December 19, 2012 - John Fitzgerald had some disappointing news for the Lake Orion Board of Education on Wednesday night.
Fitzgerald, assistant superintendent of business and finances, informed the board that school bond refinancing attempts were not to proceed as originally envisioned.
In February, the school board announced intentions to refinance its school bond, saving taxpayers about $12 million in the process. Bond debt approved by taxpayers in 2002 and set for repayment in 2013-2018 would have been reduced by $12.14 million.
Recently, however, Michigan Attorney General Bill Schuette interceded in the matter between the Michigan Department of Treasury and the state's schools.
Schuette's interference stopped the refinancing process in its tracks, catching some schools like Clarkston in the middle between pricing and delivery of the newer, lower interest rate bond.
Orion wasn't as far along, so is not in quite as bad of a predicament. But plans to save taxpayers millions are now shelved.
"What it really means for our district's taxpayers the opportunity to relieve $12 million of debt obligation and debt service to our existing debt has been taken off the table because of the Attorney General's actions," Fitzgerald said.
Board member Deborah Porter asked how frequently the Attorney General's office overrules the Treasury Department's decision, normally considered the final word on such matters
"It's the first time I've seen them interceding, basically checking another department of the state," Fitzgerald observed.
Schuette interceded in the treasury department clarification concerning the evaluation process associated with how a district's underlying tax base can be used to forecast net present property values.
Instead of adopting the treasury's ruling that allowed valuations to factor a more reasonable positive projection not more than three percent increase past the sixth year of tax base projections, the Attorney General said no.
His decision is to use the six to seven percent average annual decline over the last five years and project that forward 25 years as a tax base. With that sort of reasoning, the tax base would continue to shrink, and refinancing the bond would be eliminated as an option.
Fitzgerald said he hopes state officials will come to their senses and allow districts to take advantage of the current extraordinarily low interest rate environment.
This window will not last forever, and denying the refinancing opportunity hurts the schools and the state.
The ability to refinance, as laid out by the treasury department's clarification in September, "would help the state," Fitzgerald said. "It's a debt instrument that's a sub program of the state so it helps everybody involved. The bottom line is that it would relieve the taxpayers of this district of about $12 million in interest and principal.
Fitzgerald said the Attorney General had not offered any reasons for his ruling, but the suspicion was Shuette was creating a blanket rule in response to a few bad performers who had not refinanced in accordance with all state regulations.
"It's really too bad," Fitzgerald said.