Oct 7 2018
OPINION: School Board Candidate Titan Saved Piedmont Millions
We have lived in this beautiful city of Piedmont for twenty years. As working professionals, we don’t have hundreds of hours to attend long board meetings and read dense financial reports filled with complex financial calculus. That’s how Dr. Titan found out about the expensive financing schemes that did not improve the schools but cost taxpayers unnecessarily high interest charges. We’re grateful to Dr. Titan, a father and mathematician, for devoting his time and interest on the finances of our schools since 2013. He helped save us $26 million once and he might save an additional $26 million dollars! Piedmonters will be well served with Dr. Titan on the School Board.
Sincerely,
Wayne Leong and Suzanna Chan, Piedmont Residents
With about 4,200 households taxed in Piedmont, the $26,000,000 Hari Titan saved us averages $6,190 a household. Had Dr. Titan not analyzed and brought to our attention the very high cost of Capital Appreciation Bonds (“CABs”), the School Board would still be issuing CABs. Reviewing the 2006 Series E Bonds, which were CABs, shows that the dollars received by the School District for capital improvements would have cost taxpayers ten times that amount received in some instances.
I am voting for Hari Titan !
If Piedmonters don’t vote for a single measure or one single candidate, they owe it to themselves to clamber off their sailboats, tennis courts, horses and exercise machines to vote for Hari Titan, whose mathematical genius, foresight, and commitment to Piedmont has saved us millions of tax dollars. The Americas’Cup can wait as can Westminster
I would love to see a detailed explanation explaining exactly how Titan saved the District $26 million, including how that was calculated, and specifically what Mr Titan recommended- at the time- be done as an alternative. We have heard lots of hyperboly from Washington, I would like to see how Mr Titan explains this tremendous feat.
With due respect, the idea that Mr. Titan saved Piedmont taxpayers $26 million is a myth, and the claim that there were “expensive financing schemes … did not improve the schools” is not founded in fact. I served on the School Board during the seismic program, but anyone can review the meeting agendas and materials to understand the facts. A good place to start is the 2014 Seismic Safety Bond Program Financial Summary, http://www.piedmont.k12.ca.us/bond/SSBP_Finance_Summary.pdf. Some relevant facts:
First, the District and the School Board clearly understood the difference between Current Interest Bonds (CIBs) and Capital Appreciation Bonds (CABs), as well as Qualified School Construction Bonds (QSCBs) and Bond Anticipation Notes (BANs). These financing mechanisms, their pros and cons, were discussed in public meetings back to 2006. The Board carefully considered which options were feasible and prudent under the circumstances. Mr. Titan did not discover these differences or explain them to “ignorant” School Board members.
Second, the Board authorized the sale of CABs (Series E) to allow seismic renovation work at Wildwood and Beach Schools to proceed, rather than defer such work for years until older bonds were paid off, which would have left our children in seismically unsound buildings, increased construction costs, and lost access to the “replacement school” in Emeryville. (If you want more detail, the CABs were sold to repay the BANs that were sold to allow the District to obtain QSCBs—see the SSBP Financial Summary). Pursuant to statute, anticipated tax rates to repay bonds issued under Measure E were limited to $60 per $100,000 in assessed value. The District could not have sold CIBs to fund this work as the tax rate to repay the bonds would have exceeded the limit. Selling CABs deferred the repayment, and the taxes to make repayment, until other bonds were paid down and thus complied with the limit. See, e.g., http://www.piedmont.k12.ca.us/aboutpusd/agenda.minutes/2011_12/050813packet.pdf at pp 2-3. If Mr. Titan felt that Wildwood and Beach work should have been deferred for years to save money, he did not make such an argument to the School Board at the time.
Third, even before the CABs were sold, the Board and District anticipated re-financing them as soon as it was possible to do so. See May 8, 2013 Minutes at 3-4, http://www.piedmont.k12.ca.us/aboutpusd/agenda.minutes/2011_12/050813minutes.pdf. Saving money is commonsense. The District and Board re-financed older bonds when interest rates came down in 2009 and 2014, e.g., http://www.piedmont.k12.ca.us/aboutpusd/agenda.minutes/2014_15/10-22-14_Packet.pdf, and refinanced Series B CABs in 2015. http://www.piedmont.k12.ca.us/aboutpusd/agenda.minutes/2-11-15_Agenda.pdf. In Fall 2017, the Board and District identified options for refunding the 2013 Series E CABs and held two public meetings to obtain input. http://www.piedmont.k12.ca.us/wp-content/uploads/2017/10/2017-CAB-Refunding-Options-Summary.pdf; http://www.piedmont.k12.ca.us/wp-content/uploads/2017/11/Background-Refunding-of-Outstanding-CABs-or-NOT.pdf. The Board elected to refinance the 2013 CABs with CIBs, saving Piedmont taxpayers $26.1 million. http://www.piedmont.k12.ca.us/blog/2017/12/15/district-saves-taxpayers-more-than-26-1-million-with-bond-refinancing/. Mr. Titan, however, “encouraged the Board to wait for at least a year on CAB refinancing.” https://agendaonline.net/public/Meeting.aspx?AgencyID=1241&MeetingID=12755&AgencyTypeID=1&IsArchived=True. While no one’s crystal ball is perfect, the Board correctly chose to proceed with the refinancing in December 2017 as interest rates continue to increase.
Fourth, the School Board, well aware that CABs keep current tax rates lower only by increasing total interest payments, has chosen CIBs over CABs when available. In 2014, when proposing a bond measure to fix Alan Harvey Theater, the Board ruled out using CABs as the CIB option was available. While Mr. Titan provided public comment opposing CABs at that time, no one on the Board was advocating CABs. See January 8, 2014 Minutes at 7-9, http://www.piedmont.k12.ca.us/aboutpusd/agenda.minutes/2012_13/1-8-14_approved_minutes.pdf.
In short, claims about misuse of CABs in the past do not reflect the facts. This School Board election should focus on solving real challenges to maintaining Piedmont’s high quality educational system.
Thank you Rick for pointing out the widespread falsehoods in Mr Titan’s campaign regarding the school financing. I would hope that candidate Titan would acknowledge these facts and apologize for allowing his campaign to spread falsehoods that make our president look reserved and straight-forward. Why should anyone vote for a candidate that allows his campaign to spread falsehoods?
The historical record demonstrates that Hari Titan is not spreading falsehoods (nor widely). While I’ll refuse to respond tit-for-tat to the semantical hair-splitting to which this debate has descended (and the careful use of ellipses to cloud the discussion), I firmly and confidently state that Hari’s positive influence on improving PUSD’s financial decision-making when it comes to bond financing, is neither a myth, nor false, nor exaggerated, nor can it be overstated.
The School Board may have fully understood that the financial impact of 2013’s Series E CAB sale was expected to be an incremental $18.8M in interest payments for Piedmont taxpayers and rationalized those excess costs as a ‘necessary evil’. However, denying responsibility for that decision by declaring that there was no opposition to it at the time is tantamount to deflecting culpability on the public (which was, indeed, ignorant about the significant trade-offs CABs entail, even if the School Board was not).
It is abundantly clear, and is supported by the historical record, that Hari Titan single-handedly (and unpopularly) discovered the use of CABs, dug in and did his homework to understand the long-term financial ramifications, and explained the issue clearly to the voting public. It is also clear that once the public was aware of the use of this ‘creative’ financing mechanism, public opposition to the continuing or future use of CABs was broad-based, vocal, and vehement. I admire Hari’s courage in vigorously waving the cautionary flag to prevent further sale of CABs*.
It is also obvious from the historical record that the School Board was open to considering continuing use of CABs in spite of this opposition. CAB’s were presented as a financing option to refurbish the Alan Harvey theatre (the topic became moot when the bond proposition was not passed by voters**).
CABs remained in the School Board’s consideration set for use in the most recent $60M bond approval. Board members rationalized keeping CABs ‘on the table’ as a financing vehicle because CABs provide the District ‘flexibility’ to continue spending on construction projects while delaying payments on them (no downpayment! 0% financing!). The fact that current and recent School Board members claim victory for deciding NOT to continue using CABs after 2013 belies the fact that the School Board may very well have utilized CABs as a financing instrument if it were not for the fierce opposition raised by Hari Titan’s public education on the subject and the consistent and vocal preference declared by many, many Piedmont parents, taxpayers and voters for the use of more classical, steady-handed, disciplined financing methods.
Hari will also receive my vote for PUSD’s School Board.
*It is germane to this point that shortly after the 2013 sale of CABs by PUSD, the CA legislature outlawed the sale of those same CABs to CA School Districts because the usurious rates charged on them had nearly, or actually, bankrupted many school districts state-wide who were similarly ham-strung by the Recession’s impact on school district finances.
**It is worth noting, for those unfamiliar with Measure H history, that Measure H, a $13-15M bond placement to refurbish Alan Harvey Theatre, was rejected by Piedmont voters, primarily due to the courageous communication and diligent research supplied by Hari Titan and Alicia Kalamas, which credibly questioned the District’s plan to renovate, rather than demolish and rebuild, PHS’s existing theatre. Their time-consuming, competitive research provided local case-study evidence inferring that the proposed Alan Harvey Theatre project was projected to be excessively costly yet yield a facility with inferior amenities compared to the recent construction costs and designs of other Bay Area high school theaters.