|A Proposal for a Fieldhouse was presented at Football Banquet|
I am also going to add a personal note here--I was a high school athlete that benefited from having very good facilities at my public high school, and I practiced for choir in what was then a state of the art choir room. So I naturally love capital expenditures for athletics and the arts. Also, for years I was the finance manager for a 501(c)(3) organization that received public funding. So I am totally on board with this method of funding capital expenditures.
Before I delve into the turf project, I want to make it clear that the field certainly looks beautiful. And, rather remarkably, it was finished in time to use for the 2015 football season. As far as I know, the financing and pledges are now in place to make the Foundation a viable organization, and it can continue to pursue public/private partnerships for the noble purpose of furthering its goal of providing needed funding for the athletes and artists at Houston High School. I laud the Foundation and its goals, but I want to highlight some missteps along the way that contributed to the lack of transparency in the process of funding and paying for the turf project. Avoiding these missteps could go a long way towards ameliorating some public skepticism about the Foundation. Recounting this brief history here may help GMSD and the Foundation avoid similar difficulties in the future.
The idea for the turf was first presented to the Board of Education at a work session in the fall of 2014. The advantages of artificial turf, including saving water and lower maintenance costs, were noted in the following Commercial Appeal article: Germantown to Consider Artificial Turf for Houston High
Germantown to Consider Artificial Turf for Houston High
I would like to note that without this article, we would have no record of this discussion. No minutes are taken at work sessions, and at that time there were no recordings of work sessions. JAM had not yet started its wonderful work of describing the meetings.
Although the article stated that hiring a consulting group would be voted on at the October 20, meeting, I did not see it in the minutes for that date, and, again, JAM had not yet begun.
But JAM in Germantown reported this from the May 6, 2015 work session:
The proposed athletic fields funding was now just one field, and it was to be funded by donations. The Board of Education subsequently voted to contract with Athletic Surfaces, Plus, for a consulting agreement. Approval for that came May 18, 2015. According to the minutes:
It was emphasized at this meeting that the turf would be completely funded with Foundation dollars (this was the first public mention of the "Foundation"). For transparency and convenience I put this portion of the meeting on YouTube.
The next step should be approval of the plans so that construction could take place. I could find no record of the Board voting to formally authorize the field. I am not sure how that authorization occurred. This was probably coordinated between Mr. Cherry, Mr. Manuel, and the Foundation. Also, although the Foundation was mentioned in this meeting, I never saw a vote giving the Foundation any kind of formal authorization to make changes to the field.
Notification to the public about this was a little less than would be desired. The public knew about the plans only if they happened to know about and read JAM in Germantown, but the only thing on the agenda for the May 18 meeting had been for a "consulting agreement."
In the summer of 2015, parents suddenly saw a turf field being constructed, and naturally they wondered what happened. Many parents were very supportive of the idea of artificial turf, due to the ongoing mud and drainage issues on the football field, but others had some questions.
Most of these questions centered around the priorities of the school district. Was a new football field more important than fixing the leaky roof at Dogwood School, for instance? But other parents questioned the safety of the field, and wondered whether the field could increase athletic injuries, and questioned if the ingredients of the field were environmentally safe. Some wondered if putting "arts" into the title of the Foundation was truly accurate, since the turf field was such a large project and had no "arts" element in it. Since it was to be paid for with outside funding, at least the priority concerns for public money were answered.
The turf project was discussed again by the Board of Education in July of 2015, after there was some drama concerning funding issues. By this time the bills had started rolling in, and the Foundation could not pay them due to cash flow problems. According to Autumn Enochs, the controller of GMSD at the time, one proposed solution was to have Houston HIgh School pay contractors, and then get reimbursed by the Foundation. She strenuously objected that this would be improper, and contacted Houston High School officials directly over the issue. According to Enochs, this was a major reason that she was terminated. She explained to the Commercial Appeal:
Autumn Enochs account given to Commercial Appeal
Per the article:
She also says that in July, Manuel and Cherry directed the school’s financial secretary to misappropriate funds by paying a $70,000 bill to a vendor on the Houston High turf project. The money was supposed to be paid by the Houston High Athletics and Arts Foundation, which had not yet received its 501(c)(3) status. Enochs, through her attorney, says the payment “would practically deplete the school’s bank account.”
Here is another Commercial Appeal story about the former controller, and her relationship to her employer, GMSD.
If this account is correct, then the Foundation had signed contracts and begun construction on the project before the IRS status had been officially granted. The pledges for the field had most likely been received, but that is not quite the same thing as having enough cash on hand to pay all the bills. Generally it is not an issue that the IRS determination letter is not yet received, because the 501(c)(3) designation is retroactive to the date the entity began. Perhaps some donors were hesitant to pay their pledges until the letter was in hand. The Foundation eventually financed the field, probably secured by future pledges, but the financing may not have been firmly in place before contracts were signed and construction begun.
What is murky is the exact timeline of the dates the contracts were signed, and payments due, the date of the IRS determination letter, the content of the loan document and the day it began, etc. From Ms. Enochs' reports, it seems that the Foundation had to scramble around to make payments on the construction contracts for the field.
Autumn Enochs was terminated, but GMSD apparently decided it was best to follow her advice, and Houston High School never had to pay any of the bills.
At the GMSD Work Session on July 15, 2015, Jason Manuel said that extra money had been allocated from the state and he suggested using $125,000 of it as a donation to the Foundation. JAM gives us this account:
Note, that Lisa Parker said that the City had donated. It had been placed in the City budget, but the specific provision was not brought before the BMA until the end of July.
At the July 27, 2015 BMA meeting, the specific grant to the Foundation was passed. At no point during that meeting was there a suggestion that the Board of Education donate to the Foundation. Here is the Memorandum of Understanding, which indicates that it is a $125,000 1:1 matching grant for pledge dollars received:
From the GMSD Board meeting of July 27, 2015, (note that this is the same night as the BMA meeting) Budget Amendment 9 was brought up, which called for a $125,000 to the Foundation. From JAM:
Particularly noteworthy is that Mr. Manuel admits the cash flow issue at the Foundation, and that the donation would ensure the solvency of the entity. A neutral observer could rightfully make the judgment that cash flow and solvency issues should have been contemplated before contracts were signed and construction begun on GMSD property. Had financing been made contingent on obtaining funds from the City and GMSD, thus signaling that the school district implicitly, if not explicitly, backed the debt? We do not know, as this is all hidden in the murkiness in the 501(c)(3) structure of the Foundation. We do know that the pledges received and debt are officially on the books of the Foundation, and not the GMSD. What we do not know is exactly what happens if the Foundation is somehow unable in the future to make payments on the debt.
Another thing to note is that a total of $250,000 of City and GMSD funds were allocated to a capital expenditure for the schools that was not on Mr. Manuel's top ten list of public expenditures.
Shining a Light is NOT making the argument that taxpayer funding should not have been made available for this project. Even though it was not on Mr. Manuel's Top 10 list of capital expenditures, it is possible that the leveraging of the taxpayer money with private donations made the GMSD and City funding worthwhile. However, these donations should have been known on the front end--the project should not have been sold as one that would not need any GMSD funding, only to have that suddenly change two months later.
There was further discussion about the $125,000 pledge by the GMSD to the foundation at a subsequent GMSD Board meeting on November 30, when the MOU of GMSD was discussed and passed in a 4-1 vote, with Mr. Hoover dissenting:
We do know that the Foundation felt it had sufficient funding in 2016 to install the Jumbotron before this school year began. I have somehow come to appreciate a public high school having a Jumbotron, although I confess I have not seen it in action. The addition of the Jumbotron to the field was not specifically approved in a formal Board action.
In Part 2, the Houston High Athletics and Arts Foundation, I will examine the leadership of the Foundation and its close ties to the GMSD administration, and a bit more will be revealed about the donors to the turf field and finances of the Foundation. In the meantime, for the accounting geeks out there, here is the first Federal Form 990 (IRS filing for non-profits) for the Foundation, which will be discussed in Part 2.
Foundation's 2015 Federal Form 990
This form used the "cash" method of accounting rather than the accrual method, so the net worth is certainly much greater than the figures indicate (pledges receivable are not included as income in the "cash" method.)