Debt, taxes come with new high school
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Moon Area School District carried a debt of $13 million in 2004, before the start of an as-yet-incomplete building drive that was shepherded by firms tied to an informal network of professionals that specialize in serving government.
After a fitful six-year process, a new high school is set to open in January. It comes at a cost. The district's debt is 10 times its 2004 level, and its property taxes now are more than one-third higher than they were then.
The district began exploring its building needs almost a decade ago, and by 2004 the preferred plan involved building a new high school, converting the old high school into a middle school, and demolishing the old middle school. All the district needed was money.
J.P. Morgan Securities Inc., led locally at the time by Gregory R. Zappala, emerged from among three firms interviewed as the chosen underwriter, charged with selling the bonds to investors at the lowest interest rate it could get. Mr. Zappala is the son of former state Supreme Court Justice Stephen A. Zappala Sr. The former justice's former law partner, John F. Cambest, was and is the solicitor for Moon Area schools.
To finance the school project, the district issued bonds totaling $71.6 million, a transaction that brought J.P. Morgan a $429,360 payment, according to records obtained through a request under the state right-to-know act. Mr. Cambest's firm, then called Dodaro Cambest & Associates, was paid $15,000, according to bond documents provided by the district, to protect the district's interests and write a three-page letter saying that there was no legal barrier to the borrowing. Two other law firms were paid a total of $34,786 to represent the district and the underwriter, respectively.
A third network-related firm, MDL Capital Management, got the job of investing unspent proceeds, for a fee of 0.75 percent of the assets entrusted to it. One of the minority shareholders in MDL was a business controlled by Charles R. Zappala, Gregory Zappala's uncle.
The following year, MDL's collapse began with civil and criminal accusations that it lost hundreds of millions of Ohio tax dollars while ignoring investment guidelines. The firm's primary owner, Mark D. Lay, was found guilty of fraud in connection with his Ohio accounts in 2007 and sentenced to 12 years in federal prison. Charles Zappala was in no way implicated. Moon officials said the district did not suffer losses related to MDL's demise.
In 2005, Moon Area pursued a $76 million refinance of the debt it issued the year before. By that time, financier Joseph Muscatello had jumped from J.P. Morgan to finance firm Arthurs Lestrange & Co. The Moon Area board opted not to invite fresh proposals from competing firms, and Mr. Muscatello's new firm earned a $417,807 fee on the borrowing. Mr. Cambest's firm earned $13,500 to represent the district in the bond deal. His representation included writing another, substantially similar three-page letter.
Control of the school board switched from Democrats to Republicans in the 2005 election, and the new majority halted the building project. But facing higher debt payments, it raised millage to cover the borrowing costs, enacting the first of a string of tax hikes. Democrats recaptured the board majority in 2007, and tax hikes have continued. In six years, Moon Area property tax rates have risen from 15.72 mills to 21.3 mills -- a 35.5 percent climb.
Board President Mark Scappe said that not just debt, but also personnel costs forced the tax increases. District financial disclosures show that nearly two-thirds of the new revenue is going to pay off the debt. Property tax collections are up $7.7 million a year, and annual debt service payments are $5 million higher than they were before the 2004 borrowing.
Democrats restarted the construction push, blaming the Republicans for causing delays that pushed up costs. Republicans continued to oppose aspects of the building plan, which became a perennial election issue.
Last year, an attorney who works for Mr. Cambest's firm filed a petition on behalf of unnamed candidates for Moon Area school board to knock one of the remaining GOP board members, Jeffrey Bussard, off the ballot based on a missed deadline to file disclosures of financial interests. Allegheny County Common Pleas Judge Joseph James kept Mr. Bussard on the ballot, he won re-election, and he continues to publicly question project costs.
The borrowing continued last year, with a $20 million bond issue. Mr. Muscatello, now of Boenning & Scattergood Inc., earned $160,000, and Mr. Cambest's firm was paid $17,500 for its work, which included producing a four-page letter.
The Moon Area board voted in August to borrow another $31 million, lifting its total debt to $129 million. District business manager Al Bennett said another tax increase eventually will be needed to cover the payments.
The building project will pay dividends for the district's students, Mr. Scappe said, including improved electronic communication between the student at the desk and the teacher, and long-distance instruction.
"There are more things we're going to be able to offer students to compete in the global world."
First Published September 12, 2010 12:55 pm