August Newsletter 2014

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Welcome to the 2014/15 school year. As you have likely heard, our hopes for a State School Bond this year did not come true. The Governor had his way and got the Water Bond but wasn't willing to incur debt for schools as he did not want competition with the Water Bond.

This news is challenging to deal with and I am very aware of the significant facility needs that exist for all of our clients and the dependency there is on State funds to augment any local funds available. It even becomes more challenging to pass local bonds when there is not State funds available to allow the local bonds to accomplish more facility projects.

The only good news is that the efforts will continue in 2016. As we have done before, we will need to be extra vigilant to understand what must be done with the limited funds available and make sure the highest priority needs are the main focus, while continuing to plan for the projects that have eligibility in the State Building Program. It is still great planning to get projects in line for funding as we never know how much funding will be available when a future bond does make it to the ballot. By getting facility projects in line it provides two benefits. One, it reserves your place in line for funding. Second, it demonstrates the facility needs to our State leaders so the next bond can be sized appropriately.

Another reality that Districts are faced with is that the local bonds are the only significant source of facility funds available at this time. Until development picks up, the amounts collect in developer fees will not be able to fund any significant facility projects. Good luck to all those Districts that have School Bonds on the ballot this November.

The SAB had a meeting on Wednesday, August 20th. They met earlier than normal in an attempt to fund the ERP (Emergency Repair Program) projects that were allocated funds from this years' State budget.

State Bond

Although the bond did not make it to the ballot, there are some insights we have gained based on the language that was in the proposed bond bill. Some of the significant items we saw was that they were going to require an update to the eligibility documents to verify the projects were still eligible. Although this sounds simple enough, for some Districts it could change the eligibility to the point where they may lose a project or even gain eligibility for additional projects. Another interesting item was the requirement to incorporate several of the high performance standards into every project. Obviously there would need to be discussion on modifying the grant amounts to make this requirement equitable. Another new criteria for Districts participating in the State Building Program was going to be a requirement to submit a facility inventory. The State goal is to create a statewide database of basic facility data to better understand the ongoing needs for school facilities.

Finally, the bond started off around $9 billion but had been reduced to $4.3 billion in the Senate. The amount was very conservative and, therefore, it is my suggestion to make sure there are plenty of projects in line to justify an adequately sized bond for 2016.

State Alocation Board Meeting Notes

The State Allocation Board held a brief meeting on August 20th.

The biggest item at this meeting was funding for ERP (Emergency Repair Program) projects. $93.4 million in projects were funded and another $90 million should be funded at the October meeting as soon as the cash is made available to the SAB.

There was only one Appeal item on the agenda for the meeting. However, it was moved to the Consent Calendar and approved. The item was for Dinuba Unified and it was on the topic of Level 2 developer fees. Since Level 2 fees are supposed to be used for facilities to house students from new development projects, the District argued that those funds cannot be used as a match for the District modernization projects which were being funded under the Financial Hardship Program.

There are $392.6 million in processed projects that exceed bond authority. There are also $574.4 million in projects that have been received but not processed by OPSC. This results in a total of $967 million in projects that exceed the current bond authority. This creates the beginning of the demand for a State Bond in 2016. It is likely the amount of projects in line by 2016 will reach around $3 billion. Due to this potential volume, it becomes critical to get your projects in line so you can be funded earlier once a bond or other sources of funds become available.

The next SAB meeting is scheduled for September 24th but most likely the next SAB meeting will be on October 22nd. It was a little frustrating to hear so little after such a tremendous effort to try to get a bond for November. However, this has happened before so we know everything will continue to operate and the school Districts will need to trust that the SAB will be dedicated to reimbursing projects in 2016.

Final Notes

If anyone has the opportunity to do a local bond in 2015, now would be a great time to begin planning. Doing a Master Plan helps identify the facility needs and to prioritize them. This makes for a great document when working with the community to illustrate the District needs and its plans for school improvements. When conducting a local bond with a 55% yes vote requirement, most Districts should be able to get a successful result if they start with a good planning effort up front.

For anyone that has already passed a bond or for those about to try for a bond election, the best advice I can offer at this point is to plan your projects so that you can take care of the most important items while at the same time, apply for State funding. This will allow the District to get reimbursed when funds become available and then those funds can be used to do a second round of projects.

For our clients that have eligibility for specific facility needs but no local funds that can be raised, the only alternative may be a lawsuit. It was stated by Senator Buchanan that this issue may need to be decided in the judicial branch instead of the legislative branch. We will see what happens in the near future especially in the SSDA organization where it is more likely for Districts not to have the resources to meet their facility needs.

Sincerely,

Ken Reynolds

President

SchoolWorks

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