Capital Needs Plan
By Alex Saitta
March 28, 2015
On Monday, November 24th, the administration presented its 5-year plan to the public and the board.
The plan had two parts, one addressing building and capital needs and the other addressing the day to day running of the district.
The overall plan placed an emphasis on building maintenance, technology refreshes, extra pay raises and supplies. It called for a 4.7 mill property tax increase for debt service ($5.8 million more in borrowing each year). And it proposed an 8.5 mill tax increase for the operations tax rate over 5 years.
When the plan was handed to the board, some things I personally agreed with and the board adopted right off the bat like the administrationís top priorities. Well done. The board immediately sent the administrationís proposal for building maintenance, technology, extra teacher pay raises and supplies to committee.
With classroom supplies, the board allocated $355,000 to the supply budget retroactive for this current year. Thanks to Phil Bowers for that.
Some things I didnít agreed with in the plan like eliminating teaching positions and raising class sizes. The administration listed on a few pages of its presentation details surrounding the potential closing of any or a group of seven schools (Ambler, Holly Springs, AR Lewis, Dacusville Middle, McKissick, Hagood and Central).
My take-away on the administrationís proposal, and comments later in the newspaper by the communications director, was the administration stressed three choices: raise taxes, close schools or eliminate teaching positions. Bad and worse in my opinion.
Immediately I thought there are other choices including taking the capital needs list that contained items like roofs, paving, technology and equipment wants and needs, and scrubbing it down to only the needs, shopping around for the best prices, and coming up with a more efficient way to do things.
The focus should also be on cutting low priority, excessive or wasteful spending in the system. For instance, why didn't the administration propose reducing the bonuses given to employees who retire or leave for another district? Or any of the other recommendations Iíve made on cutting the waste and excess?
How about stepping up the sale of surplus properties to raise needed funds?
Spending and Tax Rates Are Up:
To bolster the plan for raising tax rates, outside advocates (like the Concerned Citizens of Pickens County) jumped in and said school taxes hadnít been raised in years, some said as long as 11 years. That is simply untrue.
The school district levys two tax rates -- for operations and for debt service. While the operations rate has been relatively stable, the debt service tax rate has sky-rocketed because of the too-big and too-much-at-one-time building program. In 2007 the total school tax rate was 128 mills. Today, that rate is 165.2 mills. That is a 37 mill tax increase in 8 years.
Advocates changed course and declared the school district was in financial crisis and property tax rates had to be raised. The word ďcrisisĒ wasnít energizing parents, teachers and students enough, so they transition that into there is crisis, either rates tax rates or schools will have to be closed.
A financial crisis occurs when revenue and expenses are here, and suddenly revenue falls down to here. All of a sudden you have all these expenditures and you no longer have the revenue to pay for them. That is not the case now. Revenue is growing about 4% a year, and the budget is in surplus.
And when people like State House Representative David Hiott publicly said, donít close schools in my district, Concerned Citizens of Pickens Countyís said, well maybe there isnít a financial crisis, but funding is down and it has to be restored.
They then said local funding has fallen $5 million since 2007. That is untrue too.
In 2007 the state legislature passed Act 388 which removed property taxes from homes people lived in, but simultaneously raised the county sales tax by 1 percentage point from 6% to 7%. It was a tax swap of local taxes Ė a local property tax decrease AND a local sales tax increase.
Looking at the year to year audits, local property taxes went down in 2007-08 by $5,353,990 Ė CCPCís point because property taxes on owner occupied homes was eliminated. However, local sales taxes rose by $8,730,940 Ė what CCPC missed and was unaware of. The line is 3825 Reimbursement for Property Tax Relief (Tier #3) was added that year to reflect the increase in the local sales tax rate. Local revenue was up, not down and continued to grow over time.
By the way in 2007, total school district spending was $122 million and last year it spent $171 million.
What I did agree with CCPC on was the building program has been sucking up district resources and most everything in the budget has been squeezed. The annual bond payment has increased $18 million. The annual cost to heat/ cool, insure and repair on a day to day basis the 800,000 in new square footage has increased by $3 million a year. And the district is spending about $5 million a year on capital needs for roof and HVAC replacements, repaving, computer refreshes, and equipment. In 2013-14 $4.2 million was spent on such capital needs, $8.9 million in 2014-15, and there is $6.4 million that has been allocated to projects in 2015-16 that are either underway or have not yet been started.
I donít know if people just stopped listening to CCPC or their own heads were spinning so much from their pin-ball machine arguments, but in the end I donít think the public bought any of it. Like I said, the public sees these $50 million schools, they know they werenít free, and they were the ones who paid for them.
The administration was requesting another $5.8 million, more borrowing, and a tax hike for additional capital needs reaching into 2016-17. I also had a philosophical concern with that as well.
Remember, the people of this county voted down a $197 million debt plan. The board and the administration willfully ignored the owners and borrowed more than $350 million with the Greenville Plan. The school districtís total debt level of $308 million is still quite high. In comparison, Oconee only has $46 million in debt. Combined, all five school districts in Anderson have about $175 million in debt. I thought it unfair to put more debt on the people, when they didnít support borrowing half of what the board/ administration ended up borrowing in the end.
Instead of the board/ administration taking responsibility for their decision (overspending on buildings/ over borrowing) and the aftermath (the resulting budget squeeze), I thought some on the board and in the administration were looking for taxpayer to pay for a bad decision they did not make; in fact the people vocally opposed. Typical government. Such shifting of accountability erodes public support.
In sum, my feeling was the board/ administration created the situation, and they needed to manage their way out of it with the resources it has, and not raise tax rates again.
After the administration introduced its 5 year plan and the focus shifted to passing the $5.8 million capital needs plan, the chairman of the board fast tracked the schedule to pass it. Whenever the board borrows money there has to be three readings or public votes. Usually, those reading occur over a three month period at the regular board meetings in order to give board members, the media and the public time to assess the plan, provide input, and suggest/ make modifications to the plan.
The first vote was scheduled the night the plan was proposed, November 24. The next two readings were scheduled in special called meetings of December 1 and December 14. The fact the votes were schedule smack in the middle of the Thanksgiving and Christmas holidays also supported my claim the votes were fast tracked in order to limit board inspection, press reporting, and public input.
Key board members who were likely to be the swing votes didnít like the timetable either. This was discussed at the December 1st meeting and I expressed the following:
First, the board approves budgets, beit the general fund budget or the annual capital needs budget.
A budget has a list of itemized expenditures ó item-cost, item-cost, item-cost, then a total at the bottom. On the other side it has revenue to pay for the expenditure. Total cost and revenue balance and the board is to approve both. Thatís an approved budget.
When the board was presented the capital needs plan, what we were asked only to vote on the revenue side ó the sale of $5.8 million in bonds and a 4.7 mill tax increase.
Even though the administration had shown us tens of projects ranging from a total annual cost of $3.6 million to $5.5 million to $8.5 million to $5.8 million, this propposal did not have an itemized list of projects that the $5.8 would be spent on. Once approved, the administration could have taken that $5.8 million and spend it all on computers, and come back next year to the board and said, we need more money for these roofs we told you about last year.
Both the revenue and list of projects need to be voted on and approved.
Second, like I said the board was given lists and lists of an capital needs projects. I thought, could anyone voting on this tell the public we work for if any of these projects are wants or needs? Or if they needed to be done in 2015-16? Or if we might be able to do any of them for a lower cost? All the board saw were numbers and projects listed on paper. Where was the due dilegence in this vote? No board member had seen any of these needs or projects firsthand.
Third, on the revenue side, the board should also consider and discuss other options like the TIF money, building sales or potential savings from the general fund.
Budgeting and Oversight:
Instead of approving the administrationís plan as presented, the board the capital needs proposal to the facilities committee for a closer look. That committee is made up of Brian Swords, Henry Wilson and Phil Bowers.
The board tasked the committee to work with the administration to examine the needs/ projects listed, scrub the list, rank projects in priority order and identify all funding sources.
I wasnít on the committee, so I donít know exactly how they went about it, but Wilson was in charge of working with the administration on computers, Bowers on things like HVACís, roofs and painting, and Swords the sports, band equipment and activity buses. For instance, I know Bowers went out and looked at every detention pond in the district (tens of them), and the administration/ Swords uncovered how they could cut activity bus purchases by tens of thousands of dollars.
Starting with the administrationís proposal, the final capitial needs plan was crafted by the administration and the members of the facilties committee.
They scrubbed and prioritized projects for the following year of about $4.7 million. That includes spending money on items like $372,000 for teacher laptops, $804,760 for classroom end user devices, $300,000 for digital textbooks, $700,000 for the Crosswell HVAC, $70,000 for repaving, $27,000 for playground equipment, $110,000 for band equipment, $80,000 for another activity bus replacement and more.
Also, they outlined needs for the following few years, with price tags ranging from $4.5 to $6.1 million.
Whether the administration/ board creates a 1, 5, 10 or 20 year plan, it always funds one year at a time. It is just the way it works given state revenue fluctuates so much year to year.
To fund the $4.7 million in projects listed three paragraphs above, the board voted to refinace the districtís $308 million in debt, generating a savings of $3.25 million a year. I supported refinancing the bonds, but not the way it was done, so I didnít vote for that. (More on that another time.)
Through good budget management the administration saved $700,000 when finishing up the building program (the Gettys project) and saved $400,000 on recent capital needs projects. Additionally, we sold the Pendleton Street property in Easley for a handsome $330,000.
The $4.7 million capital needs plan was passed in March. It will not result in a tax increase for bonds and the bond rate will remain at 53.2.
In sum capital needs are now funded into the 2016-17 year. This started with Jim Shelton saying we needed an annual capital needs plan, and crafting an annual capital needs budget policy and process. The administration, Swords, Bowers and Wilson worked the process through this first time around.
800 Pound Elephant:
The massive building program of the school district had four parts.
First, the district had to get the financing, and did that in 2006 by passing the Greenville Plan in November 2006. The plan cost and has been paid for, a total cost of $387,359,816.09.
Second, the district had to build the schools. After fumbling around for 2 years, buying too much land, drawing and re-drawing plans, and flying some board members and administrators around the country to look at state of the art high schools, our schools were renovated and built, and the building program will official close down later this year.
Third, the district had to cover the additional annual costs to clean, heat/ cool and repair the new 750,000 square feet. That added $3 million in additional costs to the general fund budget, and that cost is covered.
Fourth, the final challenge was identifying and funding capital replacement schedules on items like roofs, HVACís, repaving park ing lots, painting, and refreshing computers and equipment. That was the challenge we took on in 2014, and the subject of this write-up. With the approval of an annual capital needs budget policy and process, with a plan in place, and needs funded into 2016-17, that cost is being managed.
I think it is finally safe to say the district has swallowed and digested the 800 pound elephant known as the building program. It has not been pooped out yet, so it is not totally behind us, but that is in sight I think.
With that behind us the board is shifting its focus to the general fund, and its two top priorities there of boosting classroom supplies and narrowing the teacher pay gap.