Crushing Debt at MSD Decatur Township

In 2002, the Decatur School District owed $25.5 million. With the payment schedule in place at the time, that debt would be paid down to $12.0 million by the end of 2009. (Data from the 2002 "Financial Feasibility Report" by H.J. Umbaugh & Associates)

By the end of last year, our debt (principle only) stood at a crushing $266.7 million - not counting the debt from temporary loans. (Finance data from the Indiana Department of Education website)

That means that $254.7 million of new debt was loaded onto the taxpayer's backs in 7 short years. The first round of building projects accounted for $50 million, less what would have been paid back in the intervening 7 years. The High School project accounts for another $85 million. That still leaves over $119.7 million of unexplained debt that Superintendent Don Stinson, Assistant Superintendent for Business Jeff Baer, and the rubber stamping School Board got us into. Judy Collins was on the Board for all of those years - Dale Henson for the last 4 years.

So what? What do those numbers mean?

Back in 2002, the "Financial Feasibility Report" cited above, was commissioned to analyse the amount of debt that the District tax base could handle, without the District dropping below an AA- bond rating. Bond ratings dictate the interest rate and saleability of a governmental unit's bonds. The Report predicted a steady 3.5% growth in the net Assessed Value (AV) of our Township outside of the TIF area - so essentially the tax base from which the School District can draw property taxes. The net AV predicted for 2010 by the report was $1.000 billion. Our actual net AV for 2010 is $1.091 billion - so Umbaugh & Associates did a stellar job with that prediction.

As the net AV grows, the amount of debt that can be carried without losing the top tier of bond ratings grows with it. This is simply because the ability to repay the debt increases as the tax base increases; just like a household qualifies for larger loans as their salary increases.

The "Financial Feasibility Report" used the predicted net AV to calculate the amount of debt the School District could reasonably get into without losing the best bond ratings. The figures ended up that by 2010, we could reasonably handle a total debt of $80.9 million, or 8.3% of our net AV. Instead we have $266.7 million which is a crushing 24.5% of our net AV.

So how do we compare with the other School Districts in Marion County? In 2002, using outstanding debt as a % of net AV to normalize the comparison, MSD Decatur Township was in the middle of the pack. From lowest to highest were: Speedway (with no debt at all), Washington Township, Pike Township, Wayne Township, Lawrence Township, Decatur Township, Perry Township, Warren Township, Beech Grove, and Franklin Township.

How do we compare today? We have, by far, the greatest debt as a % of net AV of any of the other School Districts. Here are the debt loads of all 11 Districts:

Decatur Township = 24.5%
Franklin Township = 15.8%
Wayne Township = 11.1%
Beech Grove = 8.8%
IPS = 8.0%
Warren Township = 5.1%
Lawrence Township = 5.0%
Perry Township = 3.9%
Pike Township = 1.4%
Washington Township = 1.1%
Speedway = 0%

These numbers were calculated from data on outstanding debt provided on the DOE website and the net AV data provided by the Department of Local Government Finance.

This staggering debt may explain the claim that the District owes $3 million interest on a temporary loan of $23 million - an equally staggering 13% interest rate when other taxing units are qualifying for low single digit interest rates.

But for sure, this debt is the source of most of the financial mess we are currently in. The $1.5 million budget cut for Decatur Schools ordered by Governor Mitch Daniels is chump change in the $9.8 million hole. But, all you hear from Stinson, Baer, and the School Board is bad economy and bad Mitch Daniels.

Umbaugh and Associates presented the findings of their "Financial Feasibility Study" to a packed house in the High School Auditorium. Present was Superintendent Don Stinson. Current School Board member Don Huffman was also present. I cannot imagine that Judy Collins, Dale Henson, and Cathy Wiseman missed that meeting, either.

Let me recap - the "Financial Feasibility Study" accurately predicted our net AV and calculated that by 2010 the tax base of Decatur Schools could handle a total debt of $80.9 million. Instead, we are buried in $266.7 million total debt (excluding temporary loans). Less than $147 million can be explained by debt from building projects. Instead of having a prudent debt load of 8.3% of our net AV or tax base, we have by far the highest debt load of any School District in Marion County at 24.5%.

This is EXACTLY why we are in the financial mess we are in. And this is EXACTLY why you should vote for Coffey and Hire on Tuesday.