deferred” means maintenance that was scheduled previously, but has not yet been performed, as in delayed. We’re talking about the past tense of a word here for the people in the school District who may not have been paying attention when they went to grade school. In this case, the District attempts to claim that $371M in projected maintenance, over the next 6 years, is currently “Deferred”.
The District’s response to my original letter on this topic was comical, to say the least.
The District continues to claim there was $1.3B in “Deferred Maintenance”, but even their numbers just don’t add up.
Here’s an extract from their response:
The $1.3 billion was arrived at in the following manner. The capital program is planned over two phases of five to six years per phase. As of February 2018, the value of deficiencies as defined in the annual Summary of Findings is $588 million. The proposed 2018 bond, valued at $567 million, will address about $250 million in deferred maintenance priorities 1-3; an additional $125 million towards educational adequacy, the balance in replacement facilities, growth accommodation through additions and new buildings, safety and security, and technology.
The investment in current deficiencies will be $375 million or 64% of the need. Life cycle renewal is valued at $371.3 million in non-inflation adjusted dollars. This amount continues to grow each year as systems and components reach the end of their life cycle requiring major investment or replacement. In 2023, when the 2018 bond should be near completion, these items will have moved into the deferred maintenance categories. The balance of deferred maintenance items not addressed by the proposed 2018 bond, in non-inflation adjusted dollars, will be $213 million in addition to the $371.3 million of life cycle work that have become deferred maintenance leaving $584.3 million in unaddressed deferred maintenance.
Summarizing, the 2018 proposal is valued at $567 million, a 2024 bond proposal valued in 2018 dollars would be $584 million or nearly $1.2 billion in 2018 dollars. Applying even a modest inflation of 3% over six years, the cost exceeds the $1.3 billion value.
Here are the summarized key points in that response:
- As of February 2018, the value of facilities deficiencies is $588M (certainly not $1.3B).
- The Bond will address about $375M, or 64%, of that need.
- The balance of deferred maintenance items, not addressed by the Bond, will be $213M ($588M – $375M).
- The balance of the bond ($567M – $375M or $192M) will go toward “replacement facilities, growth accommodation through additions and new buildings, safety and security, and technology” and Charters.
- Projected Life Cycle renewal is valued at $371.3M, which in 2023 will have moved into deferred maintenance categories
For the time being, let’s ignore the FACT that you can’t call maintenance “Deferred” now, if you’re talking about something that won’t even be needed for 4, 5 or even 6 years in the future. Therefore, let’s just add up the numbers they gave me:
$375M in bond funds used for maintenance and educational adequacy needs
$213M in current maintenance needs not addressed by the bond
$371M in upcoming life cycle needs over the next 6 years
It’s time to bring out the calculator, because the total from those three numbers is $959M, NOT $1.3B.
The District’s “Subject Matter Expert” attempted to say that a liberal use of inflation COULD bring that total up to $1.3B in 6 years, but the facts are the following:
- You can’t compound that total cost figure over the course of 6 years because even the District isn’t claiming that the total amount is currently deferred.
- The “Subject Matter Expert” also incorrectly, and deceptively, claimed that in order to get to $1.3B, the entire $567M bond was deferred maintenance, which we know isn’t true: “Summarizing, the 2018 proposal is valued at $567 million, a 2024 bond proposal valued in 2018 dollars would be $584 million or nearly $1.2 billion in 2018 dollars. Applying even a modest inflation of 3% over six years, the cost exceeds the $1.3 billion value.”
- Even still, if you are going to claim that Deferred Maintenance is going to accrue over the next 6 years, shouldn’t you also reduce that by the amount the District plans in Capital Transfers during that period? To present a balanced picture, you should! Hasn’t the District been spending approximately $17M per year in facilities maintenance? And what about claims in the Bond package that amount would actually increase to $138M over the course of the next 6 years — wouldn’t that reduce the $959M by $138M to $821M? It certainly would, and the fact that this offset was left out of the District’s analysis only serves to further highlight either the incompetence or degree to which you, and the District staff, will go in order to misrepresent finances and mislead taxpayers.
To state it plainly, the District does NOT have $1.3B in “Deferred Maintenance” needs, since $371M in the costs portrayed are merely currently PROJECTED needs and haven’t been deferred. And, $192M of the claimed “Deferred Maintenance” is not “Maintenance” at all, including $56M that is designated for Charter Schools.
Therefore, Jason Glass’s, Ali’s, and other District employees’ use of the term “Deferred Maintenance”, in an attempt to portray a greater need than there may actually be within the District is inaccurate, misleading and just plain wrong and highlights the depths they will go in order to intentionally deceive taxpayers.