Tuesday, March 27, 2007

HB 1185: A shell game played with taxpayer money

This bill would allow colleges and universities in the State of Texas to sell off facilities, bought and paid for by taxpayer monies to private real estate investment trusts (REIT) that would in turn lease those facilities BACK to the college/university. In this manner, the colleges get an up front payment, but then they are on the hook to pay rent in perpetuity for use of facilities that You and I paid for. This will be a net loss in revenue for the colleges because they must pay whatever rent that the REIT decides they must pay. Additionally, I suspect that many of the board of trustees will find ways to be a part of those REITs, thereby ensuring a perpetual income stream for themselves. Taking a publicly built road and selling it to a toll road operator is wrong, and this is doing the exact same thing to our colleges and universities. They will be charging a toll on the use of those facilities that the public bought and paid for. Make sure you write your State Senators and Representatives and make sure this bill does not see the light of day.


Anonymous rideuponthewind said...

Here is the link to the members of the Higher Education Committee in the House. The bill was sponsored by Geanie Morrison, Chair of the committee. She couldn't even take the time to present the bill in front of the committee yesterday when it was presented for hearing to the public. What is she trying to hide? Who put her up to initiating this bill? I hear Pickelman was present at the hearing, but did not speak. Ain't dat interesting? These people make me PUKE!


Here is a link to the Senate subcommittee on Higher education:


Sic 'em guys!!!

March 27, 2007 8:56 AM  
Blogger Shreela said...

I read about something similar with Walmart and Texas Schools (don't recall which group).

People like me are grateful for the 'watchers' like you, and the first commenter, THANKS, and keep up the great work!

March 27, 2007 12:00 PM  
Blogger southerntragedy said...

Mr. Inkblots:

Thanks again for watching our backs and not putting a knife in it like these clowns.


March 27, 2007 7:34 PM  
Anonymous Glenn Ware said...

I would like to know how a college could benefit from selling its property and leasing it back. I would also like to know what the college has to give up in making this deal. Thanks for bringing this matter to the public’s attention. It seems to me that the traditional manner of obtaining funds for capital improvement is to present a bond to the public for a vote. I believe that our college community would approve a bond at NHMCCD if everything in the bond was clearly spelled out, justified, and reasonable.

March 27, 2007 8:25 PM  
Anonymous Anonymous said...


I don't think they consider it our money any more; I think they really believe that the taxpayer exists to feed government.

I noticed that they are only required to notify the public, but no provision is specified to stop the sale. I also saw the option given to appoint two people to the board for the lifetime of the lease.


March 27, 2007 10:05 PM  
Anonymous rideuponthewind said...

Glenn, Why don't you ask John Pickelman your questions. He was at the hearing, and I can guarantee you he was lobbying FOR this bill. I would love for someone to interview W.W. Thorne to get his views on HB 1185. For those of you who do not know who W.W. Thorne is, he founded the District with the start-up of the North Harris College campus.

March 28, 2007 7:24 AM  
Blogger Rorschach said...

Glenn, as you probably have figured out, long term, a college CAN'T benefit from this because of the never ending rent that the college will have to pay. As it stands right now, once a facility is built, the only ongoing obligation is for maintenance and lights, gas, water, and in the case of a facility built with bond money, service on the bond debt which presumably will eventually get paid off. A college does not pay property taxes like the proletariat do. But if this law passes, then all those facilities, that they are STILL paying down the debt on, will be sold and then leased back to the college. let's assume that the cost increases by 10% to 15% for each transaction. (15% to set up the REIT, 15% commission on selling the property, then the REIT rents it back with a 15% ROI profit. These get compounded by the way.) That works out to be a 50% profit margin on the transaction. Not a bad chunk of change for the investors in the REIT, but for us taxpayers? Well, it sucks to be us is all I can say.

March 28, 2007 8:19 AM  
Anonymous rideuponthewind said...

Damn, Rorschach! That's downright SEXY-smart.

I wish everyone at the district read this blog! (I bet a lot of them do!)

March 28, 2007 3:20 PM  
Blogger Rorschach said...

Heh, careful there, my wife is the jealous sort...=D

March 28, 2007 3:44 PM  
Blogger Rorschach said...

By the way, by my way of thinking, the REIT property would no longer be tax exempt and would have to be assessed at the market value. That means that as the property tax goes up, the rent does too if it is set up in an escrow account, or the college ends up paying property tax separately. I wonder what the board members would say when they had to write a sizable check to Paul Bettancourt. Bet they'd be thinking that property tax caps might not be such a bad idea after all.....

There are very good reasons why this has not been done before. It is A BAD IDEA!

March 28, 2007 3:50 PM  
Anonymous Anonymous said...

I guess that the Picture of the power of Eminent Domain should be brought into focus here. The Colleges could go out and look for 'Promising Real Estate' like your home, business, shopping center, office complex or what ever, then buy it at a reduced price and in a short period of time sell it to the REIT (at substantial profit). The bill does not say how much the college would have to use the property, but lets just say that they would use the parking lot at night and the REIT could lease out the office building during the day (and parking lot too). Sweet deal and the college would reap a windfall from the REIT in revenue and never have to do another bond issue again...

Rorschach... you also bring out a good point that the removal from the tax base or the inclusion in the tax base is a 3-4% question that is still not answered. This total amount of tax burden either removed or included in the tax base would just about cover the interest on the conventional method of Bond financing... so we are gonna pay twice here!

March 29, 2007 9:35 AM  
Anonymous rideuponthewind said...

'Ror: LOL! I recon she should be! hehe. There are so many good points here I feel like incorporating them into a letter to our reps. That would be a good thing.

March 29, 2007 9:42 AM  
Anonymous Anonymous said...

Gives me an idea. Let Say here in the north part of Harris County the current Jr. College District were to say buy the office building next to the 'Parkway Campus' on the pretense that they needed more parking.

Sounds reasonable...... but what they need is more night time parking, so they sell the property to a REIT and lease it back, but they are not going to use the office space right now and they will just need the parking at night. OK.... so based upon HB 1185 the REIT can then use or lease out the office space and utilize the parking lot during the day and the college uses the parking lot at night.... sweet. The REIT makes a windfall deal for it's investors and the college gets a bargain parking lot.

Sounds like a win win for the Jr. College, but the owner get an Eminent Domain forced sale, and doubtfully the full market value.

The question here is will the REIT be paying tax on the facility as was the previous owner and not the Jr. College is renting the parking lot and also the taxes are now being paid or will the REIT be tax exempted once the omission is discovered and then the whole property pays no tax... then that tax would have been about the interest rate the Jr. College would have paid on a regular BOND issue and they would have owned it in the end....

GOSH we get the shaft with this no matter which way you look at it.

March 29, 2007 10:22 AM  

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