I attended the first 2015 meeting of the TE School District’s Finance Committee this week that focused primarily on the preliminary 2015-16 budget. According to the District’s capital sources and uses report, there is a projected capital need of $24 million over the next five years. The Finance Committee discussed options to fund these planned facilities projects … either to borrow $18 million or $24 million. Citing the District’s stellar credit rating and the historically low-interest rates, the committee members supported this borrowing approach to help pay for the new construction and needed renovations to existing buildings. However, because TESD currently has a $32 million fund balance, some in attendance at the meeting questioned adding debt in this way.
Another topic that received some discussion from audience members was Dr. Gusick’s proposal to add a couple of new director positions in the District. Gusick explained that Robin McDonnell, Director of Assessment and Instructional Technology for the District, will be retiring in June and thinks that the job requirements are such that they now require two people, a Director of Technology and a Director of Assessment. I don’t know that anyone would question Gusick about the need for the positions, but may question the suggested salaries — $160k/yr. for each position.
Ray Clarke also attended the Finance Committee meeting. Following the meeting, he emailed comments to the school board and sent me a copy for Community Matters. Below is an excerpt from those remarks:
First, I would like to thank you for the presentations at last night’s Finance Committee meeting proposing to restructure the Administration team and to make a $18 to $24 million bond issue. We are at the stage in the budget process where many worthy proposals are on the table. Dr Gusick’s idea for qualified Directors of Technology and of Assessment is one of them, but the compensation gives pause: salaries of $160,000, plus 30% PSERS, plus $20,000 healthcare, plus ……? Unfortunately, accepting all of them – even with the maximum 3.7% tax increase – leaves the District with an unsustainable deficit approaching $2 million.
This makes it all the more important for you to critically examine the one discretionary spending item that defies understanding – raising $18 million that the District does not need, and will cost taxpayers over $28 million to repay. Further, you propose to eliminate the annual $300,000 savings from last Fall’s bond re-financing rather than giving taxpayers some offset to the otherwise continual expense increases.
The proposed financing is driven by a capital plan for the four years from 2015/16 to 2018/19 that calls for spending $30.7 million, while only $6.9 million will remain in the Capital Project Fund at the beginning of the year. The assumption is that the $24 million gap has to be filled by 75% bond funding because “that’s the way we have always done it”. However, we have not always had a General Fund Balance of $32 million earning negligible interest.
Instead of contriving financial schemes to defer interest on the new borrowing beyond the $300,000 of lost savings (and increase total borrowing costs), I believe that it is your fiduciary duty to present and analyze other options that show some fiscal restraint.
For example, a transfer of $16 million from the General Fund to the Capital Fund would take the District through 2017/18 and even through 2018/19 – if just $2 million of capital spending was deferred. At that point the 2014 bonds are repaid and there is leeway for bond financing without a premium for a convoluted structure that defers interest and principal repayments. You avoid the three quarter of a million dollar annual expense (loaded on future generations) for the unneeded 4% bond money sitting under the District mattress. And there is still $16 million in the General Fund for contingencies that you can not tax for (contrary to the $10 million “committed” to PSERS, which you can and do raise taxes for). There is already over $5 million “committed” to Capital Projects.
In the last five years, TESD taxes have risen at twice the rate of inflation and this is forecast to continue in the preliminary Budget. Radnor is finding a way to limit next year’s tax increase to the State Index 1.9%. There is great risk to the value proposition that brought many of us to Tredyffrin. As taxes rise relative to our neighbors, the more likely that existing communities and new ones like Wayne Glen will be unaffordable to those without families, the more children will enter the school system and the worse your problem will get.