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As Long as We Remember...

February 10, 2009

From Awful to Worst

Farrell Keough

The Board of Education is moving full force to ensure their new Taj Mahal is going to be built. They have used many mechanisms to side-step the tough questions and portray things in a good light. In short, we have not been given the full and accurate truth.


We have been told that the cost of this building is around $16.7 million. That is misinformation. The true cost is around $28.8 million. The reason for this is that when a loan is taken out you must not only pay back the loan, but you must pay the interest on the loan as well. Diligent people who make a purchase take into account the entire cost. People who want to pull the wool over you eyes tell you only the original amount of the loan without accounting for the interest. Keep this in mind while reading the rest of this column.


On January 20, 2009, the school board met with the Board of County Commissioners. During that meeting, the Board of Education was asked point blank if they had made a payment on the loan for this building. Members told the commissioners that they had not and were capitalizing the payments, basically rolling the payments back into the loan. It turns out that this was a misunderstanding – a nice term for what really occurred.


At the last school board meeting, member Donna Crook asked if the contract obligations had been fulfilled, (the loan for this building) and made their 2008 payment. It turns out the board did fulfill its obligation and made that payment. The kicker is that they used money from the loan to make that payment. In other words, they did not, in their eyes, use the tax money received from the county or state to make that payment. Hence it was just a simple misunderstanding.


To be more specific, any money the school board has comes as a means of taxing the public and is dispersed by the county commissioners, the state or the federal government. To say that this quantity of money is the school board’s and that quantity of money is the taxpayers is disingenuous at best. But, this is the slick accounting method it consistently uses, sort of like saying the cost of this building is $16.7 million when in truth it is $28.8 million.


In other discussions, it was noted that the payments would be around $550,000 a year. Guess what? They aren’t. The first payment in 2007 was just over $150,000. The 2008 and 2009 payment was just over $770,000. The next payment for this fiscal year will be a whopping $1.18 million and it goes up from there. And, please note, the previous payments were for interest only, again, slick accounting allowing an erroneous cost to stay in the public dialogue without correction. Sort of like saying the cost of this building is $16.7 million when in truth it is $28.8 million dollars.


Part of the strategy to pay down this loan included the sale of existing buildings. The initial figures for that sale were around $8.1 million. Of course, that figure was determined when the market was at its height. Things have changed dramatically! It is now being bandied about that the school board might get as much as $5.1 million for these buildings. It will be interesting to see if they can find a buyer.


Once again, the school board believes it has an out. It has negotiated with the current commissioners that if a buyer cannot be found, the county will provide an estimate of sale monies to the Board of Education. Of course, no where in this agreement is it stated that they will get $5.1 million. Also, there is nothing to stop the next set of commissioners from diverting that money to another use all together – thus making we taxpayers accountable for the full loan amount and the cost of these buildings.


And lest we forget, the county commissioners will have to provide the funds for the Board of Education’s Taj Mahal with our tax dollars; and they do not have to apply any funds they receive from the eventual sale of those buildings to the loan. Another of the slick accounting methods to insinuate that this deal is much better than reality suggests. Sort of like saying the cost of this building is $16.7 million when in truth it is $28.8 million dollars.


Finally, a little known secret has been revealed. The land where this building is to go, (Site G) is contaminated! The current story line is: the arsenic, lead, and other constituents are only in the top surface layer and grading will clean it up. Hence, they are claiming a $30,000 clean up cost via a decision by the Maryland Department of Environment. Have you ever heard of a clean up only costing $30,000? It should be interesting to see if that actually happens. Sort of like saying the cost of this building is $16.7 million when in truth it is $28.8 million dollars.


Now, what would occur if the school board backed out today? They would have to pay $2.1 million plus a 5% cancellation fee of $835,000 to the bank. That is not good, but would still be an overall savings. It is the cost to the contractor that is the real issue. Payment would be so large that the school board would not publicly acknowledge the amount. I have found out that this fee was estimated to be about $15.7 million.


Before you get all wrapped up in the contractor sticking it to the school board, take a breath. Warner Construction is a reputable company and a member in good standing of this community. They did not force the Board of Education to sign this contract. The Board of Education represents us and they were empowered to develop a contract which would ensure we tax payers were covered for all contingencies. One has to wonder if the school board was less interested in ensuring that we tax payers were protected as opposed to ensuring this building was completed. Sort of like saying the cost of this building is $16.7 million when in truth it is $28.8 million dollars.


I was unable to get in touch with Warner Construction. If the Board of Education backed out of this contract, Warner Construction deserves not only payment for the costs they have incurred, but a substantial cancellation fee! Because it is a reputable company, one would hope they would be willing to use the remainder of that payment for future projects with the school board. It’s not as if further school construction will not be needed.


Has the school board approached Warner Construction to see if such a deal could be made? Considering the history of shenanigans we have seen so far on this project, one has to wonder.


But, what if no deal can be made? We tax payers face either a $28.8 million payment for a building in which no children will be taught, or the loss of $19.6 million. This is the position the school board has put us in.


And worse, to make these incredible payments for the Taj Mahal, the Board of Education will have to access funds that are for our children’s education. For example, if a special education class has only one to three students, this number is aggregated into the total class size for all students. So, it may say it needs to add one or two students to the class size.


But, when you have such a small number included in the aggregate, that really means that three to five students may be added to the larger classes. This is the kind of slick accounting methods that the Board of Education uses.


Sort of like saying the cost of this building is $16.7 million when in truth it is $28.8 million dollars.



Frederick County Circuit Court (Land Records) [MSA CE 61-6681) Book SKD 6836, p. 0580 – 0581, et al.


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