New Proposal for Mt Lebanon High School

Two Thursdays back, I made a presentation to the Audit/Finance Committee with regards to an alternative approach to our high school construction plans.

Readers of this blog have come to understand a little bit about where I think this District stands financially. Way back in May, after passing the 2008-2009 budget, I expressed concern about the way we handled the budget while not setting ourselves up to prepare for this high school project. In July I posted an analysis of the District's debt obligations. In August I did a comparison of the millage rates in school districts that are comparable to Mt Lebanon and what impact those differences have. In August I also did a analysis of where Mt Lebanon stood in comparison to the debt outstanding at school districts at both the County and State level. In September I looked at the effect the stock market meltdown might have on the PSERS (State Retirement Fund) and what that might mean for the taxpayer down the road. Since May I have also posted articles pointing out the economic issues that face not just the District, but our taxpayers as well.

All of the research that went into those posts led me to the conclusion that significantly raising millage to pay for a large high school renovation/construction project would be detrimental to the future of our community and to our school district in particular.

In putting this proposal together I used some principles to guide me to my conclusion. The criteria I used were the following:
1) We need a project that does not require a 15-20% millage increase next year
2) We need to do some things immediately with the high school to ensure the safety and proper education of our students
3) Over the longer term we need to put a plan in place that will reduce debt and put us in position to tackle large scale construction projects going forward

What I came up with is a presentation that is 14 slides long. I tried to walk through where we are now and how we can get to where I want us to be. The slides include the speaker notes I used for the Audit/Finance Committee meeting. Click on the slides below for a larger image.



Let me add a couple of notes. First, currently there is no consensus on the Board as to whether or not this should be one of the options voted on in February. It is my hope that this plan (or a derivative of it) does become one of those options. Second, admittedly there are some scenarios with the high school project where this approach does not make a lot of sense. If initial investment costs exceed $15 million, then this plan does not address all that needs to be done. Thirdly, there are a lot of scenarios where a plan like this does make sense. If the bond market is closed to us, if the Board decides that we cannot float in excess of $100 million of bonds for this project, or if a referendum on a bond float of more than $116 million fails, then this Board needs a Plan B (or Plan E as the case may be). Finally, I firmly believe the community deserves an opportunity to evaluate a plan that does not raise millage by a significant amount. I am of the opinion that we cannot afford to do nothing but we cannot afford to do everything either. This plan allows for that middle ground.

As you go through the slides you may have some questions. Please finish the slide presentation and then come back here to see answers to some of the more frequently asked questions that I have received from people after talking about this plan:

1) Under this plan, why do we have to wait until 2019-2020 to start a significant high school construction project?

There are a few reasons for this. First, the way our 2005 bonds were wrapped means that we are paying very little towards the principal of those bonds. It isn't until 2017-2018 that we finally start to make a significant dent in them. I'd like to see us pay two full annual payments towards the principal of those bonds before moving forward. Second, the 10 year wait allows us to get a sizable return on investment for the items we need to purchase for the high school immediately. For instance, if we spend $4 million on a new boiler system for the high school and that results in a 50% reduction in energy costs, then it would take approximately 8 years to fully pay for that system based on current utility costs. Based on my talks with Advanced Recycling Equipment, not only are their Biomass boilers at least 30% more efficient than what we currently have, but the fuel used to heat them (switchgrass patties, woodchips, etc) is up to 70% cheaper as well. Additionally, if we went with a FLEX Roofing system that is designed to overlay the existing roof, not only could it extend the life of our current roof by a guaranteed 15-20 years, but it would cost about one-third of what a total roof replacement would cost. That's the long answer on the ten year wait. The short answer is that the wait will allow us to get further out of debt, recoup some of our initial investment on the existing high school, and allow us time to save money for a 'down payment" on whatever project is started in 2020.

2) Where does the initial investment of $10-12 million come from?

The Board has been able to set aside approximately $9 million for a project. Any funds needed over and above this number would be accumulated from an increase in millage over the next few years. That millage increase of 1 mill would be dedicated to funding only the high school project and then future infrastructure improvements throughout the district. We currently do not set aside any millage to accumulate funds to pay for these construction projects. Please see this slide to see a possible high school investment schedule as well as a new high school/debt service saving schedule.

3) Why is it that you believe we cannot afford a significant project at this time?

There are a lot of reasons. Some were not addressed in the slide presentation. The presentation addresses how much debt we have in relation to other districts in the state, looks at some of the debt/income ratios, and points out that Mt Lebanon's revenue is nowhere near that of school districts that have the amount of debt that we are potentially adding. Other facts include the loss of over 500 students over the past 10 years. This loss of students is indicative of much larger trends. I believe that people make a choice on where to live based on many factors including the school system, taxes, and community services. Mt Lebanon has a high tax rate when compared to other districts that offer a comparable education. I am of the opinion that no other municipality matches the services or the community atmosphere found here, but to someone moving to the area from out of town, it is very difficult to communicate those subjective feelings. They see test scores and taxes and they may go to a district that offers a comparable education with a lower property tax. In many ways we compete against these towns for residents and tax dollars. If we were to raise our property taxes another 15-20% to pay for a large project then we should all be concerned about the long term effect that will have on families deciding to relocate here versus Peters, Upper St Clair, Cranberry, and other towns like them. If our taxes are slightly higher than these places, that is one thing. Having them be 20% higher is another thing altogether. Additionally, with 75% of our population not having school age children in their homes, we have to consider those on fixed incomes as well. What happens to the owner of a $200,000 home that is on a fixed income when you raise his or her taxes by almost $1000 per year? I think we need to know the answer to that question before we actually do it.

4) Is there a way to do this without raising millage?

Sure there is. Our budget has revenues and expenses just like any budget does. The type of cuts in the budget that would be needed to rid ourselves of over $2 million in expenses annually would be severe. If somehow the Board managed to do just that, then I believe our community would not stand for the resulting decline of the high standards that residents demand from this District. I would fight such cuts myself. There are smaller scale changes that we can make on a yearly basis. For instance, if we continue to lose students, then we should each year make sure our staffing levels reflect the new student population levels. Just as we would expect to hire teachers and staff when enrollment increases, we should expect that through retirements we can reduce our staffing levels in the case of student population decreases as well.

5) What is a Community Endowment?

When I was at the PSBA Conference back in October I was able to talk to someone who had experience with setting up a community endowment. It is a way for people who really love Mt Lebanon and its schools to give something back. It allows people to bequest assets to the District to fund a multitude of things. Typically these funds go to scholarships. However, in this case, I would be looking for these assets to be pledged to a high school project. Instead of sponsoring a brick for $5000 (which we will still be able to do) perhaps someone wants to bequest stock, deeds, trusts, etc., to the District. Right now we have no way to pledge these assets towards a particular infrastructure endowment. I honestly have no idea how much would be generated over 10 years but if we never start it, we will never find out. Check out the State College Area School District website to see what they are doing with community endowments.


6) Wouldn't a new LEED Certified High School increase property values?

The answer to that is "maybe". Mt Lebanon is no different than most towns in Pennsylvania when it comes to this discussion. There is a certain cost of living involved in any town you look at. One such cost is property tax. If Mt Lebanon was to build a new LEED Certified high school then I have no doubt whatsoever that there will be families that would love to have their children attend that school. Some of those people might be willing to pay any amount to move their families here for that opportunity. From that perspective, one might think that a new school would indeed bring in more bidders on homes for sale and therefore increase prices. However, you also have to see the other side of the coin here. A brand new school in the neighborhood of $130 million would require a very significant increase in property taxes. That increase in tax is a perpetual increase on the cost of living in Mt Lebanon. If you look at a comparative millage chart, you can see that residents of Mt Lebanon already pay higher taxes (about $450 annually) on $100,000 of assessed value than both USC and Bethel Park. If we continue to increase the spread between our overall tax and that of other municipalities, then prospective residents will have to weigh that increased annual tax against the possibility of their children attending a new school. Will those families still choose to locate here? Will it be worth an extra $1,000 a year for a $200,000 home for them to live here to attend that school? I think you can see which way I am leaning here. I feel that the impact on home prices will be neutral at best. But even if somehow home prices increased 20% after we build a brand new school, that would have NO material impact on the budget in the District. Remember, our County Executive has frozen assessed property values at 2002 levels. This means that if my house increases in value from $200,000 to $240,000, the District sees no increased revenue. At best we might see increases in the amount of transfer tax revenue to the District.

Finally, we cannot be naive and think that nobody would be forced out of their homes with a 20% tax increase. That will happen. I know from knocking on doors a year ago that there are a lot of families that are scraping by. Due to the changes in our economy, I have to believe that there are even more families in Mt Lebanon that are struggling to make ends meet now. While I don't think there will be an immediate mass exodus of people out of Mt Lebanon, I think over a few years you might see many more homes on the market that are forced sales. Any owner of a home in Mt Lebanon that is on a fixed income or just scraping by would have to weigh their options and decide whether they want to stay here or move to a place that has a lower cost of living. The possibility of these people coming to the conclusion that they would rather spend their limited income on necessities rather than taxes could result in a glut of home supply that will most likely depress home prices in our area and thereby negate any positive effect a new high school might otherwise have had on home prices.

7) Do we need a new building to properly educate our children?

Just a few years ago this District undertook a massive renovation of each elementary school in the Mt Lebanon. We did not need to build something brand new then. In fact, the Pennsylvania Department of Education held Mt Lebanon up as an example to other school districts in the state in an article called "Renovate or Replace? The case for restoring and reusing older school buildings." In that article there is a quote from an architect that worked on the elementary renovations. He says, " The School Board recognizes its schools are well built and represent a significant investment made by earlier generations...the schools are part of the fabric of the community". Please read the article beginning on page 24 to see where we were just a few short years ago. If you believe that our community wants a completely new school, then you must also believe that there has been a significant change in the social or demographic makeup of our community. How else can one come to such a different conclusion than the one made only few years ago?

The proposal I put out there is a starting point. With a vote scheduled for February, we need to begin the discussion on alternatives like this as soon as possible. I have worked with professionals from many fields, current and former school board members, friends, family, neighbors, you name it. Much of the research I did for this came in the form of knocking on thousands of doors just over a year ago and asking people what they thought about the direction the school district was taking. To all these people I give my thanks. To all those that are reading this proposal for the first time, I offer my gratitude to you as well for caring enough about the District to consider an additional proposal for the future of our high school. Now I would like to ask for your honest feedback. This community is full of innovative, creative, intelligent folks. What can you share that might help this idea along? What can you tell me that does or does not make sense about this approach? Are you strongly supportive or opposed to any of the other plans out there? What are your concerns about those proposals?

Send your thoughts to me at james.fraasch@gmail.com. If you have thoughts for the entire board, please send us all an email at schoolboard@mtlsd.net

Thanks for reading.

James

State Budget Shortfall

Today's front page of the Post-Gazette had the following story:

Rendell: Falling revenues to force cuts

Thursday, November 20, 2008

By Tom Barnes, Post-Gazette Harrisburg Bureau

HARRISBURG -- State officials are putting out the warning: The state's budget situation is bad and getting worse, and lower-than-expected revenues will force painful reductions in state spending.

"We're expecting a shortfall of somewhere between $1 billion and $2 billion" by June 30, the end of the current fiscal year, Gov. Ed Rendell said yesterday.

That was the highest estimate of a shortfall he's made so far, although other state officials have put the looming deficit even higher.

For the first four months of fiscal 2008-09, which began July 1, revenues were $565 million below what had been expected, as tax receipts and state investments fell off sharply due to the ongoing recession.

The governor already had ordered his departments to reduce spending by 4.25 percent, which he estimated will save $311 million. That would trim the 2008-09 budget to about $28 billion.

He has imposed a hiring freeze, a ban on out-of-state travel and a ban on buying new vehicles. He has asked state agencies that he doesn't control to cut their spending, for an additional $39 million in savings.

Next, Mr. Rendell said, he'll order a second round of budget cuts. He also will ask Republican and Democratic legislators to reduce their spending.

He said it won't be easy or enjoyable, as many people's favorite state programs are trimmed or eliminated. Specific details on the cuts are still to come.

"We will do everything we can to do as little harm as possible, but the budget cuts are coming," he said. "I don't want to hear any whining. The cuts will be painful. People have to get ready."

He vowed to do everything he can to avoid "a general, broad-based tax increase" next year as a way to balance the state budget, but with revenues declining so sharply, nothing is off the table.

He said he doesn't want to raise taxes because "that would be hurtful when we are trying to recover economically." Avoiding a general tax increase "is my goal. Can I guarantee we will reach that goal? No. We will work like heck to reach that goal, but right now I can't guarantee anything."

The House Appropriations Committee held a special hearing yesterday on the growing budget deficit, but didn't suggest specific spending reductions.

"We are facing a very difficult road ahead," said Rep. Mario Civera, R-Delaware, minority chairman of the panel. "The economy is showing no signs of improvement, so we must adhere to a much greater level of fiscal restraint. Controlled spending is more critical than ever. Tax increases should not be an option."

At the House hearing, James Diffley, an economic expert with Global Insight, said the current recession is deepening and looks like the worst downturn since 1980-82. The collapse of the housing market, the plight of U.S. car companies and growing job losses are huge problems, he said.

He expects national economic output to decline for four quarters in a row, into mid-2009, which is an exceptionally negative scenario.

There are a couple bright spots for the state budget. There is the $750 million Rainy Day Fund for use in case of emergencies, but state officials don't want to raid it unless absolutely necessary. Also, the state netted $200 million from selling leases for drilling for natural gas in areas of Marcellus shale in the state.

Bureau Chief Tom Barnes can be reached at tbarnes@post-gazette.com or 1-717-787-4254.

While I don't expect the State to cut much into the education budget, the article makes it clear that budget shortfalls are not confined only to those states that have a housing crisis. More than ever, we have got be careful with how we spend our money.

James

November 17th Meeting Summary

We had our normal voting meeting of the Board on Monday night. The agenda is posted here.

First off, the Pledge of Allegiance was led by students from Jefferson Elementary School who then spoke to the Board about one of the character education traits they are learning. This month it was about Honesty. What a great job they did.

In the Board President's report, Mr. Hart spoke of the challenges that will face this district given the current national economic crisis.

In the Superintendent's report, Mr. Allison congratulated the Mt Lebanon High School girls soccer program for an outstanding season. We also heard about an award for teacher Matthew Mikesell for his mock trial of George Washington. Please see this link to learn a bit more about that, including pictures of the students working with Pennsylvania Supreme Court Justice Max Baer. Great job.

Other things of note at the meeting included:
1) A recommendation by the Audit/Finance Committee to put aside a total of $1.5 million for OPEB liabilities. OPEB is the health care retirement fund that the district funds until retired teachers reach age 65. The $1.5 million will fund approximately 3 years of the trust and will get us through to the next teachers contract. In addition to this outlay, the District needs to continue to fund the OPEB Trust Fund each year. I first posted about this back in June and suggested at the time to fund as much as we could until the end of the current teachers contract.
2) There was also a mention of a proposal I put forth for an additional high school project option. I did talk about this at an Audit/Finance Committee meeting on Thursday in order to get some feedback on the willingness of the Board to pursue this option. It generated a very good discussion at the meeting and I am hopeful I will be able to present something to the public in the next month.
3) The Board voted to extend the contract of our bond underwriters. This did not commit us to anything but it did allow us to keep our options open regarding floating up to $69 million worth of bonds. If we had let this expire then we would be back at square one if we decided to pursue something with regards to bond issuance.
4) The Board voted unanimously to approve the graduation requirements and course offerings for the District. During the discussion meeting the previous week I had asked if there were any adjustments made in light of the State's desire to implement Graduate Competency Exams. The administration was confident that our graduation requirements met or exceeded any criteria that the State might put out and that no changes were necessary due to happenings at the PDE level.

One final note. I am soliciting feedback with regards to meeting dates. At the Reorganization Meeting, the Board will set the schedule for the next year of meetings. As I posted last week, the Commission and the School Board meetings conflict on the 2nd Monday of each month. I am willing to move our meetings to another night or the 1st Monday of the month to accomodate those that want to attend both meetings. It might be more difficult to do than it would seem at first glance, but I wanted to get some feedback from people. Let me know if you have any ideas.

That is it for now. Upcoming meetings are as follows:

December 2, 2008 – 7:30 p.m. Reorganization Meeting
Mt. Lebanon High School Library

December 8, 2008 – 7:30 p.m. Discussion Meeting
Mt. Lebanon High School Library

December 15, 2008 – 7:30 p.m. Regular Meeting
Mt. Lebanon High School Library

Thanks for reading.

James

Upcoming Meeting Schedule

I wanted to get this information out there so you can start making your holiday plans. Here is the upcoming regular meeting schedule for the Board:

-November 12, 2008 – 7:30 p.m. Policy Committee Meeting
Conference Room B, Mt. Lebanon High School

-November 13, 2008 – 7:00 p.m. Audit & Finance Committee Meeting
Conference Room B, Mt. Lebanon High School

-November 17, 2008 – 7:30 p.m. Regular Meeting
Mt. Lebanon High School Library

-December 2, 2008 – 7:30 p.m. Reorganization Meeting
Mt. Lebanon High School Library

-December 8, 2008 – 7:30 p.m. Discussion Meeting
Mt. Lebanon High School Library

-December 15, 2008 – 7:30 p.m. Regular Meeting
Mt. Lebanon High School Library

The architect and construction manager gave an update on the High School Project. Really, the most important thing to remember is that we expect to have conceptual cost estimates for public consumption sometime in December. Additionally, we will be holding a number of community meetings to talk and discuss what is happening with this project. Below is the proposed meeting schedule for the high school project:

-January 14- Public forum in the High School Auditorium
-January 20- Neighborhood meeting at Markham
-January 21- Neighborhood meeting at Howe
-January 22- Neighborhood meeting at Jefferson Middle School
-January 26- Special Board Meeting at the High School (location TBD)
-February 16- Board vote on option

Please let me know if you have any questions.

Thanks for reading.

James

November 10th Discussion Meeting

During Monday's discussion meeting there were a few topics that generated the most discussion.

First, we asked for and received an opportunity to extend the bond underwriter contract with Merrill Lynch/Bank of America. This is significant since Merrill had been recently taken under by Bank of America and there was some question as to what would happen with our agreement. The contract doesn't guarantee anything except that we will be able to use Merrill/Bank of America to do the underwriting of our bonds. Interest rates, demand for said bonds, etc, all will be dictated by the bond market and not by this agreement. The agreement, pending the vote next week, will be extended by two years.

Secondly, I had asked to put our 2009 meeting schedule on the discussion agenda. Last year during our reorganization meeting there were a few residents that expressed concern about the fact that the District and the Municipality have overlapping meeting dates. We meet on the 2nd and 3rd Monday of each month while the Commissioners meet on the 2nd and 4th Monday of each month. Residents do not have the opportunity to attend the discussion meetings of both the Commission and the Board. I would not have a problem moving to the 1st and 3rd Monday's of each month to clear up this scheduling conflict. However, if we do move to the 1st Monday then we will not have all financial information available for discussion during our meeting. That presents an issue that could possibly be resolved by having the financial information available to us as soon as possible and then discussing and voting on it at our voting meeting. That is not perfect, but could be an option. Moving the meeting to a Tuesday night, while doable, may not be practical either. Superintendent Allison will be researching the impact of moving the meetings to a different night of the week and should present this information to the Board in coming weeks.

I had thought about trying to change the time of our meeting to 6pm instead of 7:30pm. I just don't know if that is too close to the end of the workday for enough people to attend.

Any thoughts or ideas regarding scheduling would be appreciated.

Thanks for reading.

James

2008 Mt Lebanon Presidential Vote Breakdown

I had a lot of good emails yesterday regarding the voter breakdown from the Kerry/Bush election so I put together the results from last night. You can find them yourself here at the Allegheny County Department of Elections website.

Note that these are not the final "certified" numbers but there is little likelihood they will change.



The overall Mt Lebanon vote broke down to 10902 votes for Obama and 8983 votes for McCain with Obama winning 54.8% to 45.2% in Mt Lebanon.

If you want to see specific Wards and their Districts, please see this spreadsheet for a complete breakdown.

Thanks for reading.

James

2004 Mt Lebanon Voter Breakdown

With the election just a day away I thought I would post a Mt Lebanon Ward Map showing how we voted for Bush/Kerry in 2004.

In 2004 there were a total of 20611 votes cast for the Presidential election. 10727 (52%) were cast for Kerry/Edwards and 9753 (47%) were cast for Bush/Cheney. 1% went to other candidates.



I also thought I would link to a ridiculously detailed spreadsheet of voter registration patterns across Pennsylvania. They break down the numbers by County so you can look up Allegheny and see what has been happening at that level. Two thing about this spreadsheet. First, it is supposed to be accurate as of October 31, 2008. Not sure how the state can do anything that quickly, but ok. Second, it breaks down registration by age, new registrations, changed registration, active/inactive, new voter party, etc, etc, etc.

I am posting here on Google's site because its easier to share and forward to your friends. The original full featured spreadsheet can be found on the Department of State website here.

Hope you found this interesting.

James