Posted on 24 March 2016.
But must work on maintenance, balanced budget
By Judy Reed
There was good news and bad news at the Monday, March 14 Cedar Springs Board of Education meeting. The good news is that the board approved the sale of the 2016 Refunding Bonds, which will save taxpayers over $2,000,000. The bad news is that the school district has numerous deferred maintenance problems to address, and needs to solve those problems while trying to come up with a way to offset a $1.3 million shortfall in next year’s budget.
Sale of bonds
The 2016 Series A refunding bonds are being issued to refund a portion of the district’s 2006 refunding bonds, and pay a portion of the costs of issuing the bonds. They were sold at a true interest rate of 2.77 percent. This will reduce the school district’s interest and save taxpayers approximately $1,017, 252 through lower debt payments over the next 16 years.
The 2016 Series B bonds are being issued to refund some outstanding indebtedness of the district to the State of Michigan under the State of Michigan School Bond Qualification and Loan Program, and to pay a portion of the costs of issuing the Bonds. They were sold at a federally taxable rate of 1.98 percent. This will reduce interest and payment costs to the state, saving taxpayers an estimated $1,500,000, according to Rosemary Zink, Director of Business and Finance. The estimated reduction in repayments is based upon the current School Bond Loan Fund interest rate of 3.50%.
“Cedar Springs Public Schools’ Bonds were well received by the bond market,” said Brenda Voutyras, Managing Director with Stifel, the brokerage firm that helped with the sale. “We saw good demand and were able to take advantage of current low interest rates that resulted in a very nice savings for the District and its taxpayers.”
Deferred facilities maintenance
Matthew Losch, with Excel Consultant Group, LLC, completed an assessment of the Cedar Springs Public Schools facilities, which are valued at $50 million. He found several issues that need to be addressed, including some that would could cause the school to be fined by MIOSHA. He told the board, in his presentation, that he mainly looked at safety, efficiency, and effectiveness. “This report is not about a staff or person not doing their job,” Losch said in his report. “It is about a department structure or organizational system which requires improvement, positive change, and support. We want to make a great school district even greater.”
Losch said that one of the problems is that the maintenance department needs a managerial supervisor to work with Jerry Gavin, Director of Maintenance and Operations. He noted that Gavin is doing a great job, but needs someone to help oversee work assignments, regulartory compliance, project coordination, safety inspections, recordkeeping, and more.
Losch also said that their regulatory compliance requires serious work because there are various safety issues, and several written programs are not MIOSHA compliant. One photo showed a saw without a guard, which he said is a $1,500 MIOSHA violation. “If someone got injured, I can’t imagine what the blank check the board would be writing,” said Losch.
The district must also develop a preventative maintenance program. He supplied photos showing asphalt cracks, roof leaks, problems with door jambs, thermal insulation falling off, a fence needing repair, etc.
Department documents also need to be organized. Photos showed blueprints and other papers piled randomly on file cabinets and in storage areas. They also need to work on safety inspections, an annual review of the district’s emergency management plan, training and instruction, certifications, etc.
Losch recommended they plan for preventive maintenance, taking care of deferred maintenance, cyclical replacement, and capital repairs. Funding strategies could include sinking fund projects, grants, performance bonds, and utility company services and funding.
Long range financial projection
The board saw a long range financial projection for the school district last week, and could be looking at a possible shortfall of almost $809,000 this year, and $1,360,000 next year, with only $2,075,000 in the fund balance. By 2017-18, with declining enrollment, and no increase in state aid, the projection shows a shortfall of of almost $2 million with only $120,000 in the fund balance.
Donald Sovey, CPA, CFO, of School and Municipal Advisory Services, PC, gave the presentation to the board. He noted that the modeling is based on if things stay the same, and that the current projections would change as new facts become available, such as enrollment, retirement contribution rates, facility and equipment needs, staffing changes and related costs, and state and local funding levels. The state aid in the long range projections was based on the governor’s proposal for the 2016-17 school year. Some maintenance that has been deferred is included in the forecast.
Sovey said he sat down with the building principals and showed them their budgets. “Some of them saw it for the first time,” he said.
He also noted that he recommended a stop to purchasing of all budgeted items for this year. “If it’s not been purchased by now, they probably won’t need to,” he explained.
“This is one of the most stable districts I’ve worked with, but there are still some challenges,” remarked Sovey. “The population numbers are shrinking some over the next few years, and state aid is tied to that. We need to eliminate surprises and upgrade documention.”
Sovey explained to the Post that there is a good accounting system in place, it just needs more refinement. “My job is to process, improve on, and tighten up procedures—to set up an accounting system to provide timely and useful information that can be used to make good decisions.”
He also noted that the audits at the school are always really good. “It’s a great district, and they’ve had some excellent people working there,” he remarked. “Finances in school districts are always a challenge, with the state aid remaining flat.”
Sovey said that the model forecast was done without seeing a new budget. “A zero-based budget is underway. This long range modeling can help us project what could happen if no changes are made. It’s not carved in stone. There may or may not be a deficit by the time the board gets done.”