January 27, 2014 Vote
By Alex Saitta
March 3, 2014
March 27, 2014 Update: Tonight in the same 3 to 2 vote, the board voted to spent the $500,000 contingency in the 2014-15 budget. The contingency is revenue in a budget that is set aside. For instance, if budget revenue was expected to be $100 million, but the board passed a budget that planned to spend only $99.5 million, there would be a $500,000 contingency or money set aside or saved. At the March 27th meeting, the board voted to spend the $500,000 contingency in the 2014-15 budget. At this point, the school district has no savings to speak of.
Inform, Take Positions & A Written Record:
There has been a lot of under-information, mis-information and halves of the story that have been in letters to the editor, letters to the governor, articles in the newspaper and chatter on the internet surrounding the January 27th vote to spend money on capital building needs (HVAC systems, roofs, repaving and painting projects) over the next 18 months.
One of my responsibilities as an elected leader is to inform the people I work for, the public, about what is going on with their school district and also let them know where I stand on those issues. It is also important to me to have a written record I can point to months or even years later on this or that issue, so I can show those I work for where I stood and why.
At the January 27th school meeting and in a 3 to 2 vote (I voted against), the board voted to spend $9.4 million of the remaining extra interest money and $3.6 in savings from two savings accounts for capital needs.
There are three significant financial points surrounding that January 27th vote.
All Interest Money Spent:
First, when the board/ district borrowed $354 million for the building program in 2006, that money was put in the bank. It started to collect interest. It was projected to generate $42 million in interest and that was spent on the building program. Given the program fell behind schedule and bank withdrawals were slower than expected, $55 million in interest was earned.
When that extra $13 million was discovered, I made a motion to set the $13 million aside in an escrow account to later be used to pay down some of the debt. It passed. Months later the board took $3.6 million of that, and spent it on more building needs (computers and a roof project). At the January 27th meeting, the remaining $9.4 million was spent.
I thought and detailed there were other avenues that should have first been pursued to help fund these capital needs. They included not spending all the extra building program money on the lone middle school in Easley after the second middle school was cancelled. I also would have been aggressive in selling surplus buildings (I supported selling the old Pickens Middle, old Gettys Middle and I would put the property across from Daniel up for sale). Finally, I would have looked for savings in the $150 million in school district spending each year. In sum, I opposed jumping over all those options and going right to the extra interest money. I also thought given all the county taxpayers have paid for these buildings, the size of the debt ($300 million plus), at least some of this extra interest money should have been used to pay down debt. That was not to be.
Second, in the January 27th vote, the savings in the general fund as well as capital account was spent. It took the board/ district three years to save that $3 million or so, and it was wiped out in one vote. I personally saw risks with that decision I didnít want the district to take. For instance, if the district doesnít rebuild its savings, it could again be borrowing money to meet payroll either later this year or late in 2015. If a recession hits, with no savings to cushion a drop in revenue, the cuts would have to be dollar for dollar in order to balance the budget as required by law. One of the lessons I learned from the 2008-11 budget crisis was the district didnít want to go into the next recession with no savings, because it would have no cushion to soften a drop in revenue.
With no savings to speak of, now more than ever, in my one-vote opinion the school district needs to do what it can to replenish its savings the next year or two.
Building Program Spending Ends:
Third, it is safe to say the spending on the building program has finally ended. All the revenue of the building program has been spent on buildings and the construction is 99.5% complete and will end with the extra wing at the new Gettys Middle in August. The spending on this eight year program has been a staggered but steady climb, that made its last leap at the January 27th meeting.
In June 2005 the district administration presented a county wide building plan to the board. Back then it was mostly a renovation plan and they attached a ballpark figure of $110 million. The cost was just a guesstimate, that hadnít been run past the construction analyst. Over the next month that plan was reviewed by the construction analyst and he put a $158 million price tag on that plan. When the board got a hold of it, the plan increased to $178 million in August 2005. This was because some of the high schools had higher planned expenditures than others. The majority of the board saw that as unfair, so some of the funding for high schools was increased. By November 2005 the plan was bumped to $197 million due to adding sports facilities and a new elementary school in Dacusville. That $197 million figure and renovation plan was packaged in a bond referendum that was voted down in November 2005 by a more than 2 to 1 margin.
The Greenville Plan was introduced by the DíAndrea administration and passed in November 2006 with a construction figure of $315 million. This plan called for new high schools, Career Center and others, in addition to renovations of the other schools. That night, a bond issuance was actually authorized for up to $336 million. The principal of the bonds at auction was $336 million and the administration said it would use the extra money for a contingency. At the December 2006 bond auction, the coupon was tweaked and the district actually pulled down $354 million in bond money. Tax rates were increased 39 mills to fund the 25 year loan.
In early 2009 the building program was boosted in vote to $365 million. This figure came about after Dr. DíAndrea left and it was discovered the building program was $95 million over budget. The size and scope of projects were reduced, savings were found in the construction plan, and the funding was boosted to $365 million. Part of that increase was funded by a bond offering the board approved, but wasnít told the details about. In October 2010 the program was boosted to $374 million. This was funded by a $9 million bond issuance, another tax hike and the funds were to be spent on adding a second middle school in Easley and other items at the high schools then under construction.
Like I mentioned above, because the building program fell about 2 years behind schedule, extra interest money was earned, and in July 2012, $13 million in extra interest money was put aside to pay down some of the outstanding debt once the building program ended. (The bond contract did not allow the board to use that money to pay down debt any sooner than the end of the building program.) In October 2012, the board voted to spend $3.6 million of that extra interest money on more building needs. That boosted the total cost of the program to $378 million. In January 2014 the remaining $9.4 million in interest money was spent on more building needs, raising the total cost of the building program to $387 million. If you look at the building program financial statement (it is online), the exact cost is listed at the bottom, $387,363,999.39.
I voted against every increase, all 10 of them. Being around finances my entire adult life, from the start I could see with the funding and construction/ renovation of all the schools at one time (being through the all-at-once referendum or the all-at-once Greenville Plan), it was going to get costly and result in ever rising costs. For that reason, I opposed both all-at-once approaches, but instead supported funding and renovating/ building bits at a time.
In my opinion, everyone had good intentions -- even those who voted for the Greenville Plan -- but I could also see the planning was weak and there was a lack of fiscal discipline in the process. If you look at the history and how the program just kept growing and growing, I thought my initial assessment proved to be accurate.
Looking ahead, the challenge will be how does the school district maintain all these buildings, and fund things like rising retirement and medical costs at the same time when revenue growth is on a permanently lower growth path? The simple solution will be to raise tax rates and burden the local economy even more. Taxes are already too high and inhibiting business formation and job growth. In my opinion, our goal is to educate the students and ALSO do what we can to make sure there are jobs waiting for them when they graduate. The other choice is to utilize the revenue we have now more efficiently/ economically, so we can meet these rising costs and not raise tax rates any more.