School Board: Budget Gimmicks, Leases W/ “Escape Clauses”…Long Term Debt Made Easy! Is This The Way You Want Your Tax $$$$’s Managed?

BROKEN GOOD GOVERNANCEIncurring long term debt should be hard…not easy!

The State Legislature in fact has in fact enacted a law making it hard, RSA 33:8 Municipal Finance Act: It states, among other things, Multi-year lease-purchase agreements for equipment are regarded as long-term debt (like a bond, they require a stream of payments to pay principal and interest over time) and thus also require a 2/3 (or 3/5 for Official Ballot or SB2 towns ) on a Separate Warrant Article ballot vote.

Apparently, the Henniker School Board feels otherwise. This year , the first time ever, the School Board is using a budget gimmick, that allows long term debt to be approved by a simple majority, RSA 33:7-e. 

RSA 33:7-e, does not consider long term contracts with “escape clauses” or “non-appropriation clause” as long term debt. Therefore such instruments of debt can be approved by a simple majority:

33:7-e Lease Agreements of Equipment. – The governing body may enter into     leases  of equipment as required by the municipality. Appropriations to fund lease agreements with nonappropriation clauses may be approved by a simple majority vote of the legislative body. Lease agreements with nonappropriation clauses shall not be treated as debt under RSA 33:4-a. For the purposes of this section, “lease” shall include lease-purchase, sale and lease back, installment sale, or other similar agreement to acquire use or ownership of such equipment as is from time to time required by the municipality. For purposes of this section and RSA 382-A, building or facility improvements related to the installation, purpose, or operation of such equipment shall be deemed to constitute equipment and the costs of such improvements may be financed through lease agreements under this section.

By approving this budgetary gimmick (leasing) and placing  the costs of the these capital improvements in the General Operating Budget, our budgeting process will be changed.

There is a direct effect on the way we will budget in the future, including the default budget. During the entire length of time, a third party will own the equipment and the terms of the lease, the details of which are unknown, will be a liability to us.

This project will not be placed for bid by our school board. The general contractor will have that control. We the Taxpayers will given up all control…not a good idea when public funds are at stake….

Upon questioning at the deliberative session, it was revealed that the School Board has not established a Capital Reserve Fund Account. Such accounts are used to procure funds necessary for Capital Improvements over time.

These funds when established and managed properly, help finance these types of projects, lowers the cost of borrowing and thus prevents large increases to our already high tax rate.

These types of reserve funds are looked favorably upon by mortgage lenders.Good Corporate Governance improves our property values.

In the absence of these funds and the inability to plan for the future, we will be subjecting ourselves to an unsustainable string of extremely costly future expenditures. All being 100% financed.

So what should we do? VOTE NO to the operating budget…call a special meeting,

Get the roof repairs out from a lease and off the operating budget…Pass a proper Warrant for the repairs….and keep our eyes peeled! No one looks out for your money better than YOU!

Next Up: A few gimmicks in the HCS Teacher’s Contract…

OHB…keeping it real… making it easier for you to find the facts so you can draw your own conclusions…..

“There are things public officials would never do if they thought somebody might call them out on it.”

http://www.onlyhennikerbruce.com

 

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