DETROIT PUBLIC SCHOOLS 525 West Ottawa Street (EMPROP-01 THRU 61) Lansing, MI 48909 PROPOSAL from GOVERNING BODY of DETROIT PUBLIC SCHOOLS (GBPROP-01 THRU 21)
Total Page:16
File Type:pdf, Size:1020Kb
LOCAL EMERGENCY AGENDA FINANCIAL ASSISTANCE (AGENDA-01) LOAN BOARD MEETING ALTERNATE DESIGNATIONS (AD-01 THRU 02) May 5, 2015 10:30 AM MINUTES-PRIOR MEETING (MIN-01 THRU 02) G. Mennen Williams SUMMARY MEMO FOR RESTRUCTURING OF Building 2014 STATE AID NOTES AND 2012 OBLIGATION (SUM-01 THRU 02) Williams Auditorium, st 1 Floor PROPOSAL FROM EM OF DETROIT PUBLIC SCHOOLS 525 West Ottawa Street (EMPROP-01 THRU 61) Lansing, MI 48909 PROPOSAL FROM GOVERNING BODY OF DETROIT PUBLIC SCHOOLS (GBPROP-01 THRU 21) DETROIT PUBLIC SCHOOLS EMERGENCY MANAGER PROPOSAL ORDER 2015-3 (2015-3_EMORDER-01 THRU 05) DETROIT PUBLIC SCHOOLS GOVERNING BODY PROPOSAL ORDER 2015-3 (2015-3_GBORDER-01 THRU 05) Local Emergency Financial Assistance Loan Board Tuesday, May 5, 2015 10:30 AM G. Mennen Williams Building Williams Auditorium, 1st Floor 525 West Ottawa Street Lansing, MI 48909 I. CALL TO ORDER II. APPROVAL OF MINUTES A. Approval of Local Emergency Financial Assistance Loan Board (ELB) Minutes 1. April 29, 2015 Special Meeting Minutes III. PUBLIC COMMENT IV. NEW BUSINESS A. Restatement of 2014 State Aid Notes and 2012 Multi-Year Repayment Obligation 1. Summary – Consideration of two proposals related to the Restatement of 2014 State Aid Notes and 2012 Multi-Year Repayment Obligation 2. Emergency Manager’s Proposal to the Detroit Public School Board 3. Detroit Public School Board Alternate Proposal 4. ELB Order 2015-3 a) Detroit Public Schools Emergency Manager Proposal b) Detroit Public School Board Alternate Proposal V. ADJOURNMENT AGENDA-01 89 (Rev. 04-15) STATE OF MICHIGAN RICK SNYDER DEPARTMENT OF TREASURY NICK A. KHOURI GOVERNOR LANSING STATE TREASURER ALTERNATE DESIGNATION FOR MEETINGS OF THE LOCAL EMERGENCY FINANCIAL ASSISTANCE LOAN BOARD Members of the Board: I am hereby designating the person named below as my representative at any meeting of the Local Emergency Financial Assistance Loan Board, and to sign on my behalf any Order of this Board. Name: Thomas F. Saxton Title: Chief Deputy State Treasurer Office Name: Department of Treasury Executive Office 1l-.2~-1s Date N. 430 WEST ALLEGAN STREET• LANSING. MICHIGAN 48922 www.mlchlgan.gov/treasury • (517) 373-3200 AD-01 STATE OF MICHIGAN RICK SNYDER DEPARTMENT OF TECHNOLOGY, MANAGEMENT & BUDGET DAVID B. BEHEN GOVERNOR LANSING DIRECTOR ALTERNATE DESIGNATION FOR MEETINGS OF THE LOCAL EMERGENCY FINANCIAL ASSISTANCE LOAN BOARD Members of the Board: I am hereby designating the person named below as my representative at any meeting of the Local Emergency Financial Assistance Loan Board, and to sign on my behalf any Order of this Board. Name: John Roberts Title: State Budget Director Office Name: State Budget Office David B. Behen ·,; . I. ii.{ Date LEWIS CASS BUILDING, 2ND FLOOR • 302 $. WALNUT STREET • P.O. BOX 30026 • LANSING, Ml 48909 www.michigan.gov/dlmb • (517) 373-1004 AD-01AD-02 4425 (Rev.11-13) STATE OF MICHIGAN RICK SNYDER DEPARTMENT OF TREASURY NICK A KHOURI GOVERNOR LANSING STATE TREASURER LOCAL EMERGENCY FINANCIAL ASSISTANCE LOAN BOARD MINUTES April 29, 2015 - 8:30 A.M. Richard H. Austin Building, 1st Floor 430 W. Allegan Street, Lansing, Michigan 48922 Members Present: Thomas F. Saxton, Chief Deputy Treasurer John Roberts, State Budget Director M Dept. of Technology, Management, and Budget Mike Zimmer, Director M Dept. of Licensing and Regulatory Affairs Others Present: Randall Byrne, Department ofTreasmy John Barton, Depm1ment of Treasury Eric Cline, Department of Treasury Shelbi Frayer, Depa11ment of Treasury Harlan Goodrich, Department of Treasmy Ed Koryzno, Department of Treasury Mike Krouse, Department of Treasury Shenique Moss, Office of the Attorney General Bill Sanders, Depm1ment of Treasury Suzanne Schafer, Department of Treasury Jeff Schwartz, Department of Treasury Terry Stanton, Depat1ment of Treasury Ann Storberg, Department of Treasury Drew Van de Grift, Department of Treasury Wayne Workman, Depm1ment of Treasury I. Call to Order Tom Saxton called the meeting to order at 8:30 a.m. II. Approval of Minutes A motion was made by John Robe11s to approve the minutes from the meeting of January 9, 2015 as presented. The motion was supported by Mike Zimmer. The minutes were unanimously approved as presented. M/S/P P.O. BOX 30728 • LANSING, MICHIGAN 48909-8228 www.michigan.gov/lreasury • (517) 373-3227 MIN-01 Page 2 III. Public Comment None. IV. Order 2015-2 City of Flint Order of Approval of Emergency Loan Wayne Workman gave a summary of the financial situation in the City of Flint. This $7,000,000 emergency loan eliminates the accumulated deficit, and is the final piece before the Emergency Manager is able to exit. Flint has had Emergency Managers since 2011. During this time, employee compensation has decreased 20%, retiree healthcare has been restructured, district courts and 911 have each been consolidated, and a new city administrator has been hired. However, challenges still remain. The City is currently involved with federal litigation regarding its retiree healthcare cuts and there -have been significant staffing cuts to both police and fire. In addition, its water system is transitioning from Detroit to the Karegnondi Water Authority while using the Flint River as an interim water source. Emergency Manager Je1Ty Ambrose spoke briefly, indicating that he is satisfied with the infrastructure that now exists within the City. Tom Saxton asked Shenique Moss, from the Office of the Attorney General, if her office had any comments. She stated that it was a standard emergency loan, with terms of 15 years at 2.09% interest. Board discussion ensued. Tom Saxton called for a motion regarding the proposal. A motion was made by Mike Zimmer to approve the Order of Approval as presented. The motion was suppo11ed by John Robe11s. The motion was unanimously approved by the Board. M/S/P The meeting was adjourned by Tom Saxton at 8:42 a.m. ~ l:J. oJ~~J2. Harlan Goodrich, Secretary -. Local Emergency Financial Assistance Loan Board Thomas F. Saxton, Chief Deputy Treasurer As Designee for Nick A. Khouri, State Treasurer Local Emergency Financial Assistance Loan Board Date Approved: _S_-_S_--_/ :!;_ ___ _ ___ MIN•02 1443 (Rev. 04-15) STATE OF MICHIGAN RICK SNYDER DEPARTMENT OF TREASURY NICK A. KHOURI GOVERNOR LANSING STATE TREASURER DATE: May 1, 2015 TO: Local Emergency Financial Assistance Loan Board (ELB) FROM: Jeanet Kulcsar, Michigan Department of Treasury SUBJECT: Restructure of 2014 State Aid Notes and 2012 Obligation of Detroit Public Schools Background Detroit Public Schools (DPS) Emergency Manager (EM) Darnell Earley has proposed a restructure and restatement of the State Aid Notes issued in August 2014 (2014 SAN) and is also proposing to restructure and restate its long-term 2012 multi-year repayment obligation (2012 Obligation). In observance of Section 12(1)(u) and Section 19 of P.A. 436 of 2012, this proposal was submitted to the School Board. The School Board then disapproved the proposal and submitted an alternative plan. The ELB now has before it the original EM proposal as well as the School Board’s alternative. Emergency Manager Earley’s Proposal On April 8, 2015, EM Earley proposed two transactions to the School Board to allow the District to implement financial, operational and academic improvements and to generate cash flow relief through August 2015: 1) Restructure the District’s obligations under the 2014 SAN, by amending and restating the 2014 SAN and enter into a multi-year agreement for its repayment. The District anticipates approximately $82 million in near-term cash savings if the financing is completed by May 19, 2015 or approximately $66 million in savings if the financing is completed by June 19, 2015. 2) If market conditions allow, restructure the District’s long-term obligations under the 2012 Obligation, by amending and restating the 2012 Obligation and enter into a multi-year agreement for its repayment. The near-term cash savings assumed total approximately $3 million. DPS Board’s Alternate Proposal The Board has proposed that the 2014 Note, the 2012 Obligations and any obligation that was incurred at any time while the Board did not have its full authority, be transferred and assumed by the State of Michigan. 430 W. ALLEGAN STREET • LANSING, MICHIGAN 48922 www.michigan.gov/treasury • 517-335-0994 SUM-01 Page 2 Analysis of Proposals Section 19 of P.A. 436 of 2012 requires, among other things, that any alternative must “yield substantially the same financial result as the action proposed by the emergency manager.” EM Earley’s proposal would result in very near-term cash savings to the District. The amount of near-term cash savings will be determined primarily by when the transaction is closed and funded. The remaining debt service payments under the 2014 Note total approximately $82 million, to be paid in full by August 2015. The proposed transaction would restructure the current obligation ($82 million as of May 19, and approximately $66 million as of June 19) so the first debt service payment on the restructured 2014 Note would occur in December 2015. This results in a decrease in debt service disbursements equal to the $82 million between May 20, 2015 and August 20, 2015 (and $66 million if the proposed transaction closes by June 19). Similarly, the restructure of the 2012 Obligation would achieve near-term cash savings of approximately $3 million, equal to the debt service payment due in November 2015. Assuming closing and funding occurs prior to November 2015, the proposed transaction is structured so the first debt service payment on the restructured 2012 Obligation would occur in December 2016. The School Board’s alternative proposal requests the State of Michigan to assume all debt incurred by the District at any time the Board did not have its full authority. Any savings would be driven by the timing the debt is assumed by the State, if any debt is assumed at all.