Bennet On Denver Public Schools
Denver Public Schools “Needed To Plug A $400 Million Hole In Its Pension Fund.” “In the spring of 2008, the Denver public school system needed to plug a $400 million hole in its pension fund.” (Gretchen Morgenson, “Exotic Deals Put Denver Schools Deeper In Debt, The New York Times, 8/5/10)
“After An Aborted Attempt To Borrow Against The Pension Plan’s Assets, Bennet And Boasberg Decided On A More Traditional Financing Plan: DPS Would Put Up Some Of Its School Buildings As Collateral And Issue $750 Million In Pension Certificates Of Participation, Or PCOPs.” (David Milstead, “Analysis: Both Sides Right In DPS Pension Debate,” Education News Colorado, 4/12/10)
Bankers At JPMorgan Chase Said DPS Could Raise $750 Million In An “Exotic Transaction That Would Eliminate The Pension Gap And Save Tens Of Millions Of Dollars Annually In Debt Costs.” “Bankers at JPMorgan Chase offered what seemed to be a perfect solution. The bankers said that the school system could raise $750 million in an exotic transaction that would eliminate the pension gap and save tens of millions of dollars annually in debt costs — money that could be plowed back into Denver’s classrooms, starved in recent years for funds.” (Gretchen Morgenson, “Exotic Deals Put Denver Schools Deeper In Debt, The New York Times, 8/5/10)
The Deal Was “Complex” But “According To Interviews With Members” Of The DPS School Board, Bennet And Then-System’s Chief Operating Officer Thomas Boasberg, “Persuaded” The Board Of The “Deal’s Advantages.” “To members of the Denver Board of Education, it sounded ideal. It was complex, involving several different financial institutions and transactions. But Michael F. Bennet, now a United States senator from Colorado who was superintendent of the school system at the time, and Thomas Boasberg, then the system’s chief operating officer, persuaded the seven-person board of the deal’s advantages, according to interviews with its members.” (Gretchen Morgenson, “Exotic Deals Put Denver Schools Deeper In Debt, The New York Times, 8/5/10)
“Rather Than Issue A Plain-Vanilla Bond With A Fixed Interest Rate, Denver Followed Its Bankers’ Suggestions And Issued So-Called Pension Certificates With A Derivative Attached; The Debt Carried A Lower Rate But It Could Also Fluctuate If Economic Conditions Changed.” (Gretchen Morgenson, “Exotic Deals Put Denver Schools Deeper In Debt, The New York Times, 8/5/10)
- “The Denver Schools Essentially Made The Same Choice Some Homeowners Make: Opting For A Variable-Rate Mortgage That Offered Lower Monthly Payments, With The Risk That They Could Rise, Instead Of A Conventional, Fixed-Rate Mortgage That Offered Larger, But Unchanging, Monthly Payments.” (Gretchen Morgenson, “Exotic Deals Put Denver Schools Deeper In Debt, The New York Times, 8/5/10)
“In Short Order, The Transaction Went Awry Because Of Stress In The Credit Markets, Problems With The Bond Insurer And Plummeting Interest Rates.” (Gretchen Morgenson, “Exotic Deals Put Denver Schools Deeper In Debt,The New York Times, 8/5/10)
So Far, DPS Has Paid $25 Million More Than It Originally Anticipated.“Since it struck the deal, the school system has paid $115 million in interest and other fees, at least $25 million more than it originally anticipated.” (Gretchen Morgenson, “Exotic Deals Put Denver Schools Deeper In Debt, The New York Times, 8/5/10)
“In The End, A Deal That JPMorgan Said Would Have An Interest Rate Of Around 5 Percent Spiked To 8.59 Percent During Its First Fiscal Year, And Has Since Settled Down To An Average Rate Of 7.12 Percent Today.” (Gretchen Morgenson, “Exotic Deals Put Denver Schools Deeper In Debt, The New York Times, 8/5/10)
“Had Denver Issued A Standard, Fixed-Rate Bond In 2008, It Would Not Be Facing Termination Fees Now. While it is possible that the annual costs of the Denver deal will come down in the future, they are now roughly in line with what the school system would have paid in a fixed-rate transaction.” (Gretchen Morgenson, “Exotic Deals Put Denver Schools Deeper In Debt, The New York Times, 8/5/10)
A Former Interim Executive Director Of DPS Said “There Is No Happy Ending” To The Deal, And Added “The Pension Certificates Issuance is Something That Something That Should Never Have Happened.” “John MacPherson, a former interim executive director of the Denver Public Schools Retirement System, predicts that the 2008 deal will generate big costs to the school system down the road. ‘There is no happy ending to this,’ Mr. MacPherson said. ‘Hindsight being 20-20, the pension certificates issuance is something that should never have happened.’” (Gretchen Morgenson, “Exotic Deals Put Denver Schools Deeper In Debt, The New York Times, 8/5/10)