‘Reality Check’ has interviewed Joe Campbell and others at the Academy and has come up with the following explanation relating to the bond default and refinancing of the bond debt and the assertions in the article below entitled “Is the Academy’s Windfall Income Going to be a Taxpayers’ Expense Annually” (see comments 47 and 51).
This article asserts that $1,110,000 (principle & interest 2003-04) minus $318,000 (P & I 2006-07) = $792,000, an amount referred to as “windfall income” for the Academy.
But along with the principle and interest of $1,119,023 paid (RC’s number) for the 2003-04 year, $688,831 in bond income (revenue) was received from the bond. In 2006-07, since the bond was erased, there was no bond income. So if one subtracts bond income of $688,831 from $1,119,023 (the total cost of the bond in 2003-04) one ends up with $430,192, the actual net cost of the bond in 2003-04. In the absence of that bond the refinanced loan cost $318,000 in 2006-07 with presumably no income. So the net difference is only $112,192, far less than $792,000 (claimed as “windfall income”).
Is this basically correct?
….But where did the funding come from that resulted an $854,000 increase in teachers salaries between the 2004-05 year and the 2006-07 year? Teachers’ salaries went from $3,680,000 in 2004-05 to $4,534,000 in 2006-07 during the time before and after bond default and refinancing. If teachers were hired, there was also the increase in fringe benefit costs associated with new employees which usually runs at about 20-25% of the salary, or about $170,000 to >$200,000.
….Also, the $688,831 in bond income in 2003-04 was presumably not used to payoff the bond debt. Wasn’t the original purpose of the bond funding for construction and other things needed to make the Academy solvent? Presumably the bond income was used for its purpose and the taxpayers paid the $1,110,000 premium in 2003-04. And then in 2006-07 the taxpayers paid the $318,000 reduced premium in 2006-07. But with all this, the tuition was not reduced by the $792,000 realized.
Is this incorrect? Read the rest of this entry »