Budgeting For Results - December 10, 2007

[Guest sullinss]

Proceedings of the Budgeting For Results Committee

School District No. 2, Yellowstone County

High School District No. 2, Yellowstone County

Billings, Montana

 

December 10, 2007

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, December 10, 2007. Chair Katharin Kelker called the meeting to order at 5:30 p.m. and led those assembled in the Pledge of Allegiance. Committee members present were: Katharin Kelker, Shanna Henry, Kari Altenburg, Peter Grass, Dan Farmer, Joan Sleeth, Joel Guthals, Mary Jo Fox, and Don Stanaway. Absent were members Duane Smith and Curt Prchal. Also present was CFO Thomas Harper, Executive Director of Facility Services Rich Whitney, Skyview English teacher Rod Gottula, Superintendent Jack Copps, Bea President Jeff Greenfield, Jerry Hansen from the community, and Shawn Byrne the Chief Operating Officer of the Yellowstone Boys and Girls Ranch Community Based Service Programs.

 

With consensus from Committee members, the Chair stated subsequent Committee meetings would begin at 5:15 p.m. rather than 5:30 p.m.

 

Communication From the Public

 

No one wished to address the Committee at this time.

 

Consent Agenda

 

Mary Jo Fox moved to recommend Board approval of Consent Agenda items as follows:

1. Minutes of November 12, 2007

Dan Farmer seconded the motion. The motion carried unanimously.

 

Budget Forecast/Mill Levy Considerations

 

Jack Copps reported the October headcount of student enrollment in Billings Public Schools as compared to last year shows a gain of 95 in grades K-6; a gain of 1 in the middle schools; and a loss of 200 in the high schools. District-wide we have lost 500 students in the last 11 years.

 

If we assume the money from the levies passed last year was used for what they were intended to the benefit of the school district and that money is important as on-going money, then we must assume what we spent last year is what we will need to spend this coming year plus more. 90% of the budget is personnel. If we assume a 3% increase in pay to keep up with inflation and marketplace salaries, and don’t receive the revenue, we would need to cut back. Next year the State will provide the school district with a 1.7% increase. At the high school level, we can handle a 3% increase in compensation because last year due to the levy we used approximately $796k to shore-up our reserves to 5%; and, now the $796k is continuing resources that are available at the high school level for other purposes, if so intended. We do not have those resources at the elementary level; so, without an elementary levy, and if we provide a 3% cost increase to staff, we have a shortfall. If we do not pass an elementary levy, we are looking at a loss of 24 teachers in addition to expected retirements.

 

If we want to provide a cost of living increase we must ask for a maximum elementary levy of $870,672. The levy would have minimal impact on taxpayers. Last year’s levy had no impact on taxes due to the growing tax base in the community. The Trustees would need to call for the levy and this Committee can recommend to the Board to have this levy. Last year the levy went for texts, and security cameras, etc., but excluded salaries. This year, any levy we have would need to help with resources for staff. Other districts across the State are looking at providing 3.5-4% increases.

 

Thomas confirmed the shortfall of $2,874,629 in the FY2009 Elementary budget and the shortfall of $1,728,075 in the FY2009 High School budget even with the passage of the mill levies in both Districts. The FY2009 budgets include the budget assumptions: 1) Facilities moved from Deferred Weatherization & Maintenance back to General Fund; 2) Business Office costs moved from Indirects back to General Fund; 3) passage of Elementary mill levy; 4) vacancy savings; 5) 3% salary increase; 6) 9% Insurance increase; and, 4) 2.5% non-personnel increase.

 

Jack recommends this Committee ask the Board to proceed with authorization to have an elementary levy; and, also recommend that there not be a high school levy. Jack said we do not benefit from an increase to the tax base – we only benefit from additional levies. We have used one-time money and are now struggling to get those obligations back into the General Fund where it requires on-going resources. We are also looking at $80M of deferred maintenance in this District. In June of 2008 our District will have no bond indebtedness. We have an obligation to address our level of maintenance.

 

Joel asked if there was anything we could do to reduce teaching staff without significantly affecting the quality of teaching. Jack said it’s difficult to cut at the K-6 level, because if you believe in the concept of neighborhood schools; then the number of students in classes would vary. If we go to the concept of sister schools, or move boundaries to fill classes, you would save 48 teachers at the elementary level. In the middle schools you can reduce the number of periods per day and reduce the number of opportunities for learners. At the high school level you can set minimum class sizes or reduce electives. We try to stay within the same student/teacher ratios that they see across the Northwest.

 

Joel asked if there was any number of elementary teaching staff that could be cut in lieu of a full levy or partial levy. Jack replied they could send Kindergarten students back to most of their respective schools and save the operating costs of Rimrock. Not all schools could absorb them, but Orchard has room. We had start-up one-time-only money for full-time kindergarten and also backfilled with money from the previous year.

 

Shanna asked why some Business Office personnel salaries were put back into the General Fund from Indirects. Thomas replied there is less Indirect money being generated for funding. The Chair said negotiations will start after the first of the year and the Board needs to call for an election 40 days before May 6, 2008. In past years the sense of our community seems to be if they vote for the levy, it is not to be used for salaries.

 

Peter Grass recommends we ask for the Elementary Levy. He believes the $800k is saleable to the public with a minimum taxpayer impact.

 

Dan believes to sell the levy to the public we need a credible wage and classification study for them to see. He also encouraged longer term labor contracts. The Chair advised that the Legislature gave a 3% increase last year but did not sustain it for next year; and, they only grant a 2-year look into possible funding.

 

Jack does not believe it makes sense to run a high school mill levy for $200k. It would not be in our best interest to lose the levy by asking too much of the public. He understands the value of $200k, but we will have a very serious problem if we don’t emphasize and pass the elementary levy.

 

Joel asked how we would cover the shortfall in the elementary even if the levy is passed. Jack advised we would cobble together one-time kindergarten money and one-time Deferred Weatherization & Maintenance dollars by leaving the maintenance salaries in there until year 2010. Joel suggested we could ask for Building Reserve levies to help address our maintenance needs.

 

Jerry Hansen addressed the Committee asking to see the miscellaneous program budget; he wants to know what we’re going to keep in the budget; and, he is in favor of a mill levy.

 

Jack said Education will have to decide whether or not the Legislature satisfied the constitutional language which may require further court action. Education received the lowest percent increase compared to other State agencies. One out of every nine students in the State attends the Billings School District which means we should have received $16M of the budget; but, we will be receiving only a 1.7% increase. We need to be advocates for kids.

 

Chair Kelker summarized the discussion with the following points: 1) reasonable support for running an elementary mill levy; and, 2) how we explain the mill levy to the public is critical. We will have a joint meeting with the other two committees in January to bring forth the information on the mill levy for the purpose of a broader discussion.

 

Assumption of Contract for Deed of Garfield School Property

 

The Chair explained the Garfield School building was sold on a contract for deed to the Child and Family Intervention Center, Inc. with a proviso that it be used for youth in the community functions. That organization is now defunct and the Yellowstone Boys and Girls Ranch has requested to assume the contract for deed to purchase the property. The Board will need to respond to the potential new buyer in regard to determining if they offer services that are required in this contract.

 

Shawn Byrne, Chief Operating Officer at YBGR Community Based Service Programs, addressed the Committee stating their initial focus would be to transfer their youth and family support service programs, and they intend to partner with other similar community organizations. He assured the Committee they have the financial resources to fulfill the contract for deed; and, financial statements have been examined by Thomas Harper.

 

Joel Guthals moved to recommend Board approval for the Yellowstone Boys and Girls Ranch to assume the contract for deed the Child and Family Intervention Center, Inc. has with Billings Public Schools to purchase the Garfield School property. Mary Jo Fox seconded the motion.

 

Mary Jo Fox recused herself from voting on this issue since she works for the Yellowstone Foundation (the grant that raises money for their endowments). Peter Grass is in favor of the motion as long as there are no potential conflicts with them offering the same services as the School District. The playground will continue to be available to the community. Chair Kelker stated we are considering the following language in the motion from Item 2 of the Agreement whereby, “The Buyer covenants and agrees that its use of the premises shall be restricted to non-profit or governmental community programs that primarily benefit youth through age 21 and/or families, who reside in Billings Elementary and High School Districts #2.” Joel pointed out page 7 of the contract, Item 15 A, which allows the contract to be assigned upon written consent of the School District, which consent may not be unreasonably withheld. If the buyer meets the terms of the contract and can make the payments, then the School District needs to approve it.

 

Voting in favor of the motion was Joel Guthals, Dan Farmer, Don Stanaway, Joan Sleeth, Shanna Henry, Katharin Kelker, Peter Grass, and Kari Altenburg. Mary Jo Fox abstained from the vote. The motion carried.

 

Updated Building Reserve Project List/Capital Investment Projects

 

Rich Whitney reported on 6 emergency items that came up this last month:

1 Failure of fire alarm system at the Career Center – not repairable, $56-60k est. replacement cost

2. West High heating problems with boilers – retube of boilers est. cost of $45k over next 1-2 years

3. Rimrock failure of heating system – rotten steam pipes patched, total replacement est. $400k

4. Central Heights – pump failed, freezeup and water damage in a classroom

5. Senior High – crumbling and falling concrete, emergency fix

6. Facility Building – leaking roof, 51 patches

 

We had $65M of building projects on the original list. We funded $15M of projects from that list with Building Reserve levies. The $50M of unfunded projects left to complete on the original list is currently equivalent to $70M with consideration of an inflation factor.

 

Rich presented the Original October, 2000 Building Reserve Project Lists with new priority items added which address “warm, dry, safe, and accessible” issues. The new items were primarily for:

• Elementary buildings: plumbing, fences in alley ways, minor transportation items, and side drainage

• Middle School buildings: plumbing, low volt systems, keyless entry systems, security cameras

• High School buildings: plumbing, low volt systems, locker room floors, bleachers, auditorium repairs, Career Center green house, parking lots & sidewalks

 

Rich said the big winners in the last Building Reserve Levy project were those elementary schools built between 1947 and 1954 with their new HVAC’s and roofs and new electrical service to serve technology.

 

Rich was asked to prepare a priority list of projects if a building reserve levy was established at different levels of $15M and $30M and also show the impact on taxes. The public is generally supportive of building reserve levies and we need to ask for a level of funding to complete enough projects to keep up with our needs rather than fall behind each year. Dan advised the Chamber is working on funding a facility study which may help with prioritization. Don suggests we show options to the public on the cost of projects today versus the cost after a number of years. Pictures reinforce the need for building repairs. Don would like to see the whole $80M project list prioritized and show benchmarks at certain levels of funding.

 

Chair Kelker summarized Committee consensus to recommend we run a Building Reserve levy in both Districts; and, our next step in the process would be to see a prioritized list from Facilities giving us an idea of estimated costs in increments and what it would cost to do it on the fast track or more slowly and also have Thomas show how a bond issue would affect this concept. Rich Whitney was directed to bring this information to the January Committee meeting.

 

Resource Conservation Management Proposals – Review & Recommendations

 

Joel reported the Energy and Environmental Innovation Committee has been working on this project for the last year and has a lot of expertise in their membership. Resource Conservation Management deals with professional management of the energy uses of the entire School District aimed at changing human behavior rather than being based on getting new hardware. People are taught how to properly utilize energy resources and still be comfortable and present savings to the School District. There are companies that provide these services, and school districts around the country have achieved significant savings. Our School District has already adopted a number of programs resulting in significant utility savings, i.e., replacing lights, etc. The EEIC received proposals and the District let a bid for this service. The three proposals we received were from Integrated Energy Solutions, Inc., Energy and Sustainable Design Consultants, Inc., and Energy Education, Inc.

 

 

 

The proposals had various degrees of savings projected for the District over a 5 year program:

Net Savings

Savings Yr 1 Savings Yr 5 Total

Energy and Sustainable Design Consultants, Inc. 800 75,600 76,400

Integrated Energy Solutions, Inc. 295,000 593,000 2,254,287

Energy Education, Inc. 383,000 660,068 2,600,000

 

The EEIC Committee decided savings proposed by Energy and Sustainable Design Consultants, Inc. was too modest; and, therefore, they focused on the remaining two proposals.

 

Proposed Fees:

IES, Inc.: paid only if there is a savings – get 50 cents out of every $1 saved.

EEI, Inc.: pay them; but if they don’t produce a savings at the end of the year, they write us a rebate check for what our savings haven’t paid for. Initial outlay is approximately $12,000 per month.

 

Joel reviewed the projected District’s savings based on the following gross savings as analyzed by the EEIC Committee:

IES EEI ESD

$250,000 (10% savings) $125,000 $33,600 $120,800

$375,000 (15% savings) $223,502 $158,600 $245,800

$500,000 (20% savings) $348,502 $283,600 $370,800

 

The Energy and Environmental Innovation Committee voted to recommend the bid be awarded to Integrated Energy solutions, Inc. Rich Whitney supports the bid award recommendation by the EEIC Committee. Joel and Superintendent Copps support Energy Education, Inc.

 

References for both companies were checked and found to be satisfactory. The District has the resources to pay a $12k monthly fee. Both companies would hire an employee, the District would provide an office and purchase the software.

 

Mary Jo Fox moved to agree with the Energy and Environmental Innovation Committee and recommend the Board accept the Integrated Energy Solutions, Inc. proposal and move forward with the contract and enter into negotiations with them. Shanna Henry seconded the motion.

 

Don asked what happened to the two year recommendation for the contact. Thomas said after further analysis it was determined that a minimum of 5 years would be required since this program is more of a cultural change rather than a one-time project. In the sixth year the plan is to turn the program over to internal resources that are developed over that 5-year period. Joel said the Energy and Environmental Innovation Committee recommended acceptance of the Integrated Energy Solutions, Inc. proposal and also to recommend the Board adopt the 5-year program.

 

Don appreciates the effort the committee expended, but he cannot vote for this proposal for the reasons expressed at a previous meeting. He doesn’t believe we can spend that much money to save that total amount. He believes we can save more by handling it internally rather than hiring an outside firm. Dan agrees it is not good business; it’s like paying someone to tell us to turn down the heat and turn off the lights. Rod and Pete see the value of utilizing a plan with an outside firm as long as it doesn’t cost us any money until a percentage of the savings can be used to pay them.

 

Joel said both companies use sophisticated software that factor into account if hardware energy improvements are made and they do not count this as part of their energy savings.

 

Those voting in favor of the motion were Peter Grass, Kari Altenburg, Mary Jo Fox, and Katharin Kelker. Voting against the motion were Don Stanaway, Dan Farmer, Joel Guthals, Joan Sleeth, and Shanna Henry. The motion failed.

 

Joel Guthals moved to recommend Board approval of Energy Education, Inc. Mary Jo Fox seconded the motion. Voting in favor of the motion were Katharin Kelker, Joel Guthals, and Mary Jo Fox. Voting against the motion were Peter Grass, Kari Altenburg, Don Stanaway, Dan Farmer, Joan Sleeth, and Shanna Henry. The motion failed.

 

Chair Kelker will report to the Board that there will be no recommendation from this Committee.

 

Approve Purchase of Facilities & Warehouse Vehicles

 

The Facilities Department and Material Handling Center (Warehouse) vehicles need to be replaced. The District has solicited bids for both purchase and lease of 20 vehicles. The average age of the vehicles is almost 20 years old. The average mileage on the vehicles is almost 95,000. The District is incurring significant cost on repair and maintenance due to the age and high mileage. The District also incurs risk from a safety standpoint when we put vehicles on the road that are not reliable. Administration recommends purchasing the vehicles for an estimated $408,563.98. This item was tabled from the last Committee meeting with a request to prepare a comprehensive plan for replacement of vehicles which is included in this agenda.

 

Don Stanaway moved to recommend the Board approve purchase of the vehicles as presented for a total of $408,563.98 and fund by increasing the current INTERCAP loan for the amount needed and extend the term from five to seven years, utilizing the current payment. Dan Farmer seconded the motion.

 

Jerry Hansen addressed the Committee stating the policy says funding for vehicles and equipment will be obtained by reserving a percentage (to be determined by the Finance office) of the revenue deposited in the Building Fund (Fund 60). State law does not allow that; it specifically states building fund money can only be expended for building, enlargement, remodeling, or repairing of buildings. He does not believe the policy, as written, follows Montana law.

 

Joel asked that the Business Manager provide a figure two years in advance of how much money it will cost for the anticipated replacement of vehicles. He stated Thomas will determine which fund to use, as the Board wishes to comply with State law.

 

The motion carried unanimously.

 

Adjournment

 

Chair Kelker advised that due to time constraints the rest of the items on the agenda would be considered by the Board and not addressed at this meeting. The meeting was adjourned at 8:30 p.m.

 

 

 

 

 

Katharin Kelker, Chair

 

 

 

Sherrill Sullins, Recorder