Wednesday, August 22, 2012

The Education Funding Crisis in America Reaches New Heights – Community Refuses to Pay $400,000 for Blue High School Football Field

And Five Residents Who Guaranteed the Loan May Learn What ‘Joint and Several’ Liability Means

It is no secret that public education in America is under fiscal attack.  State and local governments have responded to the recession by cutting spending, particularly in the area of education.  Nationally there have been massive layoffs of teaching and non teaching staff.

But of course there are affluent areas of America where public education funding is not an issue, even in recession struck Michigan.  In these school districts the idea that the football field should have new turf at a cost of $400,000 is simply another day at the office.

imageOxford, with a population of about 20,000, has a quaint downtown of two-story brick storefronts surrounded by neat housing developments, most clustered around the two dozen lakes within the township.

For the past few years, boosters had been working to get the high school an artificial-turf field, something many rival schools had already installed. A 2010 bond issue to raise money for a new field and other work at the school was rejected by voters, but they did back a measure to improve the field's drainage system and replace the track that rings the field.

Since taxpayers in Oxford, in a rare display of sensibility rejected paying $400,000 for a new astro turf football field, the boosters decided to raise the money privately.  But it took some personal guarantees from five families to do so.  That didn’t turn out so well.

The $400,000 field installed a year ago was financed by a booster group, five members of which personally pledged to cover any shortfall if fundraising fell short. It has raised close to $100,000, leaving it about $300,000 short on a bill that must be paid to AstroTurf LLC by Sept. 1.

One family is dealing with their liability this way.

Jim Reis, owner of a construction company and a member of the board of education, is one of those who backstopped the loan. He said he could sell a motor home in a worst-case scenario, adding that he doesn't want to take equity out of his house for his $60,000 share of the balance.

"We're stuck," he said. "We pledged to pay the money. We signed our names. We are going to have to do something to pay [AstroTurf] back."

And it’s nice to see that Mr. Reis is a stand-up guy, willing to pay his share of the debt.  But notice that Mr. Reis is talking about only owing $60,000 which is one fifth of the $300,000 shortfall.  While we are not familiar with the terms of the guarantee, most of these arrangements are written with ‘joint and several’ liability.  In regular terms this means that not only is each guarantor responsible for his or her share, they are also responsible for any shortfall that may arise from someone else not paying his or her share.

So Mr. Reis could be on the hook for the whole $300,000.  All of which comes from not having his priorities straight.  But the good news, at least we don’t ever have to hear from Mr. Reis and the others who guaranteed the loan that their taxes are too high.  After all, they apparently have money they need with which to buy a football field.

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