Fayette school bond issue of 2000

After the second defeat of the effort to raise the sales tax in Fayette to pay for new schools, on Sept. 21, 1999, those who were pushing for the extra sales tax were understandably frantic. They were once again condemned (as a matter of state law) to waiting at least a year before staging another such vote, and many were misinterpreting the voters’ message to mean people were against building new schools.

Many voters, however, were simply opposed to using a sales tax to finance schools, when a straight bond issue could have done the job admirably well.

In the weeks leading to the vote, it had been explained to the voters, in The Citizen, that a bond issue would cost annually, in dollars, about 20 percent of what the sales tax would end up costing. That would come from spreading the bond cost over all property owners, and not just individual consumers, and over a time span of 20 to 30 years, likening a bond for schools to a mortgage for a house.

It was also explained that bonds came with a bargain interest rate because investors pay no income tax on the interest they receive, and that the property tax is a deductible item on income tax returns while the sales tax was not.

Many citizens understood that, but the school board and the activists buzzing around it were in no mood to listen. The newly appointed school superintendent, John DeCotis, proceeded to appoint a large committee of citizens to study the issue, as the need for new schools was not going away. The activists were clamoring for a third SPLOST vote.

When I asked Dr. DeCotis for an opportunity to present the pro-bond side to him, he arranged a meeting between the school comptroller (Jim Stephens), him and me. While I had an opportunity to make the case for bonds, the comptroller was antagonistic and hung up on the idea that bonds require the payment of interest.

No person properly educated about financial subjects such as economics and monetary systems would ever have that kind of phobia about paying interest. Most people recognize that one dollar payable one year from now is not worth the same as a dollar payable today. The difference is called interest, reflecting the time value of money.

In fact, while the Koran forbids the charging of interest, even Islamic believers get around the paying of interest by calling it something else. I was dumbfounded, and also realized it was difficult for the new superintendent to break ranks with his comptroller.

What Dr. DeCotis offered me was an opportunity to make a presentation to his committee. I readily accepted. It was to be at the LaFayette Center, the evening of July 27, 2000.

In preparation for the event, I reviewed school board financial records concerning outstanding bonds, even filing an Open Records Act request to be sure to get them. The comptroller made clear I would be charged 25 cents for each photocopy I wanted.

Then I prepared a series of 21 exhibits as props for an explanation of the basics of property tax, an historical review of school taxes and bonds in Fayette, the cost of new schools expressed as a property tax, and a comparison of the burden on taxpayers from a sales tax and a property tax.

The final exhibit was entitled “How to pay for 5 new schools now without raising taxes above their current level.” The school board wanted only three new schools, but I was about to show them how to get five, with no tax increase.

This was a big committee. I was told to expect an audience of at least 60 people. To be safe, I printed 100 copies (at my expense) for distribution. There was much excitement about Harry Potter in those days, so in jest I titled my presentation “Hairy Plotter And The Epic Battle Against The Hogwash Of The Evil SPLOST.”

My exhibits had been prepared in computer form and could thus be displayed on a screen, which makes for a better presentation than referring to printed pages. When I queried a school system technical employee about the possible use of a projector, I was promised one, and also a suitable screen.

When I arrived for the meeting, I was informed that the school comptroller was scheduled to make a presentation first, and that mine would come afterwards. I also learned I’d have no screen and would have to project my slides on a painted concrete block wall. That would obviously degrade the picture quality somewhat.

The comptroller’s presentation consisted of lots and lots of old financial figures that were irrelevant and frankly quite boring. That man was about to put my audience to sleep, and he took his time doing it.

Never fear. I have had extensive Toastmasters training and am prepared for quite a lot, even someone having a heart attack while I am speaking (which can happen). I waited it out.

An intermission had been scheduled after that, allowing those who wanted to escape an opportunity to do it. Most remained, perhaps in the anticipation of seeing me fall flat on my face. In fact, members of the school board may have sneaked in about that time; they were not introduced to the audience, but I was told later that they were there. I even recognized a county attorney in the audience.

The introduction I was given was curt, without a recital of the qualifications I had as a speaker that would have prepared the audience to be more receptive. So I rose and thanked Dr. DeCotis for inviting me. To what I imagine was his relief, I told the audience he did not know what I would say and bore no responsibility for anything I said or did.

Then I gave myself the introduction I should have received by explaining my background as a tax lawyer and actuary and my interest in education. In other words, if they expected Mr. Stupid, I wasn’t it.

The presentation went well. The crowd was attentive. The title about Hairy Plotter showed I had a sense of humor. My late start forced me to hurry my conclusion a bit, but people were interested and learning something.

At the end Janet Smola asked a question about the number of dollars paid as interest with a bond. One smart aleck in the audience said aloud that I couldn’t possibly be an actuary. Since unlike a recent Grady Hospital CEO I have all my framed degrees on the wall, I had no problem with that, or handling him.

AJC reporter Paul Donsky came afterwards to get details on how it’d be possible for Fayette County to get five new schools without raising the tax level. I provided the explanation he wanted — but he never published it. All in all, it was a surprising evening.

A few weeks went by, and little was heard from the school system. I contacted John DeCotis to suggest again that he arrange for a bond issue and schedule a vote with the fall general election. What did he have to lose?

I do not know what went on within the school system in August 2000, but about Labor Day Dr. DeCotis let me know the system would ask for a bond vote. He seemed highly pleased.

When I asked about the bond repayment terms, I was told the bonds were to be repaid over a period of nine years.

Nine years! That was ridiculous. That’s like young parents without a whole lot of money buying a house and insisting on a 9-year mortgage. The mortgage payments are so high the poor folks can’t afford the furniture. Or too much else.

When I told him this virtually scuttled the main virtues of a bond issue, he told me it was now too late to change anything. The deadline for putting the issue on the ballot had just passed. The interest-averse goblins had done their sinister work.

Thus the voters of Fayette County were presented with a $65 million school bond vote on Nov. 7, 2000, and they approved it.

Today our citizens have to live with two more years, this fall and next fall, of the extraordinarily high bond payments the 2000 school board imposed upon them. Next week, I’ll discuss how we might climb out of the hole these folks got us in.

[Claude Y. Paquin, a Fayette County resident, is a retired lawyer and actuary. Actuaries are commonly described as financial experts who do the math for insurance companies.]

NINE year bonds?

Submitted by sniffles5 on Tue, 09/02/2008 - 6:53pm.

I am sitting here with my mouth wide open....

NINE year bonds?

What the HELL were these people thinking?

Back then, interest rates were at historic lows....NINE year bonds make absolutely NO economic sense. Does anyone recall what tortured rationale was offered for this idiocy?

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Paquin

Submitted by NUK_1 on Tue, 09/02/2008 - 6:35pm.

I remember Claude Pacquin's columns on the benefits of a bond issue over another SPLOST(which was going to fail again too) quite well. Despite the number-crunching aspects of a comparison between SPLOST and bonds and what can or cannot be deducted and the net cost to the homeowner, he made it pretty straight-forward and the result was people in favor of a bond issue, even those who had vehemently been opposed to SPLOST(for many of the same reasons today, HINT: it's not just the money, it's the BOE). The 9 year term I never understood and I'm glad his column last week appeared and explained why they didn't go with his recommendations and what a blunder it was and why we're back to debating another SPLOST while our confidence in this school board is real shaky.

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Claude Paquin

Submitted by suggarfoot on Tue, 09/02/2008 - 6:07pm.

It is sad you gave so much good advice, only to be treated so badly. It would seem to most of us, they wanted the bond issue to look bad. I think this SPLOST is just a way for someone to control an unlimited amount of money for whatever personal reason and very little oversite.

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