The context and challenge
I knew before I came to Oak Creek-Franklin that it was one of the minority of school districts in Wisconsin that had been saddled with a low revenue limit from a set of circumstances occurring in 1993 when limits were imposed. If you walk across the boundary street to either the school district on our west or north you find that “the other side of the street” spends about $2,000 more per student than does Oak Creek; and, their tax mill rates are above the state average of $10.92 while ours is $8.66. This is a fundamental competitive disadvantage for children in the handful of school districts similarly situated across Wisconsin that no state leader has been able or willing to fix over the last two decades. I knew I was coming to a district that was very “lean” financially but still had a good reputation. Part of my professional growth was learning how to ‘lead for children’ under tighter fiscal circumstances.
I also knew the community passed a referendum in 2014 to build two new schools to deal with growth. A supportive community is always attractive to new residents, and businesses (and a superintendent). I also knew the district had a practice of budgeting $1.2 million per year to address maintenance and capital improvement projects. Another good sign.
What I did not know for a while was that there was a backlog of maintenance projects for the existing schools estimated around $50 million either past due or coming due over the next few years. The $1.2 million each year was often used to “plug holes” and “band-aid” problems and/or take care of emergent needs in a reactive, sometimes even "squeaky wheel" manner. For example, heating and ventilation systems put in schools in the early 60’s were patched and repatched with no solid financial plan to replace and update them until there was a crisis.
Work underway to meet the challenge
Children's learning is our top priority. Safe, healthy, and quality school facilities rank 3rd in effect on learning behind great teachers and supportive parents. We needed to take action to address this looming problem.
First, in June 2016 we proposed a statutory tool this school district likely should have established long ago: a Long-Term Capital Improvement Trust Fund (also known as ‘Fund 46’. See Wis. Stat. § 120.137). The Board adopted this Trust Fund with an initial $100,000 budget transfer from the 15-16 budget. From the 16-17 budget, the Board approved putting $300,000 into this trust fund. This is a long-term solution to assure this district never again gets so far behind in capital projects. By statute and design, the trust fund cannot be used for at least 5 years to assure it really is purposed for long-term projects looming ahead in the future. I pledge to keep recommending funding this out of current revenue. Not easy given our tight funding, but important so we don’t carry such large deferrals of projects into the future without a plan.
Second, we put in place a high quality process for reviewing the annual capital improvement projects to assure we were logically addressing the most critical needs with limited amount of dollars that were budgeted.
Third, we went through a process to identify a company to assist in the technical development of an up to date, factual and comprehensive long-term facility plan. In June 2017, Nexus Solutions was chosen after a competitive process. They have been examining our buildings with teams of technical staff as well as talking to our people and holding community listening sessions. Their goal is to put together a comprehensive plan, including financial analysis, that will set our district on a course to be the best we want to be in terms of facilities for learning.
The opportunity currently under consideration
Fourth, on November 13, Nexus informed the Board of a potential opportunity to resolve about $27 Million of the backlogged maintenance projects...the most critical ones that would result in cost savings from utilities or operations. (One example: replacing the 1968 Air Handler at Carollton will cost about $2.8 Million while saving over $100,000 a year in costs + better indoor air quality). Utility savings would have to be used to pay off the bonds and reduce the tax levy but after that, it could go back into keeping up with our future maintenance projects. The full report of that meeting is located here: Potential for Energy Efficiency Revenue Limit Exemption to Accomplish Certain Capital Improvement Projects
Under Wis Stat. § 121.91 (4) (o) a school board may adopt a resolution to increase the revenue limit otherwise applicable to a school district under §121.91 (2m) in any school year by an amount spent on a project to implement energy efficiency measures or to purchase energy efficiency products. This tool had been discussed over the summer and fall, but then the legislature determined to place a one-year moratorium on this statute. Then with a clever swipe of the veto pen, the moratorium was increased from 1 year to 1,000 years. This phrase was added to the statute by that veto:
(o) 4. Unless the resolution is adopted before January 1, 2018, subd. 1. applies only to a resolution adopted after December 3018.
To get this process rolling, on November 16, the School Board adopted a preliminary resolution to Authorize the Borrowing of Not to Exceed $25,000,000; and Providing For the Issuance and Sale of General Obligation Promissory Notes to fund energy efficiency projects. (The School Board determined at this meeting to lower the amount from $27 Million previously discussed to $25 Million). Here are links to the approved resolution and a copy of the notice being published this week. Doing the entire amount would increase the mill rate by approximately $0.27 next year. Since the mill rate dropped $0.27 this year, it seemed reasonable to keep the mill rate steady while solving about half of the deferred maintenance problem. For reference, on a home assessed at $200,000, this would mean $54.
On November 27, at the School Board’s regular committee meeting, they will review the projects on the list and make a final determination on how much, if any, of the backlog they wish to take care of using this statutory funding mechanism. You will find the notice for that meeting when it is prepared (as you will find them for all School Board meetings) here: http://www.ocfsd.org/district/board-of-education/agenda-minutes . Typically Board packets are published the Thursday before a meeting; it will be Wednesday afternoon this week
If on November 27, the School Board determines to proceed with any of the projects, they would take final action at the December 11 and/or 18 regular School Board meeting.
I recommended this course of action, across 4 or 5 public meetings, to the School Board because:
- We can reduce operating costs through energy efficiency.
- We can replace critical infrastructure and improve learning environments.
- We can improve the air quality in our older schools, improving health and safety for the students and staff.
- Taking care of these projects now means we are avoiding contractor inflationary costs which are running about 5% each year.
- We can address critical needs before failures and avoid emergency situations that may disrupt schools.
- Currently available interest rates are historically low.
- We can minimize the impact on local taxes by using energy savings to reduce the levy.
I understand the point of view that any increase in the mill rate to support public schools can be controversial for some. I understand that for whatever reasons, this district has never considered using this statutory tool, unlike many other school districts who have used it; it is new to the community. While it can in no way be called “illegal” I understand the politics of veto-manipulating this tool from a 1 year to a 1,000 year moratorium starting January 1 means some do not trust local School Boards to make such decisions.
The School Board is in an unenviable position to make a hard decision that they believe will be in the ultimate best interest of the schools of our community. There are valid and civil arguments on both sides (as well as unfortunately some rhetoric and misinformation). Please consider attending the Committee meeting on November 27 to learn more about these projects and then if you wish, share your views. Please consider passing this letter along, particularly to those who do not have children in our schools.
Thank you for your interest in your public schools.
Tim Culver
Superintendent
