Below are the observations I made to the Capital Asset Advisory Committee on November 4, 2020, Tim Reed’s Response, my rejoinder and a current update..
Letter to CAAC – 24 November 2020
$57M over budget. On its own, a program that is $57M over budget less than 2 years into a 6 year plan should automatically trigger a Performance Audit. Just to recap, voters were told the Capital Improvement Program would cost $705M. At the CAAC’s last meeting in November, it had a $762,179,035 price tag.
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Tim Reed’s Response – 10 December 2020
Response: The $705M that is cited does not take into consideration premium or accrued interest that in accordance with the bond language and IRS Arbitrage regulations are to be applied to capital projects. At the time of publication the district had no knowledge of what premium or interest earnings there would be. When the amount of those funds were identified the project costs were increased to compensate for future inflation. The budget has been adjusted to reflect the revenue ($762,179,035) available as of October 31, 2020. The remaining bonds are about to be issued and could have a premium associated with them as well as interest on those bond proceeds that will accrue over the next three years resulting in an increase in Program revenue.
Rejoinder to Reed – 4 January 2021
The Capital Improvement Program is $57M over budget, no matter how Tim tries to spin it. Taxpayers gave Jeffco $649M to complete $563M worth of projects. That was the approved budget. Neither taxpayers, nor the Board, gave Tim Reed anything additional to complete the $563M worth of projects. Yes, the Bond market gave Jeffco schools an additional $50M, but there was NEVER any implicit or explicit approval, anywhere, to use that additional money on the same projects that taxpayers already approved a budget for. Let me be blunt. I’m angry that when $86M in contingency was already allocated to a program and with District stated maintenance needs of $1.3B, that $50M in “bonus” money gets shadily added to contingency and essentially squandered when it could have been been used for other needs. Let me ask you as CAAC members a question. Did you or the Board explicitly approve the use of Bond premium for added contingency to the Capital Improvement Program or did Tim Reed merely add it to the “pot”? Was there a discussion on what else could be prioritized and done with that money? Do you not understand the implications of Tim’s actions when it comes time to ask taxpayers for another Bond? Tim can’t tell me in the answer to my Question 9 that Jeffco couldn’t use the $50M in Bond Premium for 2 replacement schools because taxpayers didn’t approve it and then turn around and tell me here that taxpayers approved $50M in added contingency for the CIP. That logic doesn’t hold. The program is $57M over budget, plain and simple and Tim Reed squandered the $50M bond premium.
Current Status – 6 March 2021
Anyway you look at it Jeffco’s Capital Improvement Program is over budget. Taxpayers were told that District projects (excluding Charters) were going to cost $563M with an additional $86M in program contingency. That’s a total of $649M. As of the February 21 CAAC meeting, the total estimated cost of all District projects is $662M (Total less Contingency and $65M for Charters). That’s $13M over the total original budget. Add in the additional $8M+ in contingency the Board just approved for fields and the total budget is now $21M over assuming ZERO remaining contingency. That overage is only going to get worse.
This is not what taxpayers were promised. Taxpayers were promised an on-budget program. $86M in contingency usage to date plus an additional $21M is way over reasonable expectations and over budget in anyone’s definition of over budget.