Paso Robles School District: a Cautionary Tale

Conclusions 3

• CL1
  The financial problems that developed at the Paso Robles Joint Unified School District were a result of the actions of three groups charged with school system oversight. Their collective failures to control or report on excessive expenditures created a fiscal crisis that will take time and hard work to resolve. The previous superintendent’s leadership is responsible for overestimating income and not controlling spending. Under his administration the constant turnover in business and financial staff caused mismanagement in monitoring finances and budgets. The Trustees had hired a superintendent with a new direction and vision with the hope to revitalize their district. Unfortunately, the available funding failed to support the new vision. Despite that fact, the trustees approved expenditures in excess of available funds without sufficient questioning. And finally, Submitted on November 17, 2020 8 the limitations in the SLOCOE oversight procedures prevented the County from officially intervening in the district’s deficit spending pattern. Despite repeated warnings communicated to the superintendent and the Board President, no corrective action was taken. It was later determined that the communications from the County were never forwarded to the other trustees who remained unaware of the financial crisis on the horizon. On the other hand, the trustees are required to practice due diligence, which they failed to do. This trifecta of abdication or dereliction of duties, mismanagement and leadership failure was evident in hearing from individuals and reviewing the documents requested by the Grand Jury in search for the truth of just what happened in Paso Robles. The circle of blame is a large one that offers a cautionary tale from which every school district can benefit. CHAPTER 2 --RESERVE MISMANAGEMENT PURPOSE This chapter of the report seeks to summarize the financial conditions and actions that lead to a significant depletion of the reserves of the Paso Robles Joint Unified School District (PRJUSD) for the second time in a decade. The Grand Jury report will seek to provide answers to what happened to the PRJUSD’s reserves from the 2014/15 school year budget through the 2018/19 budget.
• CL2
  At the beginning of 2015, financial reserves were at a very healthy 10.4% of the PRJUSD budget. This provided the new district superintendent a solid financial cushion. The superintendent utilized the positive financial reserves to fund new programs, which he presented in his one hundred-day plan. The cost of these programs over this three-year period contributed to the reduction of reserves from 10.4% to 0.3% (below the mandated 3.0%). There was strong evidence of mismanagement in overseeing important business areas such as ADA calculations, the culinary academy budgets, transportation, payroll and pensions. The extremely high rate of turnover among fiscal managers (eight people in a four year period) caused a vacuum in the financial management of the district. In retrospect the PRJUSD between 2014 and 2018, the Superintendent had a grand vision on how to improve the district. His decision to deliver this grand plan, regardless of the financial impact, cost the school district millions of dollars in reduced financial reserves. To all concerned, the County Office of Education, the PRJUSD Superintendent, the Board of Trustees, and to the electorate, this should be a lesson taken seriously. Submitted on November 17, 2020 15 CHAPTER 3 – THE AQUATICS COMPLEX PURPOSE The purpose of the report is to illustrate how the administration of the Paso Robles Joint Unified School District (PRJUSD) erred and created financial blunders that impacted the entire district operation. The Grand Jury (SLOGJ) believes that nothing illustrates these failures better than the example of the Aquatic Complex plan, which to date, is not close to being constructed. NARRATIVE In 2015 the new superintendent wanted to produce a new facilities master plan (FMP) anticipating a significant increase in school enrollment and other factors. This increase would require modifications to existing facilities and construction of new facilities to support anticipated growth. The Dolinka Group, commissioned by the superintendent, had estimated an annual student increase of 2.19% from current levels on a continuing basis. Some increase happened in years 2015 to 2018 and has declined since. In only one year did the increase approach the 2.19% that was projected. Year 2015 2016 2017 2018 2019 2020 Beginning 6213 6249 6321 6468 6482 6473 ADA +/- +29 +79 +147 +15 -9 -27 Ending 6242 6321 6468 6482 6473 6447 ADA % of +0.47 +1.26 +2.32 +0.23 -0.13 -0.42 change The PMSM Architectural Firm was hired in 2016 to study every school, meet with teachers, parents and staff to determine the current state of the infrastructure, and look to the future for the changing educational needs. In April 2016, the Board of Trustees was presented with a completed plan that was used to estimate the costs for a potential bond issue to fund the plan. Included in the plan were changes to all elementary and middle schools, the high school, the War Memorial Submitted on November 17, 2020 16 Stadium and the construction of a new aquatic complex. The facilities master plan was estimated at a cost of $187 million. The original plan for the aquatic complex included a 50-meter and a 25-meter pool, decking, concession area, four rows of bleacher seating, changing rooms, rest rooms, equipment space and a solar heating system. The initial estimated cost for the aquatic complex was $10,570,000. The total budget for all changes to be funded by a bond was over $130 million. An additional amount of $58.2 million was needed for potential repairs and modifications for the schools that would have to be funded. The aquatic complex was included in the proposed bond to improve the high school athletic performance of the swim and water polo teams. The high school currently practices at a municipal pool across town, next to Flamson Middle School. They do not have an adequate venue to conduct swim meets. One of the intentions of the aquatic complex was to improve student access and competitiveness, as well as potentially attracting new students. These facility changes could only be accomplished through external funding using taxpayer funded bonds. The district modified the wish list for the aquatic complex over the next four months to prioritize projects and to make it acceptable to voters. Several board meetings and planning sessions were held by the administration and board to discuss the size and scope of the projects and the details of the bond measure. Many changes were made. Projects were massaged into an “A” priority and a potential “B” priority list. Notably, the aquatic complex estimate and scope were significantly reduced. What remained in the bond financing, which was approved for the aquatic complex, was a 50-meter pool and the equipment room. The estimate for the change to the aquatic complex in the FMP was reduced from the original $10.5 million to $5.7 million. This is the amount that voters were asked to approve as part of Measure M. The 25-meter pool, pool deck, concession area, bleachers, changing room, solar water heating system and restrooms were left off the aquatic complex bond issue list that was approved by the Board of Trustees. When the description for the bond issue was written in November of that year, however, all of the items on the list were included. The aquatic complex was listed as a community effort with the School District providing limited financing. Donations and potential, though undocumented, agreements with outside parties were to fund the remainder. Submitted on November 17, 2020 17 Measure M was planned for the November 2016 general election. The taxpayers of the Paso Robles Unified School Facilities Special District, which does not include students from Pleasant Valley or San Miguel School Districts who attend Paso Robles High School, were asked to pay for the improvements with a Bond Measure M fund for $95 million for school construction. The bond measure was approved on November 8, 2016 with a 57% majority vote. As part of the voters approving the Measure M Bond, the district was required to institute a Citizens Oversight Committee. This committee is charged with reviewing the use of funds sold using Measure M to assure that they are consistent with the language used in the text of the measure. The Board of Trustees approved the committee members in their February 28, 2017 meeting. The committee is required to publish annual audits. Audits for 2016/17 and 2018 are available on their website. Audits have not been completed since 2018. The district has proposed changes to the content and order of the projects anticipated to be funded by Measure M. The total potential value of the bond remains the same. On April 4, 2017 the board approved a committee including school staff, the bond consultant and a legal team to start the plan for selling and acquiring bond funds. Initially, anticipation notes were going to be used to do preliminary planning before the actual issuing of bonds for all proposed projects. In the June 27, 2017 board meeting, the trustees agreed to hire SIM-BPK Architects for the design and planning of the school refurbishment projects and new aquatic complex. On July 11, the district sold $3 million worth of bonds for preliminary work for the projects. On August 15, 2017, the Chief Business Officer updated the board on the progress of bond sales and the architectural design effort. The architect presented artist’s rendering of the first phase of the work on Measure M projects on October 10, 2017. Included is a rendering of the aquatic complex. The board suspended work on the aquatic complex, objecting to a lack of outside public restrooms, for which no funds were secured. However, this did not preclude the actual purchase of pool components. Keep in mind, that at this point, the project was still not fully funded. In January of 2018, the district filed an Environmental Impact Report (EIR) with the City of Paso Robles for the aquatic complex. The EIR was the same as the Measure M scope, which was approved by the voters. It included two pools, decking, an equipment room, storage room, Submitted on November 17, 2020 18 bleachers, coach’s bleachers, a classroom, administrative office, concession space, locker room with outdoor showers and restrooms making this more elaborate than originally projected. This was a significant increase in scope over what had been originally planned. As of January 23, 2018, the project design was not complete and funding for the complex was not secured. Regardless, on that date, the board approved the purchase and delivery of components for two stainless steel pools for $945,200. The vote was six in favor and one opposed. The price was higher than the Measure M designated cost. These components were delivered and placed in storage containers in August of 2018. At the time of this report, the majority of pool components remain in storage at the high school site. In February 2018, the superintendent and other district officials posed for pictures in a simulated groundbreaking photo opportunity at the proposed site. The superintendent, at the photo opportunity, stated he could build the complex for $8.2 million dollars (despite the FMP estimate exceeding $10 million) with Measure M Bond funds providing $5.7 million and anticipating $2.5 million coming from donations. He claimed to have an agreement for the ground clearing, excavation, and site work to be completed by a retired earthwork contractor and winery owner. That agreement was never documented and the party who made the agreement has since passed away. A group of citizens formed a non-profit organization to raise funds for the donations. SWIMPASO raised several thousand dollars through fundraising efforts. Their contributions were transferred to the 4A Foundation, a group used to fund extracurricular activities at the schools, designated for the construction of the aquatic complex. As of the date of this report there has not been an audit of those funds ($144,473.95) nor any indication of expenditures by the group to support the completion of the aquatic complex. On March 13, 2018, the Board of Trustees appointed new members of the Measure M oversight committee. The Board was given an update on the progress of the work for rebuilding the schools and the aquatic complex. On April 24, 2018, the Board agreed to sell $40 million dollars of bonds Submitted on November 17, 2020 19 for Measure M repairs and the aquatic complex. The $3 million of anticipation notes previously issued were paid off. In the ensuing eight months up to November of 2018, the District began physical work. They eliminated temporary structures and leveled the site in preparation for the pool installation. Total expenditures, including the pool components purchased, at that time were $1,308,128. On November 3, 2018, the District presented an update of the Facilities Master Plan including the aquatic complex. The District entertained bidding for the installation of the pools at that time. The bids received from two contractors came in at $11 million and $12.7 million (in addition to the cost of the pool components) and was announced at a January 2019 Board of Trustee meeting. They were substantially over the original estimate and the remaining bond funding set aside for the aquatic complex. The Board voted at that time to put a hold on the project until additional funding could be secured. Since that time, District staff toured a similar aquatic complex site in Hollister, California. The staff learned that the operating costs for a similar site were substantially more than what was projected for Paso Robles. The manufacturer has recalled one of the pool liners for another similar project and continues to honor a three-year warranty effective when the pool is installed. The last Board of Trustees discussion concerning the Aquatic Complex was at the January 25, 2020 board meeting. The district trustees remained committed to complete the installation that is needed for the high school. They hoped funding could come from a proposed School Modernization Bond, State Measure Proposition 13, in the 2020 primary election. That potential funding source was eliminated by the defeat of the proposition.
• CL3
  The Paso Robles School Board of Trustees and the previous superintendent prematurely purchased pool components and committed to an aquatic complex without a fully developed plan and a way to pay for it. It was mistakenly assumed that the additional funding required would be forthcoming. No written agreements have been found that could prove that the needed donations were in place to consummate the building of the complex. As a result of the trustees’ actions, Measure M, as Submitted on November 17, 2020 20 authorized by the voters, has funded expenses of $1.5 million for an aquatic complex, which is unlikely to be realized. This includes almost a million dollars-worth of pool components, which require additional funding to maintain while stored in metal containers, potentially degrading.

No Responses Found 1

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