On November 10, 2020 the consulting firm of Moss Adams presented their findings from a mid-program assessment of Jeffco’s Capital Improvement Program. The report was not good.
Included in the report were areas that should raise serious concerns among the Superintendent, Board Members, District Staff and Jeffco taxpayers.
One of the areas that Moss Adams looked at was Contractor Procurement, essentially how contractors were chosen.
Moss Adams wrote:
… however, bid tabulations or evaluations for the selection and award of the projects were notavailable. Additionally, documentation was not available to demonstrate the selection process and awarding of professional services from the prequalified list of consultants. We were unable to determine whether or how the selection and award process for District projects included the factors outlined in the District’s policies and procedures.
Essentially, Moss Adams is saying that there is no record of how winning bidders were chosen. Think about that for a minute. Of the 6 projects Moss Adams looked at from a Contractor Procurement perspective (Appendix H), only one was awarded to the low bidder and that there is zero documentation on why low bidders for the other 5 projects weren’t chosen. In addition, 5 of the bidders who were selected were subsequently issued change orders, the minimum value of which was over $6.5M.
Contractor Procurement in Jeffco’s CIP. Not awarded to low bidders.
This is just beyond belief. It is certainly not hard to imagine scenarios where a procedureless system like this can, and maybe has been abused.
Something similar happened with regards to Architect Procurement.
Moss Adams looked at 8 projects with respect to Architect Procurement (Appendix I). None of the 8 provided a proposal, with Moss Adams stating that these contracts appeared to be “sole source procurement”. How can anyone think that there is not the opportunity for fraud, favoritism or over pricing with so many sole source contracts? And, not to be outdone by the Contractor Procurement, all of these architecture firms were issued substantial change orders too.
Architect Procurement in Jeffco Schools CIP. Sole Source awards with no proposals and change orders.
This is not the way to run a capital program. The optics are that there is way too much opportunity for fraud and corruption.
These examples are only the tip of the iceberg if you take the time to critically read the full Moss Adams report, not just the cherry picked and sanitized sound bites District staff presented to the Board.
The program is out of control, not just from a cost perspective, but also from management and fraud mitigating perspectives.
Jeffco taxpayers and voters deserve nothing less than full Financial and Performance audits. Taxpayers were promised that Jeffco would be good stewards of their money. That isn’t happening.
Jeffco FF&E Projects more than $200,00 over budget
Something very strange is happening with the FF&E projects in Jeffco’s Bond program.
In December, there were 63 listed FF&E projects on the CAAC report. 12, or nearly 20%, with costs of $3.2M, had no Original Budget, meaning they were originally unplanned and out-of-scope. If you look through the CAAC notes you will see that there has never been a discussion related to these project additions. This is not the “monitoring” that Jeffco taxpayers were promised when the District was campaigning for bond approval. These are the “winner” schools.
Yet, they aren’t the only “winner” schools. There are an additional 11 schools with current costs more than $200,000 over their original estimated budget. Variances for these projects range from 81% over budget to 1950% over budget (that number is not a typo). Is this just a result of bad estimating or are these schools getting more than they were originally scheduled to get? Who approved these additions and overages?
Jeffco FF&E Projects more than $200,00 over budget
It would be one thing if the vast majority of “estimating” errors were all in the same direction, but unfortunately that’s not the case. There are 14 schools with Current Estimates more than $200,000 less than the Original Estimate. Cost variances for these schools range from 25% to 80% less than the original. This far exceeds what anyone could reasonably expect to see from good purchasing practices. These underages are representative of schools not getting what they were originally scheduled to get. These are the “loser” schools. Once again, what is the process for determining and approving these shortfalls?
Jeffco FF&E Projects more than $200,000 under budget
As you can see from this spreadsheet, extracted from the December CAAC notes, something is not right regarding FF&E projects. The degree of variance is truly incomprehensible. Are there “winners” and “losers” or is this an indicator of an unbelievable level of incompetence? Either way, this is not right and shouldn’t be tolerated.
Taxpayers were promised accountability and transparency. Unfortunately, because these projects can be “broken” up to be under $500,000, they never show up before the Board. But, someone knows what is happening here and the winner and loser schools, along with taxpayers, deserve to know what is going on.
Last
week Jeffco citizens heard the Moss Adams presentation relating to
their review of the Capital Improvement Program.
If you looked at Jeffco’s Next Steps slide, you would think that only a few simple communications tweaks were needed.
This
was reinforced by Superintendent Dorland telling the Board that “Most
projects are at or near budget”.
However, if you read the full report, this couldn’t be farther from the truth.
First,
it is completely false that most district projects are at or near
budget.
The
Moss Adams report shows that 59% of In-progress projects are over
budget, with 19% of all projects expected to exceed their budget by
over $500,000.
It
is worse for Completed projects where 67.8% are over budget, with
18.8% exceeding their budget by more than $500,000.
Dorland
was wrong. If someone gave her that faulty information they should be
fired. If she said that without doing the proper research, then she
should be reprimanded. She should always give the Board accurate
information.
Regarding the report, the findings and recommendations were much more serious than Jeffco staff wants people to believe.
Here
are the highlights:
The
current program cost estimate is now $136M more that what was
initially shown to voters in 2018.
Bid
tabulations or evaluations for the selection and award of projects
were not available.
The
District does not have policies and procedures specific to the
change order process (i.e., review process, thresholds, approval
process, approval levels, etc.).
These are egregious. Jeffco is talking about nearly 25% cost overruns (above the included 10% project contingency), with Reed telling the Board to expect another $43M in overages before the program is over.
Not
having project selection evaluations means that the program is not
transparent and is ripe for favoritism and or kick backs.
The
same can be said regarding the change order process. This leaves the
program ripe for vendor overcharging or kick backs.
None
of these are good, but all were glossed over in the report review
session.
To
make matters worse, instead of acknowledging and addressing the Moss
Adams findings and recommendations, all Director Rupert did was fault
the consultants, make excuses and praise staff for the program.
It
was appalling.
In addition, Rupert made a point that the program was not based on the 2016 Facilities Master Plan, when former CFO Kathleen Askelson, in her January 2021 bond review report stated that it was.
Rupert
was wrong and Dorland was wrong.
The
report was more damning than anyone wants to admit.
We
can only hope that Dorland can clean the mess up, but her statements
and actions to date don’t give me much hope.
Jeffco is falsely telling taxpayers that school projects are under budget
Jeffco’s Flipbook (and here if Jeffco deletes or changes it) is declaring multiple schools are under their bond program budget when they clearly aren’t.
I will document two of the schools here, Fremont ES and Belmar, but there are many more, including Arvada K-8, Columbine Hills, West Jeff MS, Welchester, Eiber and Semper.
Why
is this happening? There are only two answers, either complete
incompetence on the part of staff or a desire to mislead the public
into believing the management of the program is not as bad as it
really is.
Belmar
–
tagged
with a green arrow in the Flipbook
The Flipbook states that Belmar has a budget of $1,068,000.
This
is nearly $250,000 over budget and does not include additional costs
such as security glass, site lighting, IT cameras and network
upgrades.
Fremont
ES
The Flipbook states that Fremont has a budget of $1,289,000.
The
current CAAC report shows Fremont costs as:
Efficiency
& Future Ready
$1,087,700
FF&E
Costs
$334,083
Hazmat
Costs
$102,186
Total
$1,523,969
or
more than $230,000 over budget, not including additional costs such
as security glass, site lighting, IT cameras and network upgrades.
Jeffco
is lying to the public to present a picture that they are good
managers and stewards of our money, when the exact opposite is true.
This is not a good look.
Jeffco should fix this immediately. In addition, Jeffco should show the total costs for each school project so that voters and taxpayers can see the truth.
Varda, Reed and Parker are running on a platform of “Paying Teachers What They Deserve”.
Obviously, they want people to believe that teachers are underpaid for what they are doing. But, what does that really mean in an era of declining results in Jeffco Schools?
In any private company I’ve ever been at a salary increase would be looked at very closely when organization objectives weren’t met. In many instances, annual increases would be limited to COLA increases or less, and it would stay that way until objectives were met.
For instance, taking last year’s DUIP, how can anyone justify salary increases when Jeffco wasn’t even close to achieving their goals, that were set during the pandemic?
Yet, Varda, Parker and Reed think that teachers “deserve’ more pay. Their definition of “deserve” is far different than mine. A salary increase above COLA would be hard to justify in my mind.
In fact, over the past 4 years teachers’ salaries have increased significantly, far outpacing the 11% Denver inflation rate.
For example, a teacher w/BA @ Step 2 and a teacher w/MA @ Step 4 would have each seen salary increases of approx. 30% including the 4 steps awarded by Jeffco. These teachers now make $51k and $61k respectively, before benefits.
Approximately
40% of Jeffco teachers have salaries over $70k and 20% make over
$80k.
That’s
not bad for:
185 working days
Job Security
Ability to retire w/75% salary @55 & 30 years
In
addition, Jeffco currently pays teachers based on their level of
education along with years of service. Yet, study after study show
that, with only limited exceptions (e.g. math and science), advanced
degrees do not correlate to increased teacher effectiveness.
(https://www.mhec.org/sites/default/files/resources/teacherprep1_20170301_2.pdf)
Therefore, why is Jeffco paying more to teachers with those degrees?
Do those teachers really “deserve” higher salaries? Not in my
mind.
With
year
after year of
declining education results, just how
much do Varda, Parker and Reed think these teachers deserve in
salary? They’re
not saying, but you can be darn sure a salary increase wouldn’t be
the topic of discussion on any corporate Board.
Jeffco schools is not an organization that is showing that it “deserves” salary increases for teachers and admin. It’s time to take a realistic look at total teacher compensation, not just salaries. It’s time to push back on the same old union rhetoric that teachers are underpaid because they aren’t for the results they are delivering.
And
it is absolutely wrong for teacher pay to be one of Varda, Reed and
Parker’s top priorities when Jeffco’s education results are so
atrocious.
They
aren’t a good fit for what Jeffco’s kids need now.
Jeffco Schools Capital Asset Advisory Cmte can’t be trusted to make good financial decisions and gets played as fools by Tim Reed and Steve Bell. They are utter failures at being good stewards of Jeffco’s taxpayers’ money.
They
are responsible for overseeing now $110M in cost estimate overages of
the Capital Improvement Program and recently
agreed to spend an additional $17M for a new gold-plated
swimming
pool for the community of Arvada.
The
$17M and decision process for a new Arvada community pool is
egregious. Here’s why:
1.
Jeffco swim teams will use the pool approximately 10% of the time,
Arvada
residents the rest. Yet
Jeffco will
pay
for 50% of the $33M-$35M construction costs. That
doesn’t seem equitable. Not one CAAC member questioned that
arrangement or
suggested that Jeffco’s share be reduced to something reasonable
like
$7M.
2.
Reed told the CAAC that construction costs for a Jeffco owned 50
meter pool would be $15M-$20M. Not
one CAAC
member asked
if Arvada was taking advantage of Jeffco by building a gold plated
facility that would
cost $15M more than Reed’s estimate.
3. No one asked what was even included in that additional $15M.
4. Other area rec center pools in Wheat Ridge and Evergreen are 25yd pools. No one asked why the Arvada facility had to be a 50 meter pool. No one asked what a 25 yard facility would cost.
5.
No one asked what the cost would be to add 25
yard pools
at High Schools.
Smaller
pools, locker rooms already in place and possibly shared walls would
result in lower costs.
6. Not one CAAC member asked what the implications and precedent would be set for the other 4 Rec Districts in Jeffco when their pools “age out”. Would Jeffco help those Rec Districts fund their new pools in the future? Or, would Arvada residents be “winners”? In 2018 Evergreen voters rejected a bond package that included pool upgrades to their 50 year old failing facility.
7.
No
one asked about the equity. No
one asked why Reed and Bell thought it was fair for Lakewood or
Evergreen residents to pay for an Arvada community pool.
7. Not one CAAC member asked what Jeffco schools facility needs would not get accomplished because $17M went into Arvada’s new pool. Taxpayers were told that Jeffco had $1.3B in facilities needs when they were asked to approve the $567M bond. Are those not real needs now? Shouldn’t there be a prioritized list of projects awaiting funding that this project is compared against? Replacement schools for example? Isn’t prioritization a key function of the CAAC? Yet, trade-offs weren’t even discussed.
8.
Not
one CAAC member asked about the certainty of Arvada voters passing a
bond to fund the facility. A recent bond to fund upgrades in
Evergreen Rec district, including pool upgrades failed.
9. Not one CAAC member questioned Reed when he said that the pool would be funded from Capital Transfer, like Cap Xfer is some unlimited source of funds. Jeffco Schools promised voters that Capital Xfer would be committed to the CIP for 6 years. There is no additonal money. In fact, Jeffco is already shortchanging the CIP by $12M
10. Not one CAAC member asked how funding Arvada’s pool would affect voter sentiment District wide when Jeffco needs another capital bond passed in a few years. The current bond was carefully crafted so that everyone got something and still just barely passed. If Jeffco schools pays for Arvada’s gold plated facility, you can be guaranteed it will not sit well with Lakewood, Wheat Ridge and Evergreen voters in the future.
In a 6-0 (one absent) vote, the CAAC recommended to endorse the project.
The committee’s failure to ask reasonable questions relating to spending $17M on a pool facility for a specific community is indicative of the overall lax oversight and general negligence in the CAAC’s role as stewards of Jeffco taxpayers’ money.
Jeffco’s CAAC can’t be trusted to make good financial decisions.
Jeffco taxpayers deserve better!
Jeffco's Capital Improvement Program is currently $110M over initial cost estimates
Recently, Colorado Community Media, including Jeffco Transcript and Arvada Free Press printed an article by writer Bob Wooley about Jeffco’s Capital Improvement Program.
For
the most part, Wooley did a good job of attempting to explain a
financially complex program. However, there were some comments and
statements made by Jefferson Public Schools’ officials that were
misleading or downright false.
I’ve
outlined several of those areas below:
1.
The article states:
After
the Bond passed, the project’s estimated costs were increased by
nearly $32 million for a revised total of just under $737 million for
the program.
TRUE
– $32M
in hidden
costs were added to the program
After
the bond passed, $32M in costs were added to the flipbook for
the same list of projects.
The
use of $32M in contingency to
cover these costs was
essentially hidden.
2.
The article states:
District
officials say the increase was a result of changes in scope, market
conditions, incorrect estimates or various other factors like
asbestos removal, which were determined once the District was able to
perform more in-depth evaluations of each individual project.
While I agree that factors such
as scope changes, market conditions and incorrect estimates can
result in changed estimates, that doesn’t fully explain the extent
of the cost estimate changes between the first and second flipbooks.
The project costs for 81 schools, or nearly 60% of the total,
increased by EXACTLY 5%. This is not indicative of changes in
scope or incorrect estimates. That’s indicative of using Excel to
pad costs.
3.
The article states:
“We
told voters we would accumulate six
years of approximately $20 million
at the back-end to fill up the program,” Reed says.
FALSE
– Voters were told $23M
Voters
were told that exactly
$23M
annually in Capital Transfer would be accumulated. In reality only
$20.9M
annually is currently being transferred. That means
there is a
$12.6M shortfall in
stated revenue, again made up with Contingency.
4.
The article states:
“and
over $3.5 million was spent on hazmat expenses (which technically, do
not count as overages).”
FALSE
– Hazmat
costs ARE overages
Why
aren’t $3.5M in hazmat expenses considered overages? Any
decent construction project manager with 50 year old buildings
knows there is asbestos in those
buildings that will have to be mitigated. Mitigation costs should
have been factored into the original estimates.
Where
is the money coming from to pay for the hazmat expenses? It’s
coming from the District’s program contingency. Therefore,
technically, and for all intents and purposes, hazmat expenses are
program costs that reduce available contingency This is merely an
attempt by Reed to put lipstick on a pig to make $3.5M in overages
not seem like the $3.5M in overages hazmat costs really are.
5.
The
article states:
In
a document Reed says is now posted to the Capital Asset Advisory
Committee (CAAC) website, all budget variances are listed with
specific overage amounts and the reason for the cost variance.
FALSE
– This
document
lists variances against revised cost estimates, not original
estimates
This
document hides $32M in cost increases. That’s deception.
6.
The article states:
Therefore,
the precise amount of contingency that’s been spent on actual
projects thus far is $65,815,424.
FALSE
– The amount of contingency allocated is currently over $110M
$65M
from what Reed wants people to believe is the contingency spent, plus
$3.5M in hazmat, plus $32M in increased estimates plus $9M from
recent fields project = $110M in contingency allocated.
7.
The article states:
“I’m
not a construction guy,” Bell said. “But we have a construction
guy and I was speaking to him this morning and he said “you know, a
year ago the cost of steel was $53 a ton — today it’s $79.” A
year ago did anybody know it was going to go from $53 to $79? No.”
MISLEADING
– Cost of steel is only one small component of cost increases
Both Tim and Steve have told the Board on several occasions that they have been getting good pricing due to the pandemic. And, this report shows that non-residential construction costs have been relatively flat in Denver for the last 2 years, increasing by only 2.1% total over that time. In addition, there are numerous projects that had no steel involved that are significantly over budget. This is a misleading and deceptive statement.
8.
The
article states:
“According
to Tim Reed, Jeffco’s Executive Director Facilities &
Construction, the amount of contingency that had been spent as of
Feb. 22, was just over $81 million, of which nearly $12 million went
to charter schools…”
MISLEADING
to FALSE – $12M to Charters came from Bond Premium
The
agreement with District Charters was that Jeffco would share
approximately 10% of all bond proceeds with Charter schools. The $12M
Tim Reed is referring to is based on Charters’ share of accrued
interest and bond premium. This has nothing to do with District
contingency.
The
bottom line is that the Capital Improvement Program has already
spent
or allocated $24M over its original $86M contingency budget ($110M
total) only
2.5 years into the program. In addition, Jeffco has hidden
a $12M revenue shortfall from
Capital Transfer.
The
amount
of deception and lack of accountability for large cost increases is
truly unbelievable.
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.
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.
Where is the promised annual independent audit of Jeffco's Capital Improvement Program?
To assure voters
that the $705M 2018 bond program would be well managed, Jeffco wrote
into the ballot language that the program would be subject to an
“annual independent audit”. The implication being that the
program would be scrutinized on a yearly basis by a firm without
financial ties to the District. Yet, two and a half years into what
is now an $832M program only a very basic financial audit has been
conducted, by the same firm that has deep and long standing ties to
the District.
The ballot language
implied that voters would get more than that. Now, with multiple
questionable practices and current cost estimates $110M over what
were presented to voters, Jeffco’s staff, Board and CAAC have all
balked at providing the transparency and accountability that we all
thought we would get when we entrusted Jeffco with our money. It is
just incomprehensible to me that there is so much resistance to
providing the transparency that was promised. It seems that if there
was nothing to hide a Performance Audit would give the program a
clean bill of health and end, once and for all, all questions. By
continuing to refuse to conduct a Performance Audit it only
perpetuates the assumption that there really is something to hide.
That is not a good look!
In addition, the
highly touted Citizens’ Capital Asset Advisory Committee is not
doing its job either. CAAC meeting notes reveal that only until
recently they have remained silent and allowed the program to go
tens of millions of dollars over budget without asking any questions
whatsoever. They have provided poor oversight of our money.
After initially observing a high usage rate of program contingency funds and subsequently numerous other instances of extremely questionable observations regarding the transparency, management and fiscal practices of the program I sent an email
to members of the CAAC on November 24, 2020 highlighting 10 very specific instances which raised questions with the management and transparency of the program and urging them to call for a Performance Audit conducted by a truly independent firm. Tim Reed replied on December 10, 2020 and I sent a rebuttal to Tim’s response to members of the CAAC on January 4, 2021.
On each of my letters I clearly include an offer to discuss my concerns and my telephone number. The fact that no one has taken me up on my offer speaks loudly in and of itself.
Finally, on January 4, 2021 I sent a copy of my original letter to the CAAC, Tim Reed’s response and my rebuttal to the Board of Education
The Board of Ed Secretary’s reply was far from confidence building:
Dear Mr. Greenawalt,
Members
of the Board of Education received your January 4, 2021 email
correspondence regarding our Capital Improvement Program. Thank you
for bringing your concerns forward. You are correct that the Board of
Education will be receiving feedback from the Capital Asset Advisory
Committee and your concerns are noted.
Sincerely,
Stephanie
Schooley
Secretary,
Jeffco Public Schools
with no further
communication from the Board.
Over a series of
posts I will outline some of the issues I have seen with regard to
the transparency and fiscal management of the 5B bond program and
take a look at some of the unbelievable and incredulous responses Tim
Reed provided in a weak attempt to address my concerns. Here are some
of the topics that I will cover:
Over budget
($57M as of November 2020)
Projected
$32M Contingency Shortfall
Deceptively
adding $31M to Flipbook costs
Failure to
Share Bond Premium with Charter Schools
Out of Scope
Projects
Deceptively
Hiding the True Cost of Alameda HS Cost Overruns
Recent Large
Underspend on FF&E Projects
Unexplained
Recent Increase to Capital Transfer Revenue
Questionable
Use of $50M in Bond Premium Contingency
Failure of
CAAC Members to Maintain Independence
Failure of
Jeffco to Provide $23M in Capital Transfer as Promised to Taxpayers
Jeffco needs to put
these concerns and questions to rest.
Jeffco needs to
conduct the independent Performance Audit that voters thought they
were going to get.
1. $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.
2. Projected $32M Contingency Shortfall. At the October 7th Board Study Session, Tim Reed told the Board that $68M in contingency had been used to date.
At the CAAC’s November meeting Tim presented the following numbers for funds Expended and Encumbered, totaling $341M.
Subtracting the $68M of contingency from this value means that $273M of the $595M in total program costs are currently Expended or Encumbered, leaving $322M in remaining projects. If that same rate of contingency usage continues, that would require remaining contingency of over $79M. Yet, there is only $47M in contingency remaining, a $32M shortfall.
Do the math. The numbers don’t lie. This is not a healthy Program.
3. Deceptively adding $31M to Flipbook costs. District project costs were presented to voters as $563M. You can arrive at that number by subtracting the Charters $56M and the Contingency $86M from the Flipbook presentation.
This can be verified by adding the costs of individual projects in
the original Flipbook (Plus approx. $17M in costs for Trailblazer,
North Transportation Hub, OELS and Preschools projects which were
withheld from voters).
However, sometime after the Bond passed, the District changed the
Flipbook. The cost of nearly every project increased. Here are some
examples:
Alameda HS – an increase of $1,430,902 to $19,434,000
Green Mountain HS – an increase of $754,078 to $14,361,000
Jefferson Jr/Sr HS – an increase of $672,810 to $14,129,000
This had the net effect of raising BASE costs by a total of
$31,967,419. Essentially hiding $31M of cost increases.
For example, when the construction budget for Alameda was presented to the Board, contingency usage of $10,047,814 was based on the updated Base cost of $19,433,745, instead of the original cost estimate of $18,033,098. This usage of the revised cost estimate deceptively hid the totality of the increase, and the additional use of Contingency, of $1,430,902.
Therefore, cost estimates for all projects have now increased by
$100M; the $68M in Contingency that Tim Reed freely told the Board
PLUS the $31M in hidden cost estimate increases.
4. Failure to Share Bond Premium with Charter Schools. As recently as of the end of October, the District still had not shared Bond Premium with Charter schools, in violation of the Board’s October 2018 Sharing Resolution. The District spreadsheet widely circulated to Charter Schools show that the District only calculated sharing revenue based on the Bond par of $567M.
Yet, at the November 11th Board Study Session, Steve Bell told the Board that Bond Premium is shared with Charters.
Therefore, at this point, Charters are owed approximately $4.6M, PLUS interest – which will subsequently reduce the Contingency available for District projects by a corresponding amount.
Brian Ballard, Chair of the District’s Financial Oversight
Committee, has said that it is the CAAC that has responsibility for
overseeing 5B Bond funds. If that is the case, why hasn’t the CAAC
ensured that District Charters have been given their complete share
of the funds?
5. Out of Scope Projects. There are multiple projects that can be identified that were not in the scope presented to voters. Several easily identifiable, high-cost projects include: Ralston Valley HS Roof, Lakewood HS Track, West Jefferson MS Track, etc. The following images were taken from the Original Flipbook presented to voters and clearly do not show these projects.
Was there any discussion relating to the addition of scope and
reduction of contingency for these and other added scope projects?
What was involved with this process? Were these prioritized over
replacement schools? Was there a vote?
6. Deceptively Hiding the True Cost of Alameda HS Cost Overruns. Similar to Jefferson Jr/Sr HS, Alameda HS is slated for Track and Field Upgrades. When the Jefferson project was submitted to the Board for approval, the Track and Field upgrades were included in the project costs and subtracted from the remaining budget.
This was not the case when Alameda was presented to the Board. The cost for the Track and Field upgrades were left off of the presented costs, effectively deceiving the Board that total overages are at least $1.5M over what was shown. Was that intentional deception, or merely incompetence?
7. Recent Large Underspend on FF&E Projects. We all like to get good deals. However, the cost savings on several recent FF&E projects go beyond the definition of good deals, suspiciously into the realm of scope reductions. Look at some of the “savings” generated from some of these FF&E projects that were recently presented to the Board, $150k, $300k, $315k and $310k.
These “savings” are 47%, 22%, 60% and 66% less than the original
cost estimates. That’s far more than a reasonable person would
expect from a “good” deal. What happened here? Was scope cut at
these schools?
8. Unexplained Recent Increase to Capital Transfer Revenue. At the October CAAC meeting, members were shown Capital Transfers into the Capital Improvement Program of $41.8M. Yet, in November, they were shown $51.3M. Where did that additional $9.5M come from?
(On a side note, how does Interest Revenue DECREASE by $110,000 from August to September? Can you trust any numbers that are presented?)
Approximately $3M appears to come from the movement of the contingency in prior capital improvement programs such as 18M and 19M. This contingency decrease can be seen in documents presented to the CAAC.
But, the source of the remaining $6.5M is unexplained as the value of
the 18M, 19M, 20M programs remain the same. And this happened mere
days after Steve Bell told the Board that the capital transfers would
be $20M/year over 6 years for a $120M total.
9. Questionable Use of $50M in Bond Premium for Contingency. Recently, Tim Reed and Steve Bell told the Board that during initial 5B discussions the bond ask amount was decreased and 2 replacement schools were removed from the list of projects.
If this was the case, why then, when the District received $50M in bond premium, weren’t replacement schools immediately added to the list of projects? Instead, it appears that the $50M in bond premium has merely been added to the $86M already allocated to program contingency. What was the process in determining that the additional $50M in contingency should be used for contingency instead of being used for replacement schools, particularly when taxpayers voters were told that Jeffco had $1.3B in deferred maintenance needs?
10. Failure
of CAAC Members to Maintain Independence. Tim Reed
recently sent members of the CAAC a document relating to the Purpose
and Membership of the committee. This document clearly states that
members must be:
Independent and free from any relationship that would interfere
with independent judgment
Gordon Callahan, a CAAC member, has a relationship with the District.
His firm has been the recipient of nearly $1M in contracts over the
past year and a half.
This is not the appearance of independent judgment.
For taxpayers to fully trust the Capital Asset Advisory Committee ALL members of the committee must be completely independent and free of District relationships. Unfortunately, that is not currently the case. His continued membership on the committee is ethically questionable and erodes taxpayer trust.
