This article first posted on November 28, 2007.
For years I’ve been involved in highlighting the many abuses within the government-run public school system when it comes to pay and pensions. Now another entire chapter can be written about the abuses within the Illinois public school system thanks to the hard work of a few tenacious citizens in downstate Illinois.
The members of the Illinois Coalition for Public Awareness are telling their story on their website, and it’s clear that what is happening in Jersey County is regularly occurring all across the state.
In a nutshell, here’s what happened. Despite the fact that a referendum to build a new high school was resoundingly defeated by the residents of Community Unit School District 100 in Jersey and Greene Counties, the local administrators and board decided to ignore the wishes of the voters and got the help of an extensive public school network of associations to accomplish their goal.
The district now has two new school buildings, and the taxpayers have about $40 million dollars in debt to repay over the next 20 years.
With the help of language from the Coalition’s documents, what follows is an outline of the story.
In April 1999, Jersey CUSD 100 in downstate Illinois (just north of St. Louis) put a referendum on the ballot to secure funds for the purchase of a site to build a new high school. The estimated cost of the proposed high school was approximately $29 million dollars.
The Referendum fails
That referendum was defeated in the Jersey County section of the district 71% – 29%, and in the Green County section, 64% – 36%.
What happened then was what you’d expect after the failure of a referendum. The school district took steps to have the existing building repaired where necessary and brought up to code.
In October 2000, a year after the referendum failed, the school district had an architect survey the existing high school for health and safety improvements necessary to bring it into full compliance. The costs were estimated to be roughly half a million dollars.
But then things changed. After the submission and approval of the revised repair surveys by the Illinois State Board of Education in May of 2001, the school district’s Superintendent discharged the architecture firm and cancelled the approved surveys.
What seems clear is that the superintendent and school board wanted a new school built and they weren’t going to let the residents of the community have the final word through that failed referendum.
School district officials sought to raise the funds needed for a new high school from a different source: through the issuance of fire prevention and safety bonds, which, as you could guess, do not require voter approval. Fire and safety bonds are normally used to finance repairs and alterations to school buildings necessary to meet fire prevention and safety standards.
But the district administration and board didn’t just ignore the wishes of the people. They failed to comply with the requirements outlined in the state statute which allows for the use of fire prevention and safety bonds.
The school district sold bonds without legal authority because they violated state law in several regards, here are just two:
- The approved repair costs did not exceed the estimated replacement costs. In the case of both schools that were built, the repair costs were far below the reconstruction costs.
- The new buildings were not comparable in size. The new high school and grade school are not equivalent in area and comparable in purpose and grades served as required by law. Both newly constructed schools are approximately 40% larger than the ones that were torn down.
The Network of “associations”
The other important violations are outlined in the lawsuit brought by Jersey County taxpayers.
When school district officials changed course, they received a lot of help and advice from a network of “associations” that feed off of public education tax dollars.
Organizations like the Illinois Association of School Boards, the Illinois Association of School Administrators, and the Illinois Association of School Business Officials seem to be key groups.
But there are bond houses, law firms, and architectural firms that are also in the business of profiting from public school tax dollars, and especially in this case, the tax dollars that pay off bonds that finance new school buildings.
The district hired one such well connected architect to re-survey the high school in late 2001. This architect also determined that there were several improvements needed for the Grafton Elementary School to bring it into compliance with the Health/Life Safety Code.
Not surprisingly, this new architect found that the estimates to repair the two school buildings were wildly higher than the first architect had found. What also seems clear is that estimates to rebuild the schools were manufactured to make it look as if the cost to repair was greater than the cost to rebuild.
Here are the numbers on the high school:
1999: Estimated cost to build a new high school in the referendum: $29 million.
2000: Estimated repair costs for the old high school by the first architect: $531,167, as approved by the ISBE.
2001: Estimated cost to repair the old high school by the second architect: $13,988,124, but the ISBE only approved $11,354,034.
2001: Estimated cost to build a new high school from the second architect: $12,684,893.
2004: Actual cost of building the new high school: Approximately $28,000,000.
That $12 million dollar estimate from 2001 is just not credible. If you’re going to highlight just one fact from this entire long episode, that made-up number illustrates the corrupted mentality of the public school system and those who profit from it.
The case goes to court
When the lawsuit was brought to court, the school district’s motion to dismiss did not even address the merits of the case. They made no effort to refute the claim made by the taxpayers who filed suit.
When the lower court ruled on the case, it also chose to ignore the merits of the case and instead ruled on the legal doctrine of “laches,” which basically said that the taxpayers waited too long to file their lawsuit.
In fact that group of taxpayers had been aggressively seeking answers as the school administrators and board were taking steps to ignore the will of the voters. Just one example of the evidence of their activity is an affidavit presenting a letter sent on August 28, 2003, that sought a meeting to discuss the building replacement project currently underway.
That request was summarily denied on November 14, 2003 by James Whiteside, the superintendent of the district, who stated that,
“The Board of Education has directed me to inform you that it is not interested in meeting with you in regard to your proposed topic pursuant to your correspondence of August 28, 2003.”
At one point the school district even failed to properly advertise a hearing and instead misrepresented the intentions of the district in stating that the bonds would be used to repair the buildings, not replace them.
One of the questions still before the courts is this: How were the taxpayers to know that the statute was not being followed without the construction contracts and other cost information held by the district?
What happened is easy to sum up. The Jersey County school district was aware that the taxpayers soundly rejected the issuance of general obligation bonds to build a new high school. Instead of strictly complying with the applicable statutes, the district ignored questions raised by the taxpayers and proceeded to issue bonds. The district was aware that there might be a challenge to its actions, but proceeded ahead without disclosing the facts to the citizens.
If the courts fail to act on the law and instead rely on “laches,” it is pretty clear that public bodies will receive even more encouragement to ignore both the law and the will of the voters on important public policy and tax issues.
Those bringing the case argue that the bonds were not authorized under 105 ILCS 5/17-2.11. Just because the district succeeded in issuing them before the suit was filed does not validate an otherwise illegal act. The legal doctrine of “laches” does not bar the lawsuit.
The possible legal consequences
As this article goes to print, the Illinois Supreme Court has yet to decide whether it will rule on the lower court’s laches-based decision. While it’s impossible to know, it’s easy to imagine that the Supreme Court realizes the widespread implications of the case since literally hundreds of other districts might face similar suits.
The bottom line is that if the bond issues were illegal, then they are void, and are unenforceable against the district. While the bond purchaser will suffer a loss, the purchasers have recourse under an insurance policy that insured the bonds and/or the bank and/or its attorneys who gave legal opinions that the bond sales complied with the applicable statutes.
The courts may be reluctant to declare the bonds void, but this relief is appropriate where the statutory provisions for issuance of bonds are ignored. The Jersey County Coalition for Public Awareness’s Jeff Fergusonrecently weighed in the implications of the lawsuit:
“The obvious is the expectation that a bond insurer and underwriter should reasonably be expected to exercise due diligence in their assurance that bonds are legal and valid. A favorable ruling for us in the courts would result in the insurer having to pay the investors for the guaranteed bonds they purchased. Sounds innocent enough but it gets a whole lot more complex when you look at the real implications.
It seems unreasonable that a taxpayer should have to pay for a burden created through illegal acts. This is where it gets complicated. Laches is not an equitable defense for an illegal act. The arbitrary application of Laches imposed by the 7th Circuit Court and upheld by the 4th Appellate Court failed to consider the legality of the School District’s actions. Because the preponderance of evidence implies the District did not have legal authority to proceed with the sale of the bonds, the determination of legality should have prevailed in a Laches defense.
As the Illinois Supreme Court ponders our Petition for Leave to File an Appeal, the implications are huge. If the Petition is denied, the lower court rulings will be upheld. Assuming the actions of the District were, in fact, illegal, a precedent will be established whereby Laches can be used as a valid defense for illegal acts, given a sufficient lapse of time. The failure of the lower courts to rule on the law, and instead, to allow the Laches defense, with no consideration to the merits of the case, has created a very slippery slope for the Supreme Court.”
We will be following this story closely, and will have more to say about the vast network of public school “associations” in future articles.