Hesperia School Bond Committee Files Inaccurate Campaign Finance Statements

By Gail Fry
Staff Writer
(October 21) In the upcoming November 4 general election, the voters located within the boundaries of the Hesperia Unified School District are being asked by the district’s leadership to approve a $207 million bond measure to improve local schools.
At its August 4, 2014, regular board meeting the Hesperia Unified School District governing board approved a resolution ordering a school bond election for Measure M and authorizing necessary actions connected to the bond election.  School district governing board members Hardy Black, Niccole Childs, Ella “Lee” Rogers and Eric Swanson voted in favor of the resolution with Cody Gregg dissenting.
The proponents of the bond measure, Measure M, have formed a recipient committee entitled “Committee For Yes On M 4 Hesperia” for the purposes of collecting contributions to pay for campaign expenses.
The committee supporting Measure M consists of its member Lori Mente, who holds the title executive assistant to the superintendent at the district, and its treasurer Gina Turner. According to documents obtained from the San Bernardino County Registrar of Voters, the committee has collected $55,500 from its contributors and expended $9,389 for signs, voter slates, electricity, government filings and miscellaneous office supplies.
In an October 16 email to the Sentinel, Mente refers to herself as a “volunteer” and not “representing” the committee Yes on Measure M.
Documents filed with the San Bernardino County Registrar of Voters Office show the committee supporting Measure M were ten days late in filing its 460 pre-election statement and inaccurately reported its contributions received as being $13,500 when in fact they were $55,500 based on six 497 contribution reports filed with the registrar of voters in September and early October.
Five 497 contribution reports filed by the committee Yes on Measure M indicate that on September 18, Erickson Hall Construction Co. contributed $10,000, on September 26, Holman Capital Corporation contributed $2,500, on October 2, Frick, Frick & Jette contributed $2,500, on October 6, Copier Source Inc. contributed $5,000, on October 8, LPA, Inc. contributed $10,000, on October 2, Amber Mooney contributed $2,500 and on October 8, Atkinson, Anderson, Loya, Ruud & Romo contributed $5,000.  The total of the  contributions shown on the five 497 contribution reports equals $37,000.
One 497 contribution report filed by the Hesperia Teachers’ Association PAC and filed with the registrar of voters indicates that on October 9, it gave a $5,000 campaign contribution to the Committee for Yes on M Hesperia.
However, when the committee supporting Measure M filed its late 460 pre-election statement, it indicated that its total campaign contributions were $13,500 for the period of July 1 through September 30, 2014 with its 460 form showing a total of $13,500 in campaign contributions from Erickson Hall Construction Co. in the amount of $10,000, Holman Capital Corporation in the amount of $2,500, Certified Air Conditioning in the amount of $500 and Thomas R. Dorow Inspectors in the amount of $500.
Erickson Hall Construction Co., headquartered in Escondido appears from its website to specialize in school construction projects.  Holman Capital Corporation is a California corporation located in Rancho Santa Margarita and according to its website provides “value added taxable and tax-exempt financing solutions to federal, state, and local governments.”  Certified Air Conditioning, Inc., is a California corporation located in San Diego, according to records with the California Secretary of State.  Thomas R. Dorow Inspectors is a property inspection company located in the city of Hesperia, according to numerous references found on the internet.
Frick, Frick & Jette is an architectural and engineering firm located in the city of Temecula and according to its website, “we specialize in educational construction.”  Copier Source, Inc., is a California corporation located on Hospitality Lane in the city of San Bernardino. Entries of the business name, location and phone number are found on the internet, but no website for the company was found.  LPA, Inc. is a California corporation located in Irvine that specializes in “integrated collaboration” and “sustainable services” according to its website.  Atkinson, Anderson, Loya, Ruud & Romo is the Hesperia Unified School District’s attorney firm.
The contribution reports and pre-election statements filed with the San Bernardino County Registrar of Voters by The Committee For Yes On M 4 Hesperia and by the Hesperia Teachers’ Association PAC can be viewed at the registrar of voters website:  http://ssl.netfile.com/Pub2/AllFilingsByFiler.aspx?id=152573692.
In an interview with the Sentinel regarding the late filing of the committee’s 460 pre-election statement, San Bernardino County Registrar of Voters Mike Scarpello acknowledged that Committee For Yes On M 4 Hesperia’s 460 forms were “filed late” as they were due on October 6 and when they “turned it in on October 10 they filed it without a signature.”  Scarpello explained his office contacted the committee, which then filed its signed 460 forms on October 16, according to information on the registrar of voters’ website.
“Filing a few days late is not uncommon,” Scarpello acknowledged, explaining that the registrar of voters maintains a list of those that have campaign filings due and its staff calls to “remind them” that there is a filing due.
The statement by proponents/authors of arguments submitted to the San Bernardino County Registrar of Voters and signed by Jessica VanOverbeke, Percy L. Bakker, Amanda Macias, Thomas J. Kerman and Edward Valenzuela claims, Measure M will “improve classroom education, test scores, and help attract/retain quality classroom teachers” and the upgrades will expand “career and vocational education programs that train students for jobs in automotive, agriculture, manufacturing, health care, and technology.”
Specifically, the Argument in Favor of Measure M claims funds from Measure M will upgrade “classrooms, science and engineering labs, computers and libraries” and “insufficient security features including security fencing, cameras, lighting, and security systems to keep students safe and prevent destruction of school property.”
“Fiscally Accountable!” the argument in favor proclaims of the measure, claiming that required “independent financial audits” and a citizens’ oversight committee will “ensure funds are spent as promised.”
The Argument in Favor of Measure M submitted by its proponents claim, “Every penny is required by law to be spent locally on upgrading our schools.”
However, in an email response to questions by the Sentinel, Committee for Yes On Measure M 4 Hesperia admitted, “As discussed in open session with the governing board and presented to the school facilities committee, a portion of the general obligation bonds authorized by Measure M may be used to pay-off a lease obligation of HUSD.”
The email response sent by Lori Mente assured, “The use of general obligation bonds to pay-off a lease obligation will require future approval of HUSD’s governing board and will he dependent on future economic conditions of HUSD.”
Information provided on Measure M included on the San Bernardino County Registrar of Voters’ website in an “impartial” analysis provided by San Bernardino County Counsel’s Office states, “Issuance of all of the authorized bonds might require the outstanding debt of the district to exceed its statutory bonding limit of 2.50 percent of the total assessed valuation of taxable property in the district.”
San Bernardino County Counsel’s impartial analysis explains, “Principal and interest on the bonds will be payable from the proceeds of tax levies upon the taxable property in the district, which is estimated at 5.858 cents per $100 (58.58 per $100,000) of the assessed valuation.”  To view these documents visit the registrar of voter’s website:        http://www.sbcountyelections.com/Elections/PastElections/20141104/Measures.aspx
In other words, if the voters within the Hesperia Unified School District vote in favor of Measure M at the November 4 general election, the school district would be authorized to annually assess each property owner within the district $58.58 per $100,000 of property value.
As an example, if your house was valued at $300,000 the school district could assess your property at $175.74 a year until those bonds have been paid off with the loan term going as long as 25 years, the statutory limit.  Additionally, the bonds can be refinanced extending their payoff even further.
The resolution passed by Hesperia Unified School District at its August 4, 2014 meeting indicates that the district, in issuing these bonds, may require the outstanding debt to exceed the legal limit of two and a half percent of its net valuation of the value of the property located within the district.
According to records obtained from the San Bernardino County Assessor’s Office currently, the value of the property located within the boundaries of the Hesperia Unified School District is $5,248,752,411 net for fiscal year 2013/14.
Therefore, two and a half percent of the value would have equaled $131,218,810 in fiscal year 2013/14.  In order to exceed the statutory limit, the school district would need to obtain a waiver from the State Board of Education, which according to records shown on its website have a tendency to approve the requests for waivers with conditions.
In her email to the Sentinel, Mente explained, “HUSD does not believe the total amount of general obligation bonds issued under Measure M will exceed 2.50% of the total assessed valuation (this test occurs each time bonds are sold). This is due to bonds being sold in multiple issues as opposed to a single issuance. As total assessed valuation grows within HUSD, additional series of general obligation bonds authorized under Measure M will be sold.”
The 2.50 percent limit, i.e., “the value of taxable property in the district” on the amount a unified school district can borrow, is set by California Education Code Section 15106.
Other restrictions were placed on school bond financing when California Governor Jerry Brown, in response to concerns about creative financing being conducted by school districts, signed legislation (Assembly Bill 182) on October 2, 2013, requiring the ratio of total debt service to principal for each bond series to not exceed 4 to one among other legal requirements and restrictions included in the bill.
In other words, if 55 percent of the voters within the boundaries of Hesperia Unified School District approve Measure M at the November 4, general election and the district issues $207,000,000 in bonds, it can legally indebt the district up to $828,000,000 in debt service requirements.
Keeping within these statutory restrictions will be challenging for the Hesperia Unified School District and that is when school districts have been getting creative in how they structure their financing and how they project to payoff the debt.
For instance, when Mente explained the district’s decision to pay off a lease obligation “will be dependent on future economic conditions of HUSD” it suggests the district may be projecting rising property values in their calculations on how to pay off the school district’s debt.
There is a variety of bonds from which the district would choose from if Measure M passes in order to structure its financing to keep within these legal restrictions, such Build America Bonds or BABs, current interest bonds or CIBs, capital appreciation bonds or CABs, convertible capital appreciation bonds or CCABs.
According to Mente’s email, “HUSD anticipates using both current interest bonds and capital appreciation bonds when issuing general obligation bonds under the authorization of Measure M” and “current interest bonds will be issued to the fullest extent possible.”
“The use of capital appreciation bonds will be only to maximize the efficiency of the tax revenues,” Mente explained adding that the school district would “adhere to all legal requirements.”
Capital appreciate bonds are known to have extended maturities now up to 25 years, included compounded interest, which is interest on top of interest and have been known to have no payments due until maturity date resulting in exorbitant payoff amounts.
“The use of bond anticipation notes is not expected at this time and not needed to accomplish the goals of HUSD’s Governing Board and the School Facilities Committee,” Mente concluded.
Mente in her email to the Sentinel explained, “HUSD will adhere to all parameters and requirements set both in AB 182 or any other legal requirements in place at the time of each bond issuance when issuing general obligation bonds authorized under Measure “M.”
“If the district receives voter approval, the district will analyze the issuance of each bonds based on the planned facilities improvements, the requirements of the law, and the economic conditions at the time,” Mente asserted, explaining, “There is, therefore: no way to know today, all details of bond issuances five to 10 years into the future.”
As far as the existing debt of Hesperia Unified School District, Mente responded “HUSD does not have any outstanding general obligation bonds.”
However, Mente revealed, “HUSD has entered into two (2) lease arrangements which are making lease payments on certificates of participation.”  Certificates of participation are another type of debt instrument which is sold on Wall Street to investors without voter approval.
“In addition, HUSD has formed a number of community facilities districts,” Mente said, adding that “Two (2) of the five community facilities districts have issued special tax bonds.”
When the Sentinel asked for the names of the community facilities districts and details on the special tax bonds, Mente explained “our consultant cannot meet your deadline.”

One thought on “Hesperia School Bond Committee Files Inaccurate Campaign Finance Statements

  1. Pingback: OOPS Measure M Bond Committee Files Inaccurate Statement

Leave a Reply