los angeles county demand re lausd bond issuance

REQUEST / DEMAND

TO:

Hilda L. Solis
firstdistrict@bos.lacounty.gov P:213-974-4111 F:213-613-1739 @HildaSolis Mark Ridley-Thomas
seconddistrict@bos.lacounty.gov P:213-974-2222 @mridleythomas Sheila Kuehl
sheila@bos.lacounty.gov P:213-974-3333 @SheilaKuehl Janice Hahn
fourthdistrict@bos.lacounty.gov P:213-974-4444 @SupJaniceHahn Kathryn Barger
kathryn@bos.lacounty.gov P:213-974-5555 F:213-974-1010 @kathrynbarger Los Angeles County Board of Supervisors
500 W Temple St, Los Angeles, CA 90012

Lori Glasgow
executiveoffice@bos.lacounty.gov P:213-974-1401 F:213-633-5100 Executive Officer, Board of Supervisors
500 W Temple St # 383, Los Angeles, CA 90012

Joseph Kelly
jkelly@ttc.lacounty.gov P:213-974-2101 F:213-626-1812 Treasurer and Tax Collector, County of Los Angeles
500 W Temple St # 437, Los Angeles, CA 90012

John Naimo
jnaimo@auditor.lacounty.gov,constituent@auditor.lacounty.gov P:213-974-0383 F:213-626-5427 Los Angeles County Auditor-Controller
500 W Temple St # 525, Los Angeles, CA 90012

Mary Wickham
mwickham@counsel.lacounty.gov,contact_us@counsel.lacounty.gov,reply@counsel.lacounty.gov P:213-974-1811 F:213-626-7446 http://members.calbar.ca.gov/fal/Member/Detail/145664 County Counsel, County of Los Angeles
500 W Temple St # 648, Los Angeles, CA 90012

Debra Duardo
duardo_debra@lacoe.edu P:562-922-6127 Los Angeles County Superintendent of Schools
9300 Imperial Hwy, Downey, CA 90242

Keith D. Crafton
crafton_keith@lacoe.edu P:562-922-6131 Director, Business Advisory Services, Los Angeles County Office of Education
9300 Imperial Hwy, Downey, CA 90242

RE: Los Angeles Unified School District ("District") Bond Issuance

February 5, 2018

This letter is primarily directed at the Board of Supervisors, but you all have a statutory role in connection with school district bond issuance. Furthermore, you have all taken an oath to uphold the laws of California.

On February 6, 2018, you will consider adopting a resolution to act on behalf of the District to authorize the issuance of $1.4 billion in Proposition 39 bonds. This is a rare opportunity to intervene in a District matter of direct importance to every property owner in the District. You've only been given this opportunity because of the District's historically poor fiscal mismanagement.

The District believes that the fix is in. It's already reported to the State Treasurer's Office the scheduled sale of the bonds on February 21st.

BACKGROUND

The District's fiscal mismanagement goes well beyond its general fund. It's been the focus of scandal after scandal with its more than $20 billion bond program, predating the lowering of the voter approval threshold by Proposition 39.

In the four Proposition 39 bond authorizations over the past 15 years, even though the Education Code (§§15264(b), 15272, 15278, 15280, 15282) mandates "independent citizens' oversight," the District has used that mandate as a huge selling point (by placing it in the valuable 75-word question that voters mark yes or no) to the public over and over again.

Measure K ($3,350,000,000) 2002-11-05

SAFE HEALTHY NEIGHBORHOOD SCHOOLS: To improve local schools and relieve classroom overcrowding, shall Los Angeles Unified School District repair, renovate, acquire, lease school buildings, classrooms, libraries, restrooms, science laboratories, capital projects; upgrade fire security systems, earthquake retrofitting, lighting, heating; acquire library books; eliminate hazards of asbestos, lead paint; upgrade wiring for computers; build neighborhood schools by issuing $3.35 billion in bonds, at legal interest rates, with guaranteed annual fiscal audits, citizens' oversight committee, no money for administrators' salaries?

Measure R ($3,870,000,000) 2004-03-02

Should the Los Angeles Unified School District (LAUSD) be authorized to issue up to $3.87 Billion ($3,870,000,000) in general obligation bonds for new construction, acquisition, rehabilitation and upgrading of school facilities?

Measure Y ($3,985,000,000) 2005-11-08

To reduce overcrowding and improve learning, shall the Los Angeles Unified School District: continue repair/upgrade of aging/deteriorating classrooms, restrooms; build up-to-date, energy efficient neighborhood schools; early childhood education centers; upgrade fire/earthquake safety, emergency response equipment; purchase library books; upgrade computer technology; eliminate asbestos, lead paint hazards by issuing $3,985 billion in bonds, at legal interest rates; with guaranteed annual financial/performance audits, citizens' oversight, no money for administrators' salaries?

Measure Q ($7,000,000,000) 2008-11-04

To improve student health, safety and educational quality, shall the Los Angeles Unified School District: continue repair/upgrade of aging/deteriorating classrooms, restrooms; upgrade fire/earthquake safety; reduce asbestos, lead paint, air pollution, water quality hazards; build/upgrade specialized classrooms students need to meet job/college requirements; improve classroom Internet access by issuing $7 billion in bonds, at legal interest rates; with guaranteed annual audits, citizens' oversight, no increase in maximum tax rate?

ACCOUNTABILITY

A measure is much like a contract. The District made these offers and the public accepted them. Both the Education Code mandates and these independent promises are binding on the District. Riddle me this! What member of the public can find a public interest lawyer with the resources to take on the District in court to enforce the mandates and the promises? That's the reality. So the District continues to get away with its violations of the Education Code and breach of promises.

For fifteen years, through legal gymnastics and trickery, the District has willfully, intentionally, and successfully avoided accountability for its expenditure of billions of dollars of bond funds. It promised accountability in each of its four successful Proposition 39 bond elections. You, the county supervisors, have actually participated in the District's scheme by accepting your seat at the table. Other county offices have done the same. You're complicit in the violations and breaches.

Based on the materials on the fake committee's web page, (http://www.laschools.org/bond/reports), it has also violated the constitutional requirements to conduct financial and performance audits for the year's ending 2016 and 2017. It's even breached it's own fake committee charter and produced no quarterly reports since the third quarter of 2016. (It's now the third quarter of 2018.)

It's also violated the Education Code (§15280) by failing to post fake committee minutes since August 2017.

The fake committee, based on the materials on its web pages, has NEVER reviewed ANY expenditures, it's primary duty. We could not find a single spreadsheet, journal, or warrant or check ledger showing the payee, amount, and purpose of a single expenditure. All manner of reports appear. The fancy and voluminous reports serve to insulate and obscure where and for what the bond funds were actually expended.

To demonstrate the bogosity of the fake the committee, all one has to do is check out the "bona fide taxpayers association" member. The California Tax Reform Association is the exclusive provider. The only people who have ever heard of this anti-taxpayer, anti-Proposition 13 lobbying group are the union leaders whose organizations comprise its membership and the legislators who accept its bribes.

We won't burden you with more, except to state that THERE HAS NEVER BEEN INDEPENDENT OVERSIGHT OF LOS ANGELES UNIFIED'S BOND EXPENDITURES!

CONFLICTS OF INTEREST

Mr. Kelly, in his dual roles as Treasurer and Tax Collector, apparently thinks that the District is "legally entitled" to issue these bonds, but then goes on to explain why it's not legally entitled to do so at this time. Is Kelly acting as the District's advocate? Should he be?

Kelly goes to great lengths to justify the District's request. Kelly relies on the District's blue-sky speculation, that all things will be made right by December 2018. This evokes the catch-phrase of the Popeye cartoon character, Wimpy: "I'd gladly pay you Tuesday for a hamburger today." The analogy to the cartoon-ish District is apt.

We contend that Kelly has a dual conflict of interest in this matter. The Treasurer charges fees in connection with bond issuance and for the management of the funds in the county treasury, which is where all the proceeds will go. The Tax Collector charges fees, included in the tax rate assessed against every taxable parcel in the District, all of which is in Los Angeles County. While the bond issuances fees are of a one time nature, the asset management fees will be assessed until all the bond proceeds are spent. The tax collection fees will exist until the bonds are fully amortized. Do you care to venture a guess on how much money the county will reap from the issuance of these bonds? Millions? Tens of millions?

When Mr. Kelly states that your action will not cost the county anything, he fails to mention the huge windfall that the county will receive as a result of the issuance of these bonds.

We hope you saw this coming. You see you, as county supervisors, are responsible for all the revenue and expenses of the county. You too have a similar conflict of interest. County government, as opposed to the people of the county, will benefit immensely.

CONCLUSION

This is where character and integrity come in to play -- your character and integrity.

On the one hand, you can help the District out of its self-inflicted jam. On the other hand, you can do the morally and ethically sound thing and either reject the District's request outright or place conditions upon your approval that will work to stop the corruption in the District's Proposition 39 bonds programs.

It's kind of a Faustian dilemma, wouldn't you say? Let the district continue to abuse its taxpayers (who are also your taxpayers) and reap millions of dollars for the county or enforce the lawful, constitutional and legislative directives that Proposition 39 bond expenditures must comply with.

REQUEST / DEMAND

Here's what we're suggesting that you do.

A. Reject the District's request outright. If the District is not snowing you with it's speculative pipe-dream that it will be legally able to issue its own bonds in December, then what do a few months matter? These measures passed 10, 13, and 14 years ago -- no one remembers what they were for.

-- OR --

B. Delay issuing the bonds until the District agrees to create a plan to implement the following conditions:

1. Require that the District dismantle its current fake oversight committee and institute the promised, but never delivered, independent oversight committees (one for each measure) as dictated by the Education Code.

2. Require that, if the District wishes to have the bonds issued before it fully implements its plan, that it secure its promise to comply with its plan by a performance bond.

3. Require that the District implement every directive in the Education Code, as written and intended, regarding the citizens' independent oversight committees.

4. Require that the District adopt a binding policy that describes a selection process for oversight committee members that ensure that each committee is comprised of taxpayers who are truly independent and not influenced by connections with government agencies, public employees, or special interests that benefit from the expenditure of bond funds.

5. Require that the District cease imposing any duties on the committees. (The Education Code preempts the field.)

6. Require that the District not interfere with the committees in adopting their own bylaws, policies, and procedures, as accorded by their independent status.

7. Require that the district provide the committees with annual funds for the distribution of their reports to the public on a par with the amount of funds the District used for the distribution of "informational" and campaign materials to pass the measure.

8. Require that the District produce a warrant or check journal of every expenditure made against each measure going back as far as the District has records, but not fewer than five full fiscal years.

9. Require that the District's Office of the Inspector General examine the expenditure journals for expenditures that do not strictly comply with the accountability requirements, as written and using their ordinary meaning, of Proposition 39 and report its findings to the public.

10. Appoint an independent forensic auditor or fraud investigator as a master, paid for at District expense, to report back to you on the efficacy of the District's plan and its progress in implementing it.

If you were to impose these conditions in exchange for your consent, we do not expect that the District will accept them. We believe that the District will suffer through a little longer without getting its hands on the money, rather than expose its Proposition 39 bond programs to truly independent oversight.

Sincerely,

Richard Michael, Government Accountability Advocate
California School Bonds Clearinghouse (www.bigbadbonds.com)

cc:
Jon Coupal, President
Howard Jarvis Taxpayers Association

Michael Turnipseed, President
California League of Bond Oversight Committees