Reader Mark Offers Thoughts on McHenry High School Referendum Tax Hike Proposal

From McHenry County Blog reader Mark, who has return after too long an absence:

One of the big problems in school district reorganizations is what to do about the pay of employees in the lower paid district, which in this case is McHenry.

The biggest payroll cost in a school district by far is the teachers, not the administrators or classified employees (secretarial, aides, maintenance, bus, etc).

McHenry West High School picketers in 2015.

Although apparently not required by state law, past practice has been to hike the pay of employees from the lower paid district, to the pay of employees to the higher paid district, subsidized for the first few years by a state subsidy which is phased out, leaving local taxpayers responsible for 100% of the annual cost of the hikes after the subsidy is phased out.

Another issue is that although McHenry bonds are almost paid off (retired), that is not the case in Crystal Lake.

It is hard to believe the ROE Superintendent would not have mentioned these basic reorganization issues.

There was not even a ballpark estimate given if one or more high schools could be closed.

So how could one say with a straight face that up to $44M could be saved.

There was not even an attempt to list the breakdown of the $44M and how a reorg might prevent which of the expenditures.

Voters should vote no on the referendum, but for a different reason: the planned debt service schedule has not been released.

Who would buy something without knowing the payment plan for that item with itemized interest?

The answer is millions of voters during bond referendums for decades.

It is the norm, not the exception, in Illinois.

Here is another approach.

Save the money, then pay cash, to avoid the interest costs.

While not a perfect plan, it would at least get people to start talking about bond interest.

Worse than bond interest, is pension interest on unfunded pension liabilities.

And worse than that was legislatively hiking pension benefits while pensions were already underfunded.

After the benefits are hiked, they cannot be withdrawn for existing employees and retirees, only future employees, due to the pension sentence in the state constitution.

The transparency and understanding of the hikes by taxpayers during the legislative process was awful.

A rigged system.


Reader Mark Offers Thoughts on McHenry High School Referendum Tax Hike Proposal — 2 Comments

  1. Given that D-47 just issued $9.2 million in bonds in June with roughly an average yield of 3.0%, a similar rate on D-156’s $44 million in new bonds would generate a little over $10 million interest costs over the 15 year repayment period.

    That also assumes they don’t jack up the bond’s coupon rate in order to generate additional bond premium to be used to pay all the fees for underwriting/legal/etc.

    It looks like $22.5 million (plus $5 million in interest) will be spent on developing the Freshman Center (East campus).

    Per the State, FY17 Freshman enrollment was only 561 students.

    Per the FY19 Budget it costs the district $3.3 million, excluding CapEx, to operate the two facilities (or $1.65 million per building).

    Between the annual principal and interest costs of $1.8 million ($27.5 mil over 15 years), plus the annual operating budget for the East campus of $1.65 million, the total fixed costs over the next 15 years to instruct 561 Freshmen in a 100+ year old building will be approximately $3.48 million.

    A more sound financial approach would be to centralize instruction at one campus and shut down the East campus to generate savings.

    Then utilize the annual operating expense savings from taking East off the books, plus any other efficiency savings recognized by centralizing instruction to one campus (eg. Admin/Transportation/etc.), to mitigate the effects of the debt service expense incurred to expand the West campus.

    Its not hard to envisage those annual savings approaching $2.5 to $3.0 million.

    That gets the District awfully close to self-funding almost the entire debt service load over the 15 year loan period.

  2. Jack D. Franks is a Democrat. Stay tuned…7 days…tic, tock, vote, vote, tic, tock…

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