Superintendent Ed Brand received a no-confidence vote from a school-bond board.
  • Superintendent Ed Brand received a no-confidence vote from a school-bond board.
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Clouds hanging over the Sweetwater Union High School District have gathered into a storm. Four sitting board members, a former board member, and a former superintendent have been indicted. And serious financial woes may soon threaten the district.

At the December 2012 board meeting, Rick Knott, interim chief financial officer, gave a presentation to the Sweetwater board that enumerated signs pointing to serious financial challenges for the district. He prefaced his remarks by saying, “I’m not saying we are at risk, but we have some of the factors that could indicate a district getting into a difficult situation.”

At Sweetwater’s December board meeting, member Rick Knott presented a troubling financial picture of the school district.

At Sweetwater’s December board meeting, member Rick Knott presented a troubling financial picture of the school district.

Deficit spending was the first issue Knott addressed: “This district has a history of spending more money than we take in,” he said.

The deficit spending bomb is set to explode in 2015. Even with the benefits of Proposition 30 factored in, the district is still in trouble. Knott warned that in 2015, “We will have a negative fund balance, meaning we will have more obligations than we have assets.”

On January 18, in a follow-up interview, Knott said his presentation was meant to be a warning to the board and the public. He explained that the chronic overspending is a result of state revenue streams shrinking and the district’s reluctance to cut programs or lay off staff.

Another predictor of poor fiscal health Knott presented in December was the district’s cash-flow problems. “We also have not had sufficient cash to meet our obligations on a timely basis, and we’ve had to borrow from other funds.”

In a 2011 article, U-T San Diego drew attention to the fact that the district was borrowing from Proposition O funds. (Proposition O was a $644 million construction bond passed in 2006.) The district borrowed $40 million from the fund intended to modernize schools in order to pay for day-to day-operations. Following public outrage over this borrowing, the district backed off from borrowing an additional $58 million.

The district then turned to borrowing from Mello-Roos funds to make payroll. There are 17 Mello-Roos (or community facilities districts) in Sweetwater. Property owners in these districts pay additional property taxes to help fund public infrastructure and services.

The district’s continued borrowing from Mello-Roos funds has caused hard feelings in the community. Even though the money is paid back, Mello-Roos-paying residents believe their money is not being spent the way it is intended and that Mello-Roos-funded schools are being short-changed and falling into disrepair.

A sound household budget has accounts set aside that anticipate the future. But according to Knott’s report and the follow-up interview with him, the district has not been putting money aside for maintenance; he used leaking roofs by way of example. Nor has money been put aside to replace the district’s aging fleet of buses. They also failed to put money aside for elections. (Knott says he has addressed these problems in the new budget.)

Another way to assess the health of Sweetwater’s budget is by comparing it to the Chula Vista Elementary School District’s budget. Sweetwater and Chula Vista have essentially the same tax base and the same Mello-Roos districts.

Anthony Millican, Chula Vista elementary’s spokesperson, discussed in a January 17 email how his district handles budget challenges similar to Sweetwater’s.

On roof repair and such: “We regularly set aside two percent of our total expenditures as a budget for routine maintenance.”

On elections: “When we know a board member election is coming up, we set aside an amount for the cost of holding the election. We allocate about $51,000 for board member elections. This year (2012) we also allocated $53,000 for the Prop E election. That is the cost that we pay to the Registrar of Voters for holding such elections.”

Another contrast between the two districts is their budget reserves. The state recommends that a district have at least 3 percent in reserve. According to Knott, Sweetwater has 3 percent, or $7 million. Millican writes: “Our ending balance reserves are 19.18 percent, well above the state’s recommended three percent minimum requirement. That is $37.3 million in dollar terms.”

In his December presentation, Knott went on to advise the board that a district is in trouble when it has a combative relationship with oversight agencies. While Knott’s comment was not specific to Sweetwater, the district has had a combative relationship with the Proposition O bond oversight committee. The committee acts in an advisory capacity to the district on expenditures from the $644 million bond construction money. At one time, the bond oversight committee passed a no-confidence vote “on [Superintendent Ed] Brand’s interactions with the committee.”

After Knott’s presentation, the board voted to certify the district’s solvency. But since then, others have spoken out regarding Sweetwater’s financial issues.

Nick Marinovich, the committee’s chair, said in a January 20 interview that he finds it a struggle to obtain the financial documents the committee needs in order to do adequate oversight. Marinovich brought up the Voice of San Diego’s August report on capital appreciation bonds that will cost Poway residents $1 billion to borrow $105 million.

When Marinovich asked district representatives if Sweetwater had any capital appreciation bonds, he says he was led to believe they did not. But he later discovered the district does have capital appreciation bonds related to Proposition BB (a $187 million bond in 2000). While the bonds do not have the devastating interest rates Poway’s have, Marinovich says the issue points to the district’s lack of forthrightness.

Kevin O’Neill, also a bond oversight committee member, brought forward another financial concern during a January 20 interview. In November 2012, the board gave the green light for the district to seek a $38 million bond-anticipation note. A bond-anticipation note is a short-term bridge loan, according to O’Neill. It comes due in five years or less. Such loans are given in anticipation of increased bond money coming in as assessed property values rise. O’Neill is concerned that Sweetwater might be buying more financial woes if assessed values do not rise before the note comes due, in which case the debt will have to be paid from the general fund.

O’Neill believes that the district should hold off on construction projects for the time being. However, Knott says the district is going to market on the bond-anticipation notes in February. ■

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Comments

bbq Jan. 30, 2013 @ 6:16 a.m.

After attending a version of the Budget presentation by Mr. Rick Knott, I was impressed with his knowlege and openness on the financial subjects of the district. My biggest concern however is we have been living this Budget crisis for 5 plus years now and the Board, Adminstration (Former CFO Russo) and two Superintendents keep burying their heads in the sand. I sat on one of the Budget review comittees a couple of Years ago and all that came of it was woe as me, and the board did not follow any of the recommendations. My thought is we as citizens enlist Mr. Knott to give us an up to date assessment of what he saw in the books while he worked as interium CFO for the last few months, and maybe we could have him work with us towards the District of the future.

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anniej Jan. 31, 2013 @ 9:23 a.m.

bbq - my thought, Mr. Knott be asked to speak before a new grand jury investigating Sweetwater finances and Ed Brand.

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eastlaker Jan. 30, 2013 @ 7:45 a.m.

So isn't is crazy that Brand keeps coming up with more ways for the district to spend the money it doesn't really have?

And isn't it crazy that the majority board just plays along?

We have reasonable, highly trained individuals giving well-thought out advice, and Brand and crew ignore it.

I guess Brand knows he will get his money one way or the other (golden parachute when he finally ducks out as the district implodes just like the South Bay power plant)...so he really does not care what shape the district is left in.

As anniej has mentioned, Brand does not live in this district, so his concern is not for this district, except as a source of funding for himself and his special projects that are so good to his friends. Further--he might be building relationships with the bigwigs of for-profit education--because there might be more $ where that came from.

Personally I am taking heart--a little bit, anyway--from the fact that the county Board of Education is planning to mandate that Sweetwater "return to the (financial) fold" and again be a part of the county's financial system, instead of running their own. It shows that the county is finally awaking to the colossal morass that is Sweetwater's finances--and the shallows of the minds that have been making the decisions in Sweetwater.

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Greenville Feb. 1, 2013 @ 6:26 a.m.

That's great news about the county board of education. In the mean time it's spend, spend, spend! For instance, the purchase of iPads for another incoming class of 7th graders. It's wonderful to have this technology but oh so expensive to support. Teachers need to be trained. Schools don't have the band width needed to support all of those iPads all being on line at the same time. Additional classified staff is needed to maintain our existing infrastructure. And when you add an additional several hundred extra iPads to the mix--well, this hasn't been working well with the first round, let alone the next planned addition. AND, the classrooms have an average of 38 students. Special education kids are now undeserved as a result of the districts inability to fully staff it's state mandated programs. And the beat goes on.

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eastlaker Feb. 1, 2013 @ 10:56 a.m.

Not to mention that a few months ago it was reported that there was either a robbery or a robbery attempt on a middle-school student on their way to school--I seem to recall it was in the San Ysidro area. This was predicted.

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Visduh Jan. 30, 2013 @ 11:35 a.m.

A small point: In the photo that accompanies this posting, the photo of Knott identifies him as a "member", which one would assume is a board member. He is not a board member, but rather a district administrative employee. The caption needs to be corrected.

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bbq Jan. 30, 2013 @ 1:14 p.m.

Actually he was an interum employee, when I asked if he would stay on if possible, he replied that 1)His wife would kill him and 2) He would give up his current retirement benefits (education/Teachers retirement, State Mandate against Double dipping). Again a system that drives good people out. (Good based on one experience, vs. bad based on two experiences with Dr. Brand. Again what to do? Get a group of non- (OK Mildly)Biased citizens together and develop a future for the district beyond the current morass of whooey...

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joepublic Jan. 30, 2013 @ 4:57 p.m.

When Mr Marinovich has a problem receiving information, then the entire public has a problem. How can the bond oversight committee oversee information they don't have. Mr. O'neill is absolutely right about holding off on any new construction projects. Given this district's record for financial decision making and the community's general lack of trust, a moratorium for the time being would be wise.

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bbq Jan. 30, 2013 @ 5:40 p.m.

Absolutely agree, what gives a superintendent and boaed the right to determine what is or is not open for review by the public they are elected or employed to serve. Again it is out of control...

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WTFEd Jan. 30, 2013 @ 7:56 p.m.

Well as Ronald Reagan would say..there they go again. Why does everybody just seem no matter what to find a way to attack somebody that frankly has not had a chance since being finally made the Two Year Superintendent. The Admininstration is trying to make things better...I have seen it first hand...yet the negative energy is not good. I have seen that President Cartmill started this positive move forward and the consenus is most of the public was happy with the demeanor at the last Board meeting. We are on the prescipice of something good. Let's not kill it with more bashing...it gets tiresome.

I say we give this six months..let us as they say chill out and give Ed a chance. We teach our kids understanding is good. Maybe us parents should teach ourselves at being understanding and wiling to practice what we hopefuly preach. Please reflect and reach inside yourself and say why not lets give him the benefit of the doubt. Trust me you will feel better about yourself.

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eastlaker Jan. 31, 2013 @ 12:16 a.m.

Are you playing Neville Chamberlain? Appeasement isn't always the best policy. Frankly, your line of thinking is balderdash.

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ZORRO Feb. 5, 2013 @ 6:05 p.m.

WTFED, take off your rose-colored glasses and look at Brand's shameful past perfomance in Sweetwater and San Marcos.He is self-promoting and self-serving at the expense of the students,the employees and taxpayers.How many chances do you want to give him. He is building a house of cards that will collapse after he leaves.His charter schools(K-14) are causing the elementary districts to retaliate by taking back their 7th & 8th graders. Southwestern college is not happy either about Brand raiding their student pool.Notice that his contract runs out in 2015, the doomsday year predicted by Mr. Knott

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bvagency Jan. 30, 2013 @ 10:32 p.m.

The district, specifically Ed Brand, continues to play sleight of hand with appropriate documents for the Bond Oversight Committee to review. The prior chair of the committee made the same charge against the district,specifically that they dont provide adequate financial information on a timely basis, for the committee to adequately do its job, over a year ago. The current chair makes the same charge!

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eastlaker Jan. 31, 2013 @ 12:19 a.m.

Because Ed Brand and the majority board ARE HIDING SOMETHING--OR MANY THINGS! Why else would they keep information from the very people who are supposed to have complete access to the information.

Utterly beyond belief that any such group would feel they are so above rules, regulations and laws. I think we need to show them what is wrong with their actions.

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WTFEd Jan. 31, 2013 @ 6:02 a.m.

Oh my I wake up and check my email before I do District work today and find out that the vitrole continues against Ed Brand and his fine support team. Many would say this us and them my way or the highway attitude by the so called "activists" gets old and is symbolic of the problems with America today. We must find common ground and work together as a nation. Why don't we set an example ourselves in our little School District world. Duct tape and kazzos and disrespectful behavior by these self appointed experts on everything is just getting under my skin. If thise people are so good why don't THEY apply for District jobs and actually make a difference rather than sititng in the audience taking pot shots. Finally this Bond Oversight stuff has gotten out of hand. They are not elected officials and should act accordingly. I have been involved in this District for years and seen the marked improvement under the leadership of Ed Brand. Don't let the vocal minority drown out those in the know who respect Ed Brand. How many of those so called "concerned parents or citizens" have a PHD? Did they have the real brains to get to the top of the Education Mountain. I think they are jealous of somebody who is truly successful unlike themselves.

1

bbq Jan. 31, 2013 @ 6:44 a.m.

WTFEd - In response to your 6:02 comment, 1) There is no doubt that things are "Better" with the new superintendent, mostly because the "old" Superintendent was worse the "New" but who is telling the king he has no clothes on? 2) Calling out the "Activists" as being a problem with America is as fudimentally wrong, as Mr McCann calling out the disrespect for Veterans when people don't agree with him. 3) You say you have been with the district many years, I question if you are part of the problem or part of the solution, Until the status quo of Education starts looking outside the box for solutions we will continue to borrow from the future while not preparing our kids to be able to pay it back. 4) Respect does not come from fancy letters after your name, or your position in an organization, it comes from how you treat others, how you express yourself, and leading with a vision. Where is the Vision of the Trustees, The Superintendent, The Adminstration Staff, the Teachers and the Citizens? Rather than continue this self-distructive path, Let's work on whats broken or at least discuss what each of us thinks is broken and set a long term plan in motion. Respectfully submitted a Citizen, Taxpayer, Customer of the SUHSD

2

eastlaker Jan. 31, 2013 @ 9:55 a.m.

Wow, someone is delusional!

And defensive!

I haven't met one single individual who respects Ed Brand. I have never seen anyone in public make a statement to that regard...and I am not holding my breath until that happens.

You'd be very surprised how many of us here in the community have advanced degrees.

If Ed Brand is your definition of success, you are one truly sorry individual.

Finally, there is only one reason that anyone would want the Bond Oversight committee to stop asking for information (really to stop doing the job they are supposed to be doing), and that is if they are on the side of those WHO HAVE SOMETHING TO HIDE.

I don't think you will find any takers for whatever it is you are selling...because what you are selling is complete nonsense.

1

Greenville Feb. 1, 2013 @ 6:34 a.m.

You work for the district and use an on line name like W_? Hope you are not at a school site. And it's been my experience, directly, that this district hires administrators with enough cash to bribe board members, or who have the correct ethnic play card. I wish brains had something to do with it!

1

bbq Jan. 31, 2013 @ 6:08 a.m.

As I have tried to state in the comments I have posted the last few days, a long term outlook for the district needs to be started, I tried to get involved with assisting with STEM Programs, Lean Management Training, Budget Review Commitees, attending board meetings, District Outreach, with both the former and present superintendents. It is frustrating when there is NO follow-up and it feels like Lip-Service, I call it ask and ignor policy.
Do I believe there is a conspiricy within the district? No, Just a lack of good Oversight and Management. There is also a lack of trust and ethics concerning our Trustees. Remember if there is talk of conflict of interest or other impropriety, there is a conflict of interest, it is self-fulfilling. Again before you can grow a business, yes this is a business, you should have your core business under control, the foundation is what supports the new structure and the development, The district fundamental business model is broken and it does not appear to be being addressed. Chaos Management, Slight of Hand, always keep them guessing, are usually the tactics of weak managers and egotists.

4

eastlaker Jan. 31, 2013 @ 9:37 a.m.

There may well be a conspiracy. Sad to have to report that--but why else is there all this stone-walling of the Bond Oversight Committee?

Why else would Filner make his sickening display?

Why else would Quinones parade before National City students and parents just before the election? So she could have enough name recognition with those who don't follow the news--and she could get their votes. Because who outside of her circle of family and friends would vote for her?

Brand is working very hard to stay one step of the sheriff, but I wonder what the tax man has to say? And just what is in all those financials that Brand doesn't want to turn over to the Bond Oversight committee?

2

cvres Jan. 31, 2013 @ 7:16 a.m.

I have heard that it is legal for the district to borrow from their Mello-Roos funds. That does not make it right. The money is not collected from the residents to help the district make payroll.

2

anniej Jan. 31, 2013 @ 8:44 a.m.

Borrowing from Peter to pay Paul, and what do we do if Paul dies - not likely to happen, since the Mello funds are in the millions. But does that make it right as cvres asks?

Mandating Maria C contact counselors with the directive "you WILL provide 10 - 20 ( can't remember exact number on the memo sent out) students for Grand Canyon Univ.

Brand just hired a new CFO with a questionable past. Appears he came from a district that was embroiled in the same kinds of controversy, so he should feel right at home. He was let go after a vote of NO CONFIDENCE - SOUNDS LIKE A PERFECT FIT FOR BRAND. Allegedly he was also involved in an insurance fraud case, HOT DICKITY DOG, now I am really understanding the choice.

You know folks YOU MUST CAN'T MAKE THIS STUFF UP!!!!!

But let me ask you this, so what happens in about 2 yrs when Brand really retires? Who is going to be there to bail us out financially, when the coffers register ZERO!!!!!!

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eastlaker Jan. 31, 2013 @ 9:47 a.m.

Mello-Roos funds will start to dry up (if that process hasn't already begun) very soon. When I read the downloadable pamphlet from the state on the subject, the length of time a Mello-Roos 'collection' runs can vary, and can be up to 40 years, but should be set at the beginning. I believe that we in this district have 20 year Mello-Roos agreements. Eastlake I might be almost finished. Eastlake II will start phasing out in a couple of years.

Will there be enough new building to keep supporting what has been going on? Obviously we do not want to support Brand-like lunacy...but what about keeping the schools going they way they should be?

We really do need good, smart, honest leadership for the school district and the community. It might help if we could get some assistance but all the elected officials seem too afraid to speak out in support of honesty...neither republicans or democrats who have been elected have had a word to say...which makes me think that all of this does go pretty deep. That is really sickening.

2

Jmbrickley Jan. 31, 2013 @ 10:24 a.m.

My wife and I were one of the first families to move into Eastlake I, and we paid off our mello-roos a couple of years ago.

3

Jmbrickley Jan. 31, 2013 @ 11:20 a.m.

There are several very serious problems with the school district borrowing money from the Mello-Roos Funds.

  1. School over-crowding. These funds were intended to be spent on school infrastructure, capital construction, and certain types of ongoing maintenance. Because SUHSD has chosen these funds as a lending source, the incentive to build any new school in the Otay Ranch/Eastlake area is non-existant. At a parent meeting held at ELH several months ago, Rick Knott said the Mello-Roos Funds held approx. $160,000,000.00 (160 million). The cost of a sorely needed new high school would cost $125-$135 million, leaving an approximate balance of $25-35 million. $25-$35 million is just not enough to cover the costs of the day to day needs of SUHSD. The convenience of having a "borrowing pool" of money outweighs the needs of an overcrowed community.

  2. Rick Knott, at that same meeting said that the current Mello-Roos funds were currently being invested and earning approximately 0.5% interest. He also said when the district borrows money from the M-R Funds they pay interest on the money borrowed. The rate of interest is also in the 0.5 to 0.6% rate. However, any delays in construction on the sorely needed high school are raising the total costs of the construction at a % rate far in excess of the 0.5% this money is currently earning. The construction costs of this high school NOW will be significantly lower than any meager interest we would earn on the investment in a financial instution or loan to SUHSD. What this tells us it that there will be MORE money in the M-R Funds five years from now if we move forward on this construction sooner rather than later.

  3. The ready availability of the M-R funds are fueling a sense of monetary largess at SUHSD. Decisions that would have never been made had these funds not been available as a borrowing pool are continuing to be made at an alarming rate, with no thought to the consequences. Does anyone really think SUHSD would have bought all those iPads if M-R funds weren't there to be tapped? I use the iPads only as a single example, there are far too many others to list in my reply. The point is, these iPads were at the expense of not just the M-R monies, but also contributes to the overcrowding at all the schools in the east portion of the district.

4

eastlaker Jan. 31, 2013 @ 11:30 a.m.

Thank you for this wealth of information.

I have a small something to add. According to what I have read, Mello-Roos funds are NOT supposed to be held in interest-bearing accounts...that stipulation I believe is so that the funds will be used as they are supposed to be used.

Can anyone advise further?

1

FedupinCV Feb. 6, 2013 @ 10:03 a.m.

The overcrowding east of 805 is due in large part to Brand's decision to allow any student to go anywhere he or she wants, effectively abandoning the schools to the west of 805, which are experiencing serious declining enrollment and "brain drain". Scores will continue to fall there, as students who have any motivation or means of transportation flee to the east. Sorely needed high school??? Existing high schools west of 805 are running way below capacity and being sabotaged at every turn.

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Susan Luzzaro Jan. 31, 2013 @ 5:37 p.m.

Jmbrickley,

I hadn't thought about the district's expenditures from the angle that you raise. In a personal budget one tries to maintain some discretionary funds--are the Mello-Roos funds the discretionary part of Sweetwater's budget?

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Jmbrickley Feb. 1, 2013 @ 7:19 p.m.

Susan Luzzaro,

Discretionary funds are funds that that can be used at the discretion of whomever is in charge of those funds. Rainy day funds are for emergencies. Since the Mello-Roos Funds are being raided by Dr. Brand and the Board, I would think these would fall into the category of unsupervised loans. AKA "finders keepers, losers weepers."

2

Visduh Feb. 1, 2013 @ 9:16 a.m.

In looking at the photo of Brand at the top of this post, I wonder why the Reader used an unflattering shot of him that had been used before. Can't you find some other equally unflattering photo of him to use? (Oops, every photo of him is unflattering. That's just the way he looks.)

1

eastlaker Feb. 1, 2013 @ 9:30 a.m.

At least we know he hasn't used district funds for spa visits, elective surgeries and the like. At least we hope he hasn't. We don't really know, because he won't release the information to the Bond Oversight Committee!

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bvagency Feb. 4, 2013 @ 5:35 p.m.

If you have concerns call Ed Brand to advise:

Superintendent’s Hotline is Open When Tue, February 5, 2:30pm – 4:30pm Where (619) 691-5570 (map) Description Dr. Brand is accepting calls at the Superintendent’s Hotline. If you have a suggestion or concern, call 691-5570 between 2:30 and 4:30 p.m. to talk directly with the superintendent. The hotline is open the first Tuesday of every month. more details» copy to my calendar»

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FedupinCV Feb. 6, 2013 @ 10:49 a.m.

Be sure to check out Brand's latest decision -- this one without our accused criminal board's ok...though it's probably fine with them; he fits right in with that very unscrupulous crowd... http://www.sandiegoreader.com/news/20...

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