San Carlos Real Estate Agent, San Carlos Realtor Lehman Brothers’ collapse hits San Carlos School District. | The White Oaks Blog
San Carlos Schools October 1, 2008

Lehman Brothers’ collapse hits San Carlos School District.

by Chuck Gillooley

lehman_brothers.jpg

It might have been wishful thinking to believe that the collapse of an investment bank all the way across the country would not hit us directly here in San Carlos.  But unfortunately, that’s not the case.   According to San Carlos School Superintendent Steve Mitrovich, the failure of Lehman Brothers could cost the San Carlos School District as much as $630,000.  Below is the latest “Superintendent’s Bulletin” email that we received, reproduced in its entirety:

Superintendent’s Message
Undoubtedly you will soon read in the newspapers that the bankruptcy of Lehman Brothers is going to have a direct and significant impact on San Carlos School District. With this bulletin, I hope to give you a basic overview on the issue as well as plans that the administration and board of trustees have to address yet another threat to our district finances

School Districts are required to deposit funds collected from state apportionments and taxes with the County Treasurer. These funds are invested in a County Treasury Pool, of which we are a part.  On September 25, County Treasurer and Tax Collector Lee Buffington confirmed that the recent bankruptcy of Lehman Brothers has had a direct impact on the school districts of San Mateo County, including the San Carlos School District.

Representatives from our district attended a meeting last Friday, September 26, to gather more information about this situation. Lehman Brothers represented 6% of the entire pool of 2.7 billion dollars. The estimated loss is 150 million dollars. At that meeting it was confirmed that our district may lose as much as $630,000.

Our board of trustees is currently planning a special board meeting for this Thursday, Oct. 2, to discuss the impact  to our district. Please check our web page for the agenda that will be posted soon. Additionally, I plan to attend a special meeting of county superintendents this Friday to hear more and discuss various options available to our district.

Here’s an article from the San Mateo County Times that discusses the impact on other schools as well:

Lehman Failure Being Felt Locally

There will certainly be more to follow on this in the upcoming days.  Regardless, this is a very tough pill to swallow for a school district that’s already facing drastic cuts from the latest state budget.

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Comments 10
  • It was rumored for MONTHS that Lehman Brothers was on the brink of collapse. Don’t our trustees and superintendant exercise any control or regard for the district’s investments? What a bunch of amateurs!

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  • Agree with SC Parent. Isn’t the general rule of thumb never to invest more then 4% in any one company? I think the people doing the investing for San Mateo County should be re-evaluated.

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  • Most trustees hold money for others. In many entities they are not allowed to risk the funds of the beneficiaries. If they do, the beneficiaries may sue them as individuals for failing to perform their fiduciary duty.

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  • To be clear, the Trustees of the San Carlos School District (as I am one) did not invest this money, and we are as outraged as anyone by this irresponsibility (and in fact, there is a special board meeting tonight on this subject). Local agencies — including school districts — are REQUIRED by law to keep their money with the San Mateo County Treasurer’s Office, who has complete discretion on how to invest the money. This situation has affected every public agency in San Mateo County, not just San Carlos, and not just schools (around 30 agencies are affected). I praise our Superintendent for being proactive to inform our community about the problem. I agree that they should have seen the Lehman Brothers collapse coming, and their investments, in general, are not diversified. We may have little recourse in this matter, but again it will be discussed tonight at the School District Board meeting.

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  • Seth,

    Thanks for taking the time to comment on this topic. First of all, I agree with you — kudos to Steve Mitrovich for getting the straight scoop out to the public in an expeditious manner. It’s tough to be the bearer of bad news, and he is no more responsible for what happened than anyone else in the general public. I met Steve on the first day of school at Brittan Acres, and he seems like a good guy and a very competent leader. Hopefully, nobody is “shooting the messenger” in this situation.

    The anger and outrage that will ripple through the community, though, will be very real and raw. The loss of such a significant amount of money cannot be accounted for just monetarily. Much of the funds that had been raised to support San Carlos schools were the result of countless hours of volunteer efforts from hundreds of families, year after year.

    The cash reserves that foundations such as SCEF accumulate normally don’t come from a few wealthy benefactors. It’s an aggregation of thousands of smaller donations and fund raising events at the various schools. As a very typical example, my family will be participating in our 10th straight Walk-a-Jog at Brittan Acres this year, and that’s just a drop in the bucket compared to what many other families have contributed to San Carlos in the form of sweat equity. Consequently, the instantaneous loss of such a tremendous amount of money certainly resonates deeply with many of the families who have dedicated their time to the cause – so nobody should be surprised if these families will question why should they work so hard in the future if their efforts can be squandered so quickly.

    I’d greatly appreciate it if you could keep everyone posted on the progress of possible recourse. Whether it’s good news or bad news, I think the families in San Carlos just want the straight scoop.

    Thanks again,

    Chuck

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  • Chuck — Thanks for the reply, and I agree 100%. Before I was on the School Board, I was on the Board of the San Carlos Educational Foundation, so I am definitely aware of the tremndous amount of effort and resources required by so many people to bring money to our schools.

    I understand and agree that this news will dishearten a bunch of people. However, we do need to focus on what we can do about it now — of course one of these things is passing Measure S, a crucial parcel tax measure which will bring more local, sustainable money to the School District. In any case (and although I can’t speak for the whole School Board), I am confident that the District will continue to be proactive in communications around all of these issues, as well as see if we have any recourse with the County.

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  • Can San Mateo county sue the corporate bond credit rating company?

    Is there an independent citizens oversight committee that oversees how effectively San Mateo county is investing funds?

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  • The county has already sued the officers and directors of Lehman Brothers, and I suspect they could sue the credit rating agencies, but I don’t know enough about it to guess on how successful they could be at that. Also, keep in mind that there is a distinct possibility that a number of local agencies could also sue the County.

    As for your second question, there is a County Treasury Oversight Committee, appointed by the County Board of Supervisors. See the link to the investment policy here, which also mentions the role of the committee:
    http://www.co.sanmateo.ca.us/bos.dir/BosAgendas/agendas2008/Agenda20080108/20080108_att_36.pdf

    I also don’t have enough information to express a strong opinion on whether the Board of Supervisors and/or the Oversight Committee was asleep at the switch here, although I suspect they may have been.

    The County Board of Supervisors has a meeting on November 4th to question the County Treasurer on the situation, but I have not yet heard a report as to what happened at the meeting or any likely outcome. It is my opinion, that at a minimum, the County Board of Supervisors needs to change the investment policy to minimize both industry exposure as well as indidivual issuer exposure (perhaps to 1% or 2% of the portfolio).

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  • Great question, SCA…

    And thanks to Seth once again for taking the time to check in with some more insight on this tough situation.

    Chuck

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  • Hi! I was surfing and found your blog post… nice! I love your blog. 🙂 Cheers! Sandra. R.

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