The New Lenox School District 122 Board of Education huddled together Jan. 9 at a special meeting to review its financial planning.
The workshop, jumpstarted as part of the District’s biannual review, aims to examine projects and finances, set priorities, affirm a philosophy and proactively plan.
“One thing that I’m really proud about with our district and what our boards have done over the last five years [are that they’ve] been to be very proactive and not reactive,” Superintendent Peggy Manville said. “I think what happens sometimes when you hear about districts having trouble and things happening throughout the state, it’s because they’re just reacting.”
At the meeting, areas of focus targeted were the District’s financial status, operational and facility needs, projected revenues and expenditures, the state of the state, five-year financial forecasting and existing debt.
The District prides itself on not spending more than it takes in, meeting facility needs using cash and working to pay down existing debt.
District 122 currently has identified $53.7 million of capital projects to pursue through 10 years.
This upcoming summer, the District has identified an estimated cost of $4.4 million of work to complete. What this includes is the HVAC system at Haines School, the painting of some school buildings, gymnasiums and hallways, seal coating of parking lots, improvements to gym flooring at Liberty Junior High School. Bids for these projects will be read and reviewed by the Board of Education in February.
The District has not yet solidified what projects will be addressed in the summer of 2019 or beyond.
The Board of Education went on to examine an overview of revenues depicted in the five-year financial forecast, with several assumptions made for the levy, in terms of the rate of inflation, new property growth, and other sources of state and federal aid. The state of the state also has District 122 projected to lose about $1.5 million in aid this year and not being able to assume they’ll get the categorical payments for transportation in future years.
On the expenditure side, items are identified as far as salaries, benefits, future staffing, technology initiatives, utilities, transportation and other costs.
Projections shown to the Board of Education reveal a net of about $2.8 million is collected versus spent on the District’s everyday bills this year, and the net change averages out to an estimated $2 million surplus every year thereafter for five years.
The District is projected to end the year with an estimated $30 million fund balance, which equates to a 60 percent fund balance, in terms of revenues versus expenditures. That amount goes down by about $8 million over five years to pay for capital projects.
In fiscal year 2023, the net fund balance is projected to amount to $22 million, or a 38 percent difference between expenditures and revenues.
Business Manager Groos said though the fund balance is shown to drop over the next five years, the District is still considered to be on good footing.
“We’re kind of strategically spending down our fund balances slowly, not extremely fast, but we’re using some of the existing fund balances we have and the surpluses we have to knock off several of these [fiscal year 2018] projects,” Groos said.
The Illinois State Board of Education recommends that districts secure a 25 percent fund balance.
Board Member Michele Degroot Rosenfeld called into the question the District’s ability to say that they have a surplus and said this is “misleading” when the board is spending its savings to pay for improvements.
“If you look at the numbers and include the capital improvements, we’re spending more than we’re bringing in, and I think we have to include the capital improvements when we’re figuring out, if we’re going to explain to people what our revenue is and what our expenditures are,” she said. “Our expenditures are higher than our [revenues.] I understand we’re doing capital improvements, but to say that we have a net of $2.7 [million] this year is not really accurate because we’re … spending $1.2 million more than we’re bringing in.”
Manville tried to temper the concern raised by Degroot Rosenfeld.
“It is accurate because that it is what we’re spending only,” she said. “We’re choosing then, as a group, to say now, we’re going to get into savings and do the capital projects. So, it would be misleading to say to the public that we’re overspending. We’re not. We do have a net; we do have a surplus. Now, we’re choosing to take the surplus, plus go into our savings and take more money.”
Manville explained that they’re deficit spending, instead of adding debt and went on to say it would be wrong to roll together the District’s everyday bills and one-time expenditures for capital projects and debt service payments to make sense of the finances.
Degroot Rosenfeld said the point she is trying to raise ultimately is that District 122 is too aggressive in tackling capital projects.
The Board of Education moved on to examine an overview of its debt and take a look at the bond market.
District 122’s current debt service payment levies for about $9.6 million.
Elizabeth Hennessy, managing director of public finance for Raymond Jones Financial, said the landscape is trending favorably for districts at this time, as interest rates are relatively low.
Hennessy suggested that District 122 consider restructuring bonds as early as 2019, to avoid the point at which interest rates are due to spike.
“You do have some bonds outstanding that are taxable already,” she said.
The recent passing of a tax reform act included a piece of the law that disallows advanced refunding on a tax-exempt basis for bonds with future call dates. If District 122 elected to restructure these debts, they could do that on a taxable basis, though it draws higher interest rates.
District 122 intends to clear its existing bond debt by 2031.
County facility tax in talks
Also during the meeting, the Board of Education was presented information on a proposed county facility tax.
The measure, if approved with favorable support from Will County’s school districts, imposes a new sales tax of one percent at a maximum.
The way it works is all the money generated is used for school facilities improvements or to pay off bond debt.
To date, there are 49 counties that have the county facility tax in place.
School districts will commonly use bonds, go out to referendum, or dig into their savings to complete capital improvement projects.