DUSD Board To Consider New Superintendent, Millions More In Debt

DUBLIN, CA — Besides the expected approval of newly appointed Superintendent Chis Funk’s employment contract, money will be foremost on the minds of Dublin school board members Tuesday as they consider borrowing millions more and selecting a forensic auditor to account for money already spent.

Anticipating formal approval of a debt waiver by the state Board of Education at its meeting in Sacramento Wednesday morning, Dublin board members will consider a resolution authorizing the immediate sale of $116 million in general obligation bonds authorized when voters approved the $290 million Measure J bond issue last year. None of the bonds could be sold without permission to exceed the district’s legal limit on the amount of bond debt it can legally incur.

The board also will consider approval of a $130,000 contract with Eide Bailly LLP, a North Dakota-based international accounting firm with offices in 14 states and Mumbai, including an office in San Ramon.

The school board approved a forensic audit at the urging of board Vice President Megan Rouse, a certified financial planner, after interim Superintendent Daniel Moirao revealed in a Jan. 20 Community Update that the district had a $184 million shortfall in funds needed to complete seven of its highest-priority school construction projects. The $800 million capital improvement program seeks to expand and modernize existing buildings and build a new high school, Emerald High School. Moirao attributed the deficit to several factors, including cost escalations and “human error.”

Read more: DUSD Reports At Least $184M Shortfall On School Facility Projects

Debt Waiver Crucial

The expected approval of a debt limit waiver comes at a critical time for the district, which has several projects underway — including the construction of Emerald High School in east Dublin — but not enough money to pay for all its expansion and modernization plans.

State law prohibits districts of Dublin’s size from selling bonds with an aggregate outstanding principal balance greater than 2.5 percent of the assessed taxable value of property within its boundaries. This restriction prohibited the sale of any Measure J bonds without a state waiver. The district applied for a waiver last year following the required public hearing last September.

This will be the second waiver requested by the district in the past four years. The district obtained a six-year waiver in 2017 that raised its debt limit to 3.1 percent of its then $14.8 billion assessed valuation. That permitted the sale of all $283 million in Measure H bonds approved by voters in 2016. Currently the district has approximately $524.1 million in outstanding bonds.

The district’s pending request seeks a seven-year, 3.39 percent waiver of its current $19.25 billion assessed valuation — raising its debt limit to $652.6 million. With the increased limit and annual bond debt service payments during that period, the district will be able to sell all Measure J bonds. With additional state funding, the district expects to fund its entire program, although its facilities planning is presently under review.

Chris Hobbs, interim assistant superintendent of business services, told Patch last month the initial sale of $116 million in bonds will be followed by two other planned sales: $87 million in 2023 and $87 million in 2026. Hobbs said the district has several other applications totaling $18.9 million pending for state matching funds.

The district’s school facilities fund account, maintained by the Alameda County treasurer, had a balance of $218.8 million as of March 1. Proceeds from new bond sales will augment that account until bills are submitted for payment.

If approved, the $116 million sale of Measure J bonds will earmark $3 million for technology projects, with the remaining $112.7 million for construction costs.

Following The Money

The Eide Bailly contract calls for a comprehensive and wide-ranging forensic audit focused on what district officials knew about the $184 million deficit, when they knew it, and who was responsible. Auditors will closely examine at least 12 specific areas, including when the shortfall was first discovered and by whom and how information was reported to the school board.

Read more: Why DUSD Is Struggling To Pay For School Projects

The audit also will include detailed interviews with current and former board members, district staff and consultants, as well as a detailed examination of documents and other financial records, to determine if there were any breakdowns in the district’s internal financial controls and cost estimating procedures. It will recommend improvements in district financial and capital projects management.

A final report is tentatively scheduled to be completed by Sept. 30 and will be publicly released.

The virtual board meeting will begin at 6 p.m. and be livestreamed here.

See also: Dublin Taps New Schools Chief From South Bay

— Patch Special Correspondent Bob Porterfield contributed to this report