Calling a spade a spade.
It’s time for state officials to address JCI’s activities
by Marshall Helmberger
Publisher, Timberjay Newspaper
When is someone in St. Paul going to start connecting the dots and demand accountability for the systematic fleecing of taxpayers across the state of Minnesota by Johnson Controls, Inc.?
After all, it isn’t just the St. Louis County School District (ISD 2142) and its taxpayers who are paying the price for an expensive district restructuring that was supposed to save millions of dollars annually, but is now costing the district more than ever.
The Duluth School District is in the same boat, in the wake of JCI’s disastrously-conceived Red Plan that soaked taxpayers there for $300 million and left the district in a mess.
We saw another example in the Duluth steam plant, where JCI promised big energy savings to the city of Duluth, then failed utterly to deliver.
The company left the Lake Superior School District in similar trouble and the Paynesville, Minn., School District was headed towards its own JCI-inspired fleecing when folks there got wind of what took place in ISD 2142 and successfully ran the company out of town, albeit with a quarter million-dollar parting payoff.
What we have here, in reality, is a Fortune 500 company that views local school boards and other public officials as easy marks. They pitch their plans to well-meaning, but unsophisticated, public officials with promises of big operational savings, knowing that, in most cases, the company won’t be held accountable when the promised savings don’t materialize.
In the case of ISD 2142, the gap between the promise and the actual result is stunning. According to JCI’s pitch, the school district faced a $4.1 million budget shortfall, imminent school closures, and eventual dissolution, unless voters approved the company’s $79 million school construction and renovation plan. The plan, which JCI was subsequently paid nearly $12 million to implement, was supposed to save the district $5.6 million a year, and turn yawning deficits into a million-dollar annual surplus.
As Timberjay readers well know, JCI’s story was fiction from the start. The school district had already resolved its budget problems, and wasn’t facing huge deficits. Teacher layoffs approved in June 2009 left the district with a modest budget surplus. That’s right, a surplus.
But with implementation of JCI’s plan, the bottom has fallen out of the district’s finances and it’s now facing real deficits, rapidly depleting fund reserves, and the prospect of statutory operating debt.
None of this should be a surprise, since the JCI plan was riddled from the beginning with bogus projections and assumptions that were evident with even cursory due diligence. Unfortunately, school district officials, who simply wanted to believe the plan was their salvation, questioned nothing.
That’s disappointing, but not as disappointing as the lack of due diligence on the part of state officials who reviewed the plan, and who accepted the JCI projections hook, line, and sinker.
Officials at the Minnesota Department of Education say they don’t double-check financial figures provided by school districts, they just assume they are accurate.
But MDE officials are well aware that school districts rarely write the review and comment reports they provide to state officials, companies like JCI do, and in many cases those companies stand to make millions when state officials give the green light. If state officials actually want a meaningful oversight role over major and expensive school district projects, they need to stop assuming that the numbers are always on the up and up. There’s too much money at stake for the consultants involved to leave it to the honor system.
MDE officials may well believe they don’t have the legal authority to take a hard look at financial figures during plan reviews. If so, the Legislature should amend the review and comment statute to ensure that they do have that authority in the future. That’s particularly critical when MDE officials are reviewing proposals prepared by companies, like JCI, with a troubled track record.
But MDE isn’t the only branch of government that has sat too idly by as JCI has continued to deploy its questionable tactics on school districts and other public bodies in Minnesota. The state auditor’s office has had credible documentation of contract violations and potential fraud in the ISD 2142 project for more than a year, and as far as I’ve been able to determine, the auditor has done exactly nothing with it. While the auditor apparently fiddles, JCI burns through taxpayer funds without consequence.
And legislators shouldn’t be left off the hook. Many of our local legislators are well aware of the situation, and realize along with the rest of us that district taxpayers were taken to the cleaners by JCI. It’s not enough for legislators to simply shrug their shoulders and say it’s a school board matter. When a private company is allowed to continue to operate in such a manner across the state of Minnesota, without consequence, legislators should sit up and take notice, because it’s their job to pass laws that prevent such abuse.
We simply can’t allow big companies to continue to coax unsuspecting government officials into signing costly contracts based on exaggerated promises of savings. It’s a predatory practice and it has to stop. It’s time for state officials to act.