By Sharon Noguchi
snoguchi@mercurynews.com
Posted: 07/07/2010 09:26:44 AM PDT
Updated: 07/07/2010 09:26:55 AM PDT
An innovative fund in Santa Clara to help teachers buy houses was so poorly supervised that more than one-third of the loans were delinquent at some point, its board of directors seldom met, and the director of the fund was granted a loan himself, according to a critical report by the Santa Clara County civil grand jury.
The jury also criticized the Santa Clara Unified School District's construction program, which it said has lagged because of poor planning and execution. In five years, the district spent only one-quarter of the $315 million in bonds that voters approved in 2004, the jury reported.
"There was a lack of proper management to execute the program in a timely manner. There was also ineffective oversight," wrote the jury in a report released in May called "Management Missteps at the Santa Clara Unified School District."
The jury is an investigative body of the Santa Clara County Superior Court, but it has no enforcement powers.
The school district forcefully rebutted the jury's charges.
"We've rectified every concern" that the grand jury raised, district spokeswoman Tabitha Kappeler-Hurley said Tuesday.
Board President Andrew Ratermann said the bond program is on track to finish all the planned projects by 2014, its target. About the loan program, he said the district has reassigned the director and renegotiated all but one of the delinquent loans.
"When you consider what's happening with the real estate market, for us to have only one delinquent loan is pretty remarkable," he said.
The district created the loan program in 2000 to attract and retain qualified teachers. Using a $10 million below-market-rate bond sold to Intel, the district created a nonprofit agency and used proceeds to help finance interest-free mortgages.
Each qualifying teacher could get a $30,000 loan, paid in $500 monthly increments, to help with mortgage payments. After five years, borrowers had to repay the loan at the same rate, or $500 per month.
The fund lacked proper management and oversight, reported the jury. It also charged that the board responsible for the independent Teacher Mortgage Assistance Program never met before the investigation began. But retired Superintendent Paul Perotti, who created the program, said that the board had met regularly.
The grand jury began looking into the fund last summer, though district officials say they had already begun to investigate on their own.
The district stopped issuing loans three months ago. It has renegotiated the terms of 17 delinquent loans, Kappeler-Hurley said. And it added an enforceable second deed of trust to the loan terms.
Former loan program director Roger Barnes took out a loan in 2002 and repaid it last year. Perotti said he approved it, as well as loans for principals, because he believed the program applied to administrators as well. He praised the program, which he said has helped more than 100 teachers to own homes, as a national model.
"I screwed up on one person," Perotti said.
The fund has $1.4 million in circulation, Kappeler-Hurley said, in 40 outstanding loans plus 17 loans that have been restructured.
She stressed that the money is not public, taxpayer-funded money. The district paid off the Intel bond in 2005.
In examining district construction projects, the grand jury blamed delays on poor management. Santa Clara Unified promised voters in 2004 that Measure J would help to rehabilitate secondary schools, relieve overcrowding and repair roofs, plumbing, heating and electrical systems. The district revised the master plan twice, most recently last fall, the jury reported.
Rather than delaying, the district was working to minimize disruption to students, Kappeler-Hurley said.
Ratermann said, "We intended to take the time to do it right."
Contact Sharon Noguchi at 408-271-3775.
Grand JURY"S RECOMMENDATIONS
About teacher mortgages:
The program should approve loans only to qualified teachers.
The board should renegotiate outstanding loans with delinquent borrowers.
The program board should meet regularly.
About bond spending:
The board should ensure that adequate funds are available to complete projects on schedule.
The board should periodically review information to make sure projects are on track.
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