Budgeting For Results Mtg - October 13, 2008

[Guest sullinss]

School District No. 2, Yellowstone County

High School District No. 2, Yellowstone County

Billings, Montana

 

October 13, 2008

Call to Order

 

The Budgeting For Results Committee of School District No. 2, Yellowstone County and High School District No. 2, Yellowstone County, Montana met at Lincoln Center, 415 North 30th Street, Billings, Montana, on Monday, October 13, 2008. Chair Malcolm Goodrich called the meeting to order at 5:15 p.m. and led those assembled in the Pledge of Allegiance. Committee members present were: Shanna Henry, Joel Guthals, Mary Jo Fox, Don Stanaway, Malcolm Goodrich, Paige Darden, Kelly Donovan, Deana Elder, Rod Gottula, Bruce MacIntyre, Ross Johnson, and Joan Sleeth. Members Peter Grass and Jane McCracken were absent. Also present was CFO Thomas Harper, District Clerk/Internal Auditor Leo Hudetz, BEA President Jeff Greenfield, Rocky Mountain College President Michael Mace, and Thomas Murphy President & CEO of North by NorthWest Capital Corporation.

 

Communication From the Public

 

No one wished to address the Committee at this time.

 

Chair Goodrich suggested deferring agenda item E, Budgeting For Results Process, to the November Committee meeting or a special meeting with Trustees due to the presentations and length of the agenda.

 

Don Stanaway moved to defer agenda item E, Budgeting For Results Process, to a future meeting. Bruce McIntyre seconded the motion. The motion carried unanimously.

 

Consent Agenda

 

Bruce McIntyre moved to recommend Board approval of the Consent Agenda items as follows:

1. Minutes of September 08, 2008

2. Addition of Middle School Math Day Trust Fund Account at Lewis & Clark

3. Addition of Meadowlark-PTA Trust Fund Account at Meadowlark

Don Stanaway seconded the motion. The motion carried unanimously.

 

Report on Qualified Zone Academy Bond (QZAB) Program

 

Thomas Murphy, President & CEO of North by NorthWest Capital Corporation presented information on the Qualified Zone Academy Bond (QZAB) Program. This is a Federal program created in 1997. Congress approves $400M per year to be lent interest free to qualified schools. Montana’s is administered by the Office of Public Instruction. Funds can be utilized for: 1) renovation and repair of facilities, 2) equipment and technology, 3) curricula development, and 4) teacher training. Funds cannot be used for new construction (adding new square feet). A 10% private match is required. The investor receives a tax credit in lieu of interest. Each school borrows individually and qualifies if 35% or more of the students are eligible for free or reduced price school lunch or if the school is located in an enterprise community or an empowerment zone. Private contributions can come from individuals, corporations or foundations. These contributions can be anything from cash and equipment to mentoring.

 

Montana OPI accepts applications and allocates the QZAB authority on a “first come, first served” basis. The bank lends the QZAB funds to the school district. There are two sources of repayment: 1) VOTER APPROVAL REQUIRED: general obligation bonds or Federal Impact Aid Revenue Bonds; and, 2) VOTER APPROVAL NOT REQUIRED: bond sold to Montana Board of Investments or the district’s general fund budget.

 

If you apply for approval and allocation and bonds are not approved in an election, the district can return the allocation at no cost to the district. Trustees need to approve the application, and the projects must be specified. The process takes 3-6 months to get the allocation. The maximum term of 14 years for repayment is set for the IRS by the Treasury once per month. They customize the repayment schedule to fit the district’s cash flow vs. forcing a cash flow on us. The fees are 5% for the first $2.5M on a sliding scale and includes the bond counsel fee. An allocation is usually for two years, at which time the district can reapply.

 

Malcolm suggested the possibility of using these funds for curriculum and teacher training which would free up general funds for other uses. Joel suggested the possibility of investing in energy saving capital improvements and in turn project a cash flow; and, therefore, not need to seek voter approval.

 

Mr. Murphy said if we receive the allocation, we would establish a QZAB account with Rocky Mountain Bank for a clear audit trail. The money would stay in Rocky Mountain Bank and the District would parcel it out. We can earn interest on our reserve money in Rocky Mountain Bank. There is a five-year spending period to use the money, and we can earn interest during that time. We would also have five years to raise the matching funds. The 10% match can be “in-kind” contributions.

 

We would need to pay 100% of our QZAB fees from our general funds. Bruce asked if QZAB fees could be paid from matching funds. Mr. Murphy said that may be a possibility. Thomas advised BPS is already on the OPI “first-come first-served” waiting list as a place holder for a future program allocation for “X” dollars for year 2008. Montana gets about $1.4M every year to allocate. Deer Lodge is ahead of us on the list for $500K.

 

Joel Guthals moved that this Committee shall recommend to the Board of Trustees to proceed with evaluation of the QZAB Program and application for bonds if uses for the bonds are determined to be feasible. Deana Elder seconded the motion. The motion carried unanimously.

 

Ross Johnson left the meeting at 5:50 p.m.

 

Consent Agenda

 

Joel Guthals moved to waive the rules to reopen the consent agenda. Mary Jo seconded the motion. The motion carried unanimously.

 

Joel Guthals requested specific changes to paragraph two of the September 08, 2008 minutes under subject heading Proposed Facility Projects 2008-2009 to clarify the intent of the wording. Joel Guthals moved to approve minutes of September 08, 2008 as revised. Bruce McIntyre seconded the motion. The motion carried unanimously.

 

403(b) Plan – Vendor Recommendations

 

The 403(b) Committee was charged with the duty of meeting the new IRS guidelines and performing a search and selection of vendors to provide investment options to the employees of Billings Public Schools. The 403(b) Plan provides no financial benefit to the District; this program is strictly an optional benefit to the employee. Over the past 10 months, the committee has been working on these tasks. A plan document that meets IRS guidelines has been developed and approved by the Budgeting for Results committee and the Board of Trustees. There are currently 60 vendors in the District. Requests for Proposals were sent out to over 70 vendors and 20 RFPs that have been returned have been evaluated. The committee enlisted the services of Gallagher Retirement Services of Denver to assist in the RFP process. Gallagher provided expertise in developing a standardized RFP, compiling the results received and performing analysis.

 

The 403(b) Plan Committee has kept the employees of the District informed of its actions and recommendations throughout this process. There have been 5 letters sent to employees and 2 district wide meetings held. In addition, the three collective bargaining units’ presidents are members of the 403(b) committee.

 

The Budgeting For Results Committee is being asked to approve, and forward to the full Board, the 403(b) Plan Committee recommendation that the following vendors be approved to participate in the Billings Public School’s 403(b) plan: ING, AIG/Valic, Hartford/UBS, Ameriprise, and Security Benefit. In addition, the Committee recommends that ING be retained as record keeper with administration responsibility.

 

The IRS believed they were losing tax dollars so their new guidelines make the 403(b)’s mirror 401k’s. This adds fiduciary responsibility to the District to monitor employee contributions, and hardship withdrawals, etc. We have about 400 employees participating in 403(b) programs. Narrowing vendor choices to 5 improves the ability to manage the program. After vendors are approved, the 403(b) Committee will organize 403(b) Fairs to bring in those vendors so employees can come and talk with them regarding their fees and costs and make their own investment decisions. This will also allow vendors to have an equal chance to sign up employees without being intrusive to employees at their school locations.

 

An employee currently enrolled with a vendor that did not get picked can roll their 403(b) money into one of the five vendors, or freeze their account; because, after we adopt these five vendors employees cannot keep putting money into a different vendor. Three of the vendor finalists are open to third parties selling through them.

 

ING offers a very comprehensive service to record keep and administer funds at no cost to the District or participating employees. An administrator must provide numerous services which include information sharing agreements, 1099’s, loans, hardship withdrawals, etc. All of the other vendor finalists approve of this scenario. A separate third party administrator would charge $2-4 per month per purchase. Don questioned how ING could perform this record keeping/administrative service for free. Leo thought it may be one of the costs they were willing to absorb because they wanted to increase their business in this area and perhaps thought it was a competitive advantage.

 

Joel questioned if any efforts had been made to check out these vendors as a result of the crises in the financial service industry. Leo said Gallagher Benefit Services, Inc. believes the retirement division of AIG is sound; and, AIG also says it’s sound. AIG ratings have gone down two notches; ratings for the other vendors have remained the same. The underlying risk is the mutual funds the employees invest in; whereby, AIG is the trustee for these funds. The 403(b) Committee does not believe it’s an issue requiring removal of AIG from the vendor list.

 

Leo advised the new IRS 403(b) guidelines must be implemented before the end of this calendar year, and conversion can take up to 60 days.

 

Joel and Malcolm believe the District has implied fiduciary responsibility as the trustee for the 403(b) plan; therefore, they question consideration of vendors that Gallagher considered “passed with reservations.” Rod believes since it’s the employees’ choice and money that the District is not at risk. Leo said Gallagher is doing their due diligence via these comments; but, Leo agreed there is a level of fiduciary responsibility on the part of the school district. Due diligence would mandate a need to meet a number of times a year to analyze vendors and their investments. If returns appear out of line there may be a need for District action to ask them to change the funds they’re offering or drop them as a vendor. Bruce believes we may be increasing our exposure by narrowing our vendors down to five. Rod said as a representative of 1200 employees that are eligible for this program, he believes we need to put this process in motion.

 

Joel Guthals moved that the Committee shall recommend to the Board of Trustees :

1. ING be retained as the record keeper with administration responsibilities for the Billings Public Schools 403(b) Plan.

2. The Board of Trustees shall select the following vendors as approved to participate in the Billings Public Schools 403(b) Plan: ING, Ameriprise, and Security Benefit with the additional vendors AIG/Valic and Hartford/UBS to be considered upon a follow-up report from the 403(b) Committee as vendors for the plan.

Shanna Henry seconded the motion.

 

Joel does not believe the first three vendors need an opinion of counsel. Joel believes the additional two should be studied by the 403(b) Committee, and if the reservations cannot be removed at that point they would be referred to counsel. Rod suggests we need to offer employees diversity, and we could pass all five vendors withstanding any negative financial information in the next couple weeks. Malcolm suggests doing the due diligence regarding financial stability of AIG and Hartford and having the 403(b) Committee report back to the Board. Leo is concerned with the time constraints it may be difficult to have the attorney review these before the next Board meeting.

Chair Goodrich called for the vote. The motion carried unanimously.

 

Chair Goodrich advised that following due diligence on AIG and Hartford the Board can still approve all five vendors.

 

Proposed Lease Purchase Agreement

 

In FY2008 the Board decided for budget reasons to close the Kindergarten Center at 2803 13th St. West. The District received a proposal from Rocky Mountain College (RMC) to enter into a Lease Purchase Agreement for this location. RMC President Michael Mace presented details to Committee members stating they want to pay $66,616 rental rate per year; with $45,942 of that rent to be applied to the purchase price of $998,750. They want to partner with the District in two ways: 1) offer high school dual credit; and, 2) make three classrooms per year in the Rimrock School facility available if SD#2 needs space for K-6 students in that building. They will maintain facilities for SD#2 for elementary education in the building. They have a Masters of Educational Leadership program and would like to use that facility as an internship opportunity. The term of the lease would run until year 2034 at which time the property would become the property of RMC. RMC would take care of capital improvements to the building if it becomes a long-term lease/purchase agreement.

 

Rod said RMC faculty cannot teach dual credit courses unless they’re licensed through OPI; student teaching is at the discretion of the teacher whether a teacher chooses to accept or not accept a teacher; and, there is objection to Jo Swain administering SD#2 employees. Rod believes the District should retain the property since the campus is of the size and location that could house a new school. He urged the District to establish a long-term vision for schools and rather than renovating McKinley and we should use facilities and locations we already have.

 

Paige shared her concern for losing a mid-town facility as a loss of flexibility in terms of how we proceed with remodeling existing facilities. We own this facility and have access to this space if we need it. Paige does not support the lease/sale agreement.

 

Thomas advised the 5.5 acres can only be used for education; there is no commercial value since RMC retains reversionary rights to the property. Malcolm reminded Committee members of the significant improvement costs associated with that building. Thomas said the Agenda Setting Committee discussion was to refer it to a Board subcommittee to study and recommend to the full Board; or, to have Administration work on the details with RMC and make a recommendation to the full Board. Joan believes the Long Term Facilities Committee recommended keeping Rimrock since it was the only piece of property large enough to build on if they tear McKinley down. Superintendent Copp’s forwarded his recommendation that SD#2 sell Rimrock School to RMC if the terms of sale are mutually acceptable; that the terms of sale should be negotiated by an appropriate subcommittee of either the Board of Trustees or BFR Committee including recommendations to the full Board. The Superintendent prefers an out-right sale but is not opposed to a lease/sale agreement. Shanna said we wouldn’t be building on the Rimrock location without closing another school because Rose Park is not at capacity yet. Mary Jo is opposed to selling the Rimrock property because of it’s value and size which allows us flexibility for future uses.

 

Mr. Mace said he has compassion to find a solution for the need of the group of students living around that school; and, this is an attempt to solve that problem with this proposal and as a buyer for property for RMC. RMC is going to grow to 1400 students and needs additional space. A School of Education located there would be of benefit to both groups. If SD#2 doesn’t wish to sell, they will find another solution.

 

Rod questioned if the land could be subdivided so RMC could obtain part of the land and the District could keep 3+ acres. Conversation indicated there may be some flexibility in some sort of sharing relationship.

 

Joel said the Board thinks it’s premature to enter into a long term lease/purchase agreement on this facility or to sell it until they get further into their long-term facility plan and have more information.

 

Mr. Mace thought we should continue dialogue if there is opportunity to subdivide. He discussed with his RMC Board about the fact that if SD#2 would offer a bond issue RMC would buy part of the bond issue and gift it back to SD#2.

 

Rod Gottula moved to recommend to the Board to reject the lease agreement proposed by Rocky Mountain College and that any further proposals be dealt with in a case by case manner rather than a package situation so we deal with each thing one at a time whether it’s dual credit, whether it’s the last school, whether it’s the student teacher placement - that we deal with those issues piece meal. Joan Sleeth seconded the motion.

 

Joel thinks the better action would be to recommend to the Board that this be referred to Administration for further study and review and also for the possible appointment of the Ad Hoc Board Committee to study a possible cooperative venture with Rocky Mountain College on Rimrock property.

 

Mary Jo disagrees. We should say that this Committee recommends we reject the sale; and, to entertain other options if there are any admissible to Rocky Mountain College.

 

Rod is willing to change his motion to say “sale of the property” not the “lease.” Rod is comfortable with the lease.

 

Malcolm verified that the amended motion would say something like it’s recommended to the Board to reject the concept of the sale of Rimrock; but, the Board could continue forward with negotiations for cooperation and/or possible use short of an absolute sale, and on any other terms, bringing those terms back to the Board.

 

The piece meal part would be part of the negotiations process. This would be a formal amendment so we will vote on the amendment first and then vote on the original motion as amended. Mary Jo so moved. Joel did not make a motion, he made a comment. Joel seconded the amendment. The motion carried unanimously.

 

Chair Goodrich said now we vote on the original motion as amended: that this Committee recommends to the Board that Rimrock School shall not be sold at this time. The amended motion carried unanimously.

 

Chair Goodrich thanked Mr. Mace and advised the Board would move forward with this.

 

The Chair recessed the Committee at 7:15 p.m. The meeting reconvened at 7:20 p.m.

 

Increase in Adult Breakfast & Lunch Price

 

In July, 2008 the District recommended and the Board approved a .15 cent increase in the Adult Breakfast and Lunch price. A letter from OPI was received mandating a minimum charge for meals and larger portions must be charged according to cost. In order to comply with the National School Lunch and Breakfast Programs the District is recommending the following:

 

Adult Current New

Breakfast $1.30 $1.40

Lunch – Elem Schools $2.75 $2.80

Lunch – MS/HS $3.00 N/C

 

Thomas explained if we don’t raise the prices it would be considered a benefit.

 

Mary Jo Fox moved to recommend the Board approve increasing the Adult Breakfast and Lunch prices to comply with the National School Lunch and Breakfast Program guidelines. Bruce McIntyre seconded the motion.

 

Voting for the motion was: Shanna Henry, Mary Jo Fox, Don Stanaway, Malcolm Goodrich, Paige Darden, Kelly Donovan, Deana Elder, Rod Gottula, Bruce MacIntyre, and Joan Sleeth. Voting against the motion was Joel Guthals saying the increase was not enough. The motion carried.

 

Bills Paid – September, 2008 (summary sheet)

 

The Committee reviewed the bills paid for September, 2008. Joel Guthals moved to recommend Board approval of the bills paid for September, 2008. Kelly Donovan seconded the motion. The motion carried unanimously.

 

Financial Reports – September, 2008 (Unaudited)

 

The Committee reviewed the unaudited Financial Reports for September, 2008. Thomas reported there are no abnormal variations. Thomas explained the deficit in the CARE Program is from this year and is a timing issue in receiving payments.

 

Health Insurance – Financials – August, 2008 (Unaudited)

 

The Committee reviewed the unaudited Health Insurance Financials for August, 2008.

 

Adjournment

 

There being no further business, the meeting was adjourned at 7:40 p.m.

 

 

 

 

 

Malcolm Goodrich, Chair

 

 

 

Sherrill Sullins, Recorder