District 65 Lease Certificate Numbers Still Don't Add Up

I FOIA'ed bussing invoices and present evidence that the District's claims about cost savings are false.

FOIA Gras is a free newsletter run by Tom Hayden (FOIA GRAS LLC) that explores various topics in local Evanston Governance, especially around School District 65 (Evanston/Skokie). I publish and share all my data and reports. Subscribing is free, so please subscribe or share

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A few weeks ago, I posted a story about the financial product that District 65 purchased in order to build the new school in the fifth ward. This financial product is called a lease certificate and is functionally a 18-year mortgage. The lease certificate is also a loophole in the law that allows public bodies to make significant capital investments without a referendum, even if the law requires a referendum.

(a) To build or purchase a building for school classroom or instructional purposes upon the approval of a majority of the voters upon the proposition at a referendum held for such purpose or in accordance with Section 17-2.11, 19-3.5, or 19-3.10. The board may initiate such referendum by resolution. The board shall certify the resolution and proposition to the proper election authority for submission in accordance with the general election law

At least, this is the argument made by the District’s municipal finance advisors, Raymond James. Other Districts have bought the arguments and built new buildings using this financial product¹, and other Districts have had less success. The whole funding hinges on the ability of the District to build and finance a school without any additional taxpayer funds. You can read the District’s own statement on the plan;

We are pleased that costs will be fully covered through the issuance of Lease Certificates and without raising taxes or putting a financial burden on our community.

So how does this magic work? Where’s the money coming from? You can read the lease certificate where the District very clearly lays out the origin of the funds.

In plain language, it states the payments will come from $3.25 million in savings obtained by reducing the amount of bussing expenses. I believe this number is false and the District’s own statements contradict it.

Data Point 1: Positive Connections Bills

I FOIA’ed a copy of all the bills related to the Positive Connections bussing company dating back to 2018. You can take a look at a single month, I picked October 2022 because it was the top of the stack and was a pretty high gas price month.

You can do the math yourself; at most it seems the cost for bussing fifth ward and >1.5m walkers is $167,146 (or about 62%) of the Positive Connections cost². The rest is mid-day bussing, special education, shuttles, etc.

Annually, you can do the math $167,146 x 12 = $2,005,752. So about $2 million bucks; we’re $1.25 million short. Again, that’s a very generous number since there is minimal bussing during three months of the year.

Data Point 2: Dr. Horton’s Own Statements

In August 2021, Dr. Horton sent an email to parents titled, “Student Assignment Update & School Funding Option.” In the email, he writes;

The district could use the potential savings in transportation costs along with operating savings to pay back approximately $2.3 million annually in lease payments over the 20 years life of the lease certificate. This figure is based on the assumption that a new school total cost is approximately $36M.

$2.3 million is about one million dollars short of the final number the District provided to Raymond James. What happened between August 2021 and May 2022, when the lease certificate was finalized? Interest rates went up, the term went from 20→18 years, and the principal went from $36 million → $38 million. That $2.3 million turned into $3.25 million pretty quickly.

Below is a chart of the prime rate from August 2021 to May 2022.

Data Point 3: District’s Bills Paid

You can look at the District’s bills paid in calendar years 2019, 2021, and 2022 (2020 was excluded due to COVID). Transportation is, indeed, an expensive cost for the District but again, at the absolute most, the District is paying around $2.1 million to bus the fifth ward students.

In addition, as we saw above, even if the District spent $2.1mm with positive connections in 2022, only about 60% of that expense was relating to bussing fifth ward kids. The math just doesn’t add up.

No Response from the District

I emailed the District on June 13 and again on June 28 looking for comment or explanation and haven’t received a response.

My understanding is that the argument is something like: “Tom, you’re looking at this going backwards in time and we’re trying to understand the bussing cost in the year 2037. A $3.25 million dollar savings seems reasonable to project in 2037.”

I see the argument but that makes a lot of assumptions which are like .. who knows? I’m not sure I would feel great making that argument on a document filed with the SEC.

No matter how I slice and dice these costs, I cannot verify the financial claim that District 65 put on the lease certificate is true. In my opinion, it’s an almost certainty that this financial product will end up costing the taxpayers of Evanston and Skokie money, they just don’t know it yet. Worst case, the money to pay the certificate will come out of the operating funds while bussing costs drop by much less than $3.25 million.

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Housekeeping Note: District 202 (ETHS) Bills

Just a quick note: I’ve now digitized the ETHS / District 202 Monthly "List of Bills” from board meetings. You can view the data here. I strongly believe that governments should be publishing this data in a much more transparent form than a scanned PDF jammed in a meeting agenda. This is my attempt to reconcile that lack of transparency.

Unlike my District 65 List of Bills document, I cannot attest for the data including all District 202 expenses. For some reason, the List of Bills that end up in their Board agenda often misses specific weeks here and there, such as the week of the alleged $48,570 fraud committed against the District. I have FOIA’ed some of those weeks and will update data when it is available.

1. It’s worth noting that some of the successful examples involve a complete 1-for-1 replacement of a building. For instance, a building built next door to the old one and the old one is torn down.

2. My understanding is that the entirety of fifth ward student bussing is with Positive Connections.