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Pension refinance spat roils DPS

On March 8, after the appearance of yet another national story describing municipalities done in by complicated financial transactions, Denver school board vice president Arturo Jimenez sent an email asking for more information.

Jimenez, who took the unusual step of copying two reporters on the request, was among the board members voting 7-0 to approve a complex $750 million deal for Denver Public Schools in April 2008.

“I apologize if you have already given us this information but I do not remember receiving it,” he wrote to DPS Superintendent Tom Boasberg. “Is it possible that we will experience some of the consequences as other public entities described in the article?”

Six weeks later, the question of whether DPS is suffering adverse effects from its pension refinancing has evolved into an ugly fight between factions on the board deeply divided over the best way to reform the city’s schools and, increasingly, in their support for Boasberg.

“I’m very skeptical of the information that comes out of his mouth at this point,” said Andrea Merida, one of three board members – along with Jimenez and Jeannie Kaplan – who are publicly questioning the transaction. “He’s not showing to me personally a track record of being open.”

In public meetings and on various blogs, they have asserted DPS may be losing up to $100 million a year as a result of the transaction. Boasberg has countered by declaring the deal a success, crediting it with allowing DPS to raise teacher pay even as other districts cut staff and impose furloughs.

It’s far less polite one step removed. Former DPS board candidate Christopher Scott, described by Merida as “the heart of the team” assisting the three in their investigation of the transaction, blogged on The Huffington Post that Boasberg and his predecessor, Michael Bennet, “perpetrated one of the greatest tax payer scams in Colorado history.”

Tonight, at Kaplan’s request, DPS board members are scheduled to talk about the pension refinancing for half an hour. Kaplan said Thursday that members of a working group assisting the three will attend. The group includes Scott and John MacPherson, former interim executive director of the Denver Public Schools Retirement System.

“I don’t think we have clearance to actually say who they are but they’re people who are very well-placed and very well-experienced in government finance and municipal finance,” Merida said of the working group in a recent interview. “The notion that it’s just a bunch of individual citizens doing this is partly true but it’s also people who know what they’re talking about.”

How does a polite email evolve into a public tug-of-war over who’s telling the truth about millions of dollars?

Education News Colorado filed a public records request seeking emails exchanged between board members and DPS administrators to find that out.

Less than 48 hours after Jimenez’ email was sent to Boasberg, Merida followed up with her own email asking about the status of the request. Her email also was copied to two reporters.

“The article seems to suggest that we could be in an extremely precarious situation,” she wrote on March 10, referring to the New York Times story that sparked Jimenez’ request. “Who authorized this?”

Boasberg did not respond to either email because the press was copied. His chief operating officer, David Suppes, met with Jimenez later that day and Boasberg was scheduled to have his monthly meeting with Merida two days later, on March 12.

But on March 11, Jimenez, Kaplan and Merida issued a press release calling for transparency in the pension transaction.

“Based on our preliminary research, we believe Denver Public Schools is being adversely affected by this kind of deal,” they wrote. “Because of our fiduciary responsibilities, we ask for a public accounting of these matters.”

Jimenez said his meeting with Suppes dealt largely with other matters and “we just kind of touched base” on the pension issue.

“But afterwards I followed up in discussions with my colleague, Jeannie Kaplan, and she reminded me of the many times she had asked the same questions … and the lack of information that had come back to us in any written form,” he said.

“All I was given was generally, we probably made some money the first year but we didn’t make the $20 million we expected and this year, hopefully, it would be more.”

Kaplan did not request information that week until Friday, the day after the press release, when she asked for a monthly breakdown of costs associated with the pension transaction.

But she produced copies of emails showing she asked Boasberg for general financial updates periodically in 2008 and 2009.

“Tom, can we have a quick update on district finances after or before tomorrow’s meeting, including estimated costs to date of what has been happening?” reads one email sent Nov. 19, 2008.

“I wasn’t like pounding” the table demanding answers, Kaplan said. “I asked for information and I didn’t get what I thought I needed.”

She said she was first approached last year by community members concerned about the pension transaction. Because she wasn’t getting answers, she said she asked Scott, whom she had supported during his school board campaign, for help in January.

Other board members do not recall Kaplan repeatedly asking questions about the pension refinancing.

“I have never heard Jeanne ask for more information on this transaction until recently, after issuing a press release,” said Bruce Hoyt, who was board treasurer until Nov. 30 and who is still a member of the board’s finance and audit committee.

“Whenever I have asked for information on this, I have been granted immediate information, all I wanted,” he said. “So I have a hard time believing that’s true.”

Hoyt, an investment banker who others agree most closely questioned the transaction before its approval, said he continues to believe the board made the right decision. So does Theresa Peña, who was board president at the time.

Of the seven current board members, four – Hoyt, Peña, Jimenez and Kaplan – were among those unanimously voting yes on the transaction.

Of the three new board members who joined in November, Merida is the only one complaining about a lack of information.

“Tom Boasberg addressed the pension issue twice in March, at the work session and at the board meeting. He shared a detailed spreadsheet that had information about the transaction and asked if there were any questions … there were no questions,” said board President Nate Easley.

"To improve our schools, the most important thing we can do is reach out to parents," said Denver School Board President Nate Easley.
DPS school board president Nate Easley

“And so I think the superintendent has been very transparent about the transaction.”

Mary Seawell, now the board’s treasurer and a member of the finance and audit committee, said she initiated conversations with Boasberg, Suppes and the district’s chief finance officer about the pension transaction in the days before and after the press release came out.

“Based on everything I looked at, I don’t believe we need to be making a change,” she said.

But Seawell said she also has reached out to Scott, her former opponent, and wants to hear what he has to say “to make sure there’s not something I’m missing.”

She doesn’t fault the three board members for taking their concerns public and not telling the others first.

“I wouldn’t have done it that way,” Seawell said, “but … sometimes you’ve got to make a stink to get people to pay attention to an issue that’s important.”

Others are questioning the sincerity of the interest in a two-year-old deal.

“I get a sense that there’s a hidden agenda,” said Easley, the board president, “that this has to do with not just the school district, it also has to do with the Senate race because Michael Bennet was the superintendent at the time this transaction happened.”

Kaplan, Jimenez and Merida issued their press release a few days before the Democratic caucuses in which Bennet, now a U.S. senator, faced challenger Andrew Romanoff.

All three have expressed varying degrees of support for Romanoff – Kaplan has donated the maximum allowable to his campaign; Merida, active in local Democratic politics, was on stage with him at the recent Denver Democratic assembly; and Jimenez has signed on as a Latino “unidos con Romanoff” on the candidate’s website.

The other four current board members are all Bennet supporters – Pena serves as his campaign committee treasurer; Hoyt has donated money; Easley and Seawell co-hosted a fund-raiser.

“What I find completely dumbfounding is that there are people on the board now who are raising these questions who were on the board when it was approved,” Easley said. “It’s almost like saying you didn’t scrutinize it, you weren’t assertive, you weren’t aggressive or you voted on something you didn’t understand … so to bring it up again, at this time? To me, the timing is questionable at best.”

The press release didn’t mention Bennet though Scott’s blog postings, which Merida links to from her Facebook and Twitter pages, clearly aim at the former superintendent. Kaplan denies any political motivation.

Jimenez said he believes concerns that Bennet might somehow look bad are what has prevented more information from being released.

“What really bothered me was everyone’s reluctance to talk about it and always the issue of – this could really hurt some people in the political arena,” he said. “I don’t think there are necessarily people doing things wrong in the district but it’s our job as elected officials to really bring transparency to this, whether or not it affects the political environment.”

For Boasberg, who was brought into DPS by Bennet, a childhood friend, and who was his chief operating officer during the transaction, the motives for bringing up the pension transaction are clearly political.

“I expect the mudslinging to continue throughout the primary and I expect the mudslinging will continue throughout the general election,” he said. “I think it’s very, very unfortunate to issue outright false and misleading statements about the Denver Public Schools for purposes of those election campaigns.”

Whether tonight’s meeting will resolve any concerns is uncertain.

On March 15, during the first public discussion of the issue, Boasberg responded to Kaplan’s request for monthly costs with a spreadsheet passed out to all board members.

“Our numbers don’t jibe with that so we’re going to have to compare notes,” Merida said, looking over the data. “It’s not just Jeannie and Arturo and I that are looking at these numbers. Smarter heads than ours are looking at this with us and that’s not what we see.”

A few nights later, Boasberg talked with Kaplan and Merida after the public board meeting.

“I went over the numbers again with them,” he said. “I thought they understood the numbers then.”

But two weeks ago, Kaplan sent Boasberg a spreadsheet and asked it be filled in by Friday. It wasn’t and Merida noted it on her Facebook page, writing “I find this alarming.” Kaplan said they received them Wednesday evening.

She declined to say what action she will request at tonight’s meeting but both Merida and Jimenez have said they want an outside audit of the transaction to ensure a true picture of its consequences.

“I want somebody outside of DPS to audit this thing – whether that be the state or whether that be some other entity, that would be fine,” Merida said. “And so once we actually know what the damage is, at that point the board will be more informed to make a decision.”

Her fear? “Somebody made a mistake,” she said. “It was an honest mistake but somebody made a mistake and we’re losing money hand over fist.”

Other board members said DPS already has an independent auditor as required by state law.

“We don’t need to spend more resources, take resources away from the classroom, to do a triple, quadruple check on information that is already readily accessible,” Hoyt said.

Jimenez said the three board members are simply trying to be responsive to their communities by calling for a transparent airing of the kind of deal that has, in other areas, gone sour.

“The fact that we voted for it doesn’t diminish our responsibility to find out the extent of what happened with our financials,” he said. “We answer to the voters, we answer to the parents and we answer to the community. If we don’t have the information that we need, we’re not doing our job. So I just want to be able to do my job.”

Easley agreed that “one of the most important things we do as a board is to scrutinize the finances of the district.”

“That scrutiny should be aggressive, it should be detailed and we should get answers. And I feel like that’s been done in this issue,” he said. “How much time do we have that we can dedicate to this?”

EdNews asked an experienced financial journalist to look at the pension transaction. Read his analysis here.

Nancy Mitchell can be reached at nmitchell@ednewscolorado.org.

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