Tuesday, December 30, 2008

The Economy and Pennsylvania School Districts

First, on a personal note, it is great to be back in Mt Lebanon. My family had a good vacation. We first spent some time in Washington DC and saw first hand the preparations being made for Obama's inauguration. We stayed across the street from the Willard Intercontinental Hotel which is famous for hosting both Martin Luther King, Jr (where he finished writing his "I Have a Dream" speech) and Julia Ward Howe (where she wrote "Battle Hymn of the Republic"). After two days in DC, the family headed down to Yorktown, VA where the last great battle of the Revolutionary War was fought. It was a great trip.

Upon my return I went through some of the newspaper articles I had missed. The following article from the Tribune-Review was published on Christmas Day:
Financial meltdown seeps to districts
By Rick Wills
TRIBUNE-REVIEW
Thursday, December 25, 2008

Public schools are feeling the squeeze from the financial chaos and instability that have clouded the future of everyone from the Big Three automakers to people nearing retirement.

Schools' revenue from earned income taxes has dropped in some cases, while real estate transfer tax revenue already is down 27 percent this year in Pennsylvania. Some school districts have reported abrupt jumps in tax delinquencies.

To make matters worse, returns on the handful of fixed-income investments that school districts are allowed have dropped from about 5 percent one year ago to less than 1 percent in many cases.

It is pervasive. Tax revenue is down across the board," said Jay Hines, executive director of the Pennsylvania Association of School Business Officials. "And state revenue shortfalls are a leading indicator of what will happen with schools and local governments."

No one expects state funding of schools to increase from last year.

"If the state flat-funds us -- and everyone thinks they will -- that's another hole in our budget," said Jeff Kline, business manager for the Hampton School District.

In Hampton, tax delinquencies already are on the rise, Kline said. The district anticipates that revenue from earned income taxes could fall as much as 10 percent this year.

"We were not impacted until the last two or three months," Kline said.

The district expects to lose between $300,000 and $400,000 because of falling income from the district's investments, which now yield less than 2 percent.

"It is a rough budget for this year," said Kline, who said his district might eventually have to look at a variety of cost-cutting steps.

In North Hills School District, mercantile and business privilege tax revenues are down slightly this school year. District business manager David Hall expects the outlook to worsen.

"We have four car dealerships in the district. And if General Motors' sales are down 40 percent, I can assume the car dealers are not doing well," Hall said.

The biggest part of any school districts' funds come from property taxes, a matter about which Hall is not especially worried.

"The same rule that keeps assessments from going up in Allegheny County also keeps them from going down," he said.

Even in the event of foreclosure, banks that take over properties generally continue to pay property taxes, said David Davare, director of research services for the Pennsylvania School Board Association.

"Banks will pay taxes to protect themselves," Davare said.

Communities with a large commercial base are more insulated in the short term but could be at risk in the long term if the economy continues to spiral downward.

"That will have an impact," Davare said.

So far, the biggest impact the recession has had on Pennsylvania schools is in the postponement of construction projects, Davare said. Four of the state's 501 school districts have postponed major construction projects, while six others have decided to go ahead.

An extended economic slump could force districts to make painful cuts, Davare said.

"They will have to look at the extras and maybe make some hard decisions. But we still have an obligation to educate every child that shows up," he said.

Keystone Oaks business manager Gwen Walker prepares for the worst, no matter the economic times.

"We always budget very conservatively and do not anticipate a high rate of return on investments. We learned that lesson in the late 1990s," Walker said.

Rick Wills can be reached at rwills@tribweb.com or 724-779-7123.



There was a second article published in The Almanac that went further into detail on effect the economy is having on the Pennsylvania State budget. The State is dipping into its rainy day fund to help balance the budget:

State dives headfirst into tight economy
By Bob Williams Staff Writer
December 30, 2008

The year 2008 may be remembered as the year the national economy imploded after many years of liberal lending by banks, and irresponsible borrowing by tens of millions of Americans from sea to shining sea. As of Dec. 9, there were 41 states facing budget shortfalls, Pennsylvania among them. But it could be worse, say Pennsylvania lawmakers and Gov. Ed Rendell (D). California, for example, is on the verge of fiscal collapse which could have a ripple effect throughout the U.S. in 2009. California this week eliminated $3.8 billion worth of construction on schools, roads and other public works projects.

Gov. Arnold Schwarzenegger (R) said California will run out of cash in February 2009, facing an 18-month deficit of over $40 billion.

By comparison, Pennsylvania is in good shape. As of Dec. 9, state revenues were $658 million behind estimates with current trending projecting a $1.6 billion shortfall by June 2009.

In response, Rendell and the state legislature have moved to approve a wish list of some $500 million in budget cuts. More cuts will follow, legislators say. A tax increase is not on the agenda--yet. Cuts proposed include the following: • $464 million from the already announced budget cuts and other cost-saving measures, including a wage freeze for more than 13,600 non-union employees and the elimination of this year's cost-of-living adjustment for the governor and cabinet members; a hiring freeze; and the curtailment of out-of-state travel; • $36 million in budget cuts by the General Assembly and other independent agencies - reductions that have yet to be identified by those entities; • $375 million from a portion of the commonwealth's $750 million Rainy Day Fund - which will safeguard the remaining half of the Rainy Day Fund to meet future economic challenges; • $174 million in income from the Marcellus Shale natural gas drilling leases•; $450 million in anticipated federal fiscal relief; and • $101 million in unused funds left over in state accounts from prior-year budgets.

"In Pennsylvania, general fund revenue collections from July through November were $657.9 million - or 6.8 percent - lower than estimated," Rendell said. "During the same period, motor license fund revenues were $112.5 million - or 9.8 percent - lower than estimated.

"Now that that rainy day is here, we will be able to draw on the funds we have prudently put aside to help us balance the budget. To continue its pattern of fiscal prudence, the commonwealth plans to use only half of the Rainy Day Fund - $375 million - to balance the 2008-09 budget," Rendell said.

While not confirmed, Rendell said President-elect Barack Obama has earmarked $450 million to Pennsylvania as part of his proposed federal stimulus package.

The reason actual revenues are down by $657.9 million with projections of a $1.6 billion deficit is that Pennsylvania budgets run from July 1 to June 30 of the following year. Pennsylvania's last budget was approved in July 2008. The $657.9 million represents the losses through December 2008. If the current trends continue through June 2009 and no cuts are approved, the deficit will be $1.6 billion by June 2009.
The State flat-funding our budget next year would clearly have an impact on us. While we do not get as much funding from the State as many other Districts in Pennsylvania, it will make it more difficult to pass a balanced budget.

Finally, there was a third article published in the Post-Gazette that looked into the PSERS contribution rate increase coming in a few years. I posted an entry on my website on December 18th. The full article is below:

Payments to school retirement system set to soar
Tuesday, December 30, 2008

North Hills School District over the years has built up a healthy $10.2 million fund balance, but officials won't go on a spending spree any time soon.

David Hall, director of finance and operations, said he expects to need at least some of that money to deal with ballooning payments to the state Public School Employees' Retirement System, forecast to begin in 2012-13.

School districts and the state, which share the employer pension costs, haven't contributed enough money to cover PSERS' liabilities, particularly as financial markets have declined.

As a result, PSERS has an unfunded liability of $8.4 billion, its actuaries, Buck Consultants, told the agency's board this month.

That shortfall is forecast to come to a head in 2012-13, when the rate of retirement contributions by school districts and the state are expected to more than triple.

"The chickens come home to roost eventually," Mr. Hall said.

The burden of coming up with the money will fall on taxpayers, both local and state, making the problem a critical one for school boards and state officials who already are struggling with tight budgets.

This month, PSERS approved an employer contribution rate of 4.78 percent of salaries for 2009-10, only slightly above the current rate of 4.76 percent. Of the employer contribution, about half is paid by school districts, charter schools and other public school entities. The state pays the other half.

Employees' contributions are expected to average 7.32 percent of their salaries in 2009-10. The state and PSERS cannot change the employee contribution rate without granting new benefits, so the shortfall ultimately must be made up by schools and the state.

Current estimates call for the employer rate to increase to 16.4 percent of salaries in 2012-13. But by this time next year, based on stock market trends, the estimate for the employer's 2012-13 rate may exceed 20 percent, Jeffrey Clay, PSERS executive director, cautioned the agency's board.

"We are not funding the benefits earned each year, much less paying the unfunded accrued liability of the system," Mr. Clay told the board this month.

"This is the equivalent of having the mortgage and not paying the principal. The principal gets added to the debt and, of course, interest is charged on top of that," he said.

For school officials in the North Hills, which has an annual budget of about $65 million, the increased share translates into millions of dollars. Currently, the district contributes half of its share of $1.5 million for the PSERS cost, or about $750,000. If the contribution increases to 16 percent of employee salary, Mr. Hall figures the district and state combined share will rise to about $5.8 million, meaning the district's share would be about $2.9 million.

How did the fund get to this position?

The state in 2001 and 2002 enhanced retiree benefits. Then it decided to delay larger contributions to the fund until 2012-13, partly because of stock market volatility in the years following the decision to enhance benefits.

The employer contribution rate dipped as low as 1.09 percent of salaries in 2001-02.

"That was, to me, the epitome of penny-wise and pound-foolish," Quaker Valley Superintendent Joseph Clapper said.

PSERS cannot raise the rate now to allow a more gradual increase because it must follow the rate formula -- which includes averaging five years of investment returns -- set by the Legislature.

The procrastination -- with its specter of massive payments beginning in 2012-13 -- has frustrated some school officials and the 40,000-member Pennsylvania Association of School Retirees.

"Even though we know we are coming up to a cliff, nobody's been willing to address that cliff ahead of time," Mr. Hall said.

Some districts -- including Butler Area, North Hills and Quaker Valley -- have nest eggs or forward-looking budgeting that may soften the blow.

But even if districts have set money aside, the high rate is not expected to be a one-year event. The current PSERS forecast put it above 14 percent for at least five years after the spike hits.

Some are calling for the Legislature to make changes to avoid or minimize any rate spike in 2012-13.

"I think the Legislature needs to take a look at the fundamental nature of the retirement system. We really can't afford this system going forward as structured," said Tom Gentzel, executive director of the Pennsylvania School Boards Association.

Richard Rose, a member of both the PSERS and Bethel Park School District boards, said, "I think something has to be done, but it's out of PSERS' hands to do it."

He suggested the Legislature require schools to follow a state Department of Education recommendation that schools budget more than 7 percent each year for retirement contributions so they can build a reserve to be ready for the rate spike.

Mr. Rose said that PSERS had been doing "very well until the market crashed on us like this. We have to ride out the storm. We are still currently investing money, and hopefully there are some reasonable investments out there today that will put PSERS back in good standing."

Over the last decade, about three-fourths of the pension fund came from investment returns.

In the last school year, PSERS investments fell 2.82 percent, its first negative annual return in more than five years and a significant drop from the 22.93 percent earned in 2006-07.

In a report last summer, the governor's budget office painted a troubling picture of PSERS and the State Employees Retirement System, or SERS, which covers non-school retirees.

SERS will not set its new employer contribution rate until spring. Its current rate is 4 percent, and its last projection for 2012-13 was 5.7 percent.

"Unfortunately, this year's investment climate has made old news out of that number," said SERS spokesman Robert Gentzel. SERS reported its investment returns fell 14.4 percent for the first nine months of this year.

The Association of School Retirees has asked the Internal Revenue Service to review the state's management of PSERS and SERS.

"The escalation of our systems' unfunded accrued liabilities poses a very real danger to the taxpayers of Pennsylvania, who will ultimately be required to contribute much more to our systems in later years to make up for the funds that the systems did not receive from the state and school districts and all that the systems were not able to generate from investment of those contributions," Ureneus V. Kirkwood, president of the retiree association, said in a Dec. 2 letter to IRS Commissioner Douglas Shulman.

Tom Gentzel expects that PSBA will make a proposal early next year to create a plan that would apply to employees hired after a certain date in the future.

"One of the ideas that we've been drawn to is the idea of some kind of a hybrid plan, a combination of a defined benefit and defined contribution," he said.

It may be time to think about such a plan, he said, because a high number of teachers who are from the baby boom era will be retiring in the coming years, resulting in new hires that could enter a new kind of retirement plan.

Joe Smydo can be reached at jsmydo@post-gazette.com or 412-263-1548. Eleanor Chute can be reached at echute@post-gazette.com or 412-263-1955.
First published on December 30, 2008 at 12:00 am
There are a lot of factors that will have an effect on our next budget. It will be difficult to navigate these waters.

Thanks for reading.

James

Thursday, December 18, 2008

PSERS Contribution Rates set to increase 244% by 2013

PSERS has released its employer contribution rate that will be effective July 1, 2009. That rate will be 4.78 percent, a slight increase from this year's rate of 4.76 percent.

From the press release:

PSERS Executive Director Jeffrey B. Clay also cautioned that, while the latest actuarial figures support only a small increase in the contribution rate, school employers should continue to prepare for the dramatic employer contribution rate increase forecast in four years.

Mr. Clay stated that “while PSERS cannot collect employer contributions in excess of what is actuarially required by funding methodologies, some school districts on their own have begun to create a reserve in anticipation of the large rate increase projected in FY 2012/2013. Mr. Clay recognized the difficulty for school employers to create a reserve in the current economy, but stated “it would be very prudent for school employers to do so.”


Here is a chart of the expected contribution rates that was put out by PSERS. This chart outlines the projected rates of contribution all the way out to the year 2038. According to this chart, the employer contribution rate is scheduled to increase from 4.78 percent for 2009 to 16.40 percent beginning in 2013. That would be a 244% increase.

Last year the District spent roughly $2.8 million on these contributions, half of which were reimbursed by the state. In the District budget available online on page 68 you can see how much revenue Mt Lebanon received in reimbursement. Forecasting from today's numbers, a 244% increase would mean our contribution for the 2013 year would be close to $6.8 million of which about $3.4 would be reimbursed by the state.

Hopefully our state lawmakers will see this and make sure they do some leveling of the contribution rate before the huge increase.

Thanks for reading.

James

Almanac Article

I thought yesterday would be my last post before vacation. However, there was an article in the Almanac that covered both the Mt Lebanon and Upper St Clair construction projects. I will post the article below and then give a few comments on some of the quotes that are in there.

School plans under review
By Bob Williams Staff Writer bwilliams@thealmanac.net

With the U.S. economy facing the worst downturn since the Great Depression according to J.P. Morgan Chase & Co., residents in Mt. Lebanon and Upper St. Clair have some thinking to do before investing nearly a quarter billion in three aging school buildings.

Mt. Lebanon High School and both Upper St. Clair's middle schools are in need of major renovations, say school board members in the respective communities.

A narrow majority of Mt. Lebanon School Board members say postponing $80 million to $150 million in construction at the high school is folly, while a strong majority of board members in Upper St. Clair say they aren't ready to put the brakes on a $60 million to $65 million overhaul of Fort Couch and Boyce middle schools.

The question is, will the national economic downturn have a local impact?

National outlook

National economists say 2008 could be one of the worst years since the Great Depression. In November alone, 533,000 jobs were lost. December could be worse. The national GDP for the fourth quarter may be less than zero with the GDP free-falling 6 percent over the year. The stock market lost half its value over 2008, over one trillion dollars. The 401K plans imploded.

The failed federal loans to the Detroit automakers caused GM to announce 21 plant shutdowns. Millions of jobs are affected by the Big Three. President George W. Bush may try to override a veto of the loan package by the U.S. Senate last week.

Offsetting these negatives is the federal government's trillion dollar bailout plan, which is hoped to shorten the duration of the recession.

Many economists, including J.P. Morgan, expressed confidence in President-elect Barack Obama's economic team. Once the new president is sworn in, the markets may react favorably and move in a positive direction. Fuel costs are down, as are interest rates. If these both continue to remain low, it could help boost the economy in 2009.

Mt. Lebanon's option

Reviewing these economic realities, Mt. Lebanon School Board member James Fraasch offered an alternative to the current plan for the high school renovation.

"If we were to raise our property taxes another 15-20 percent 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," Fraasch said. "If our taxes are slightly higher than these places, that is one thing. Having them 20 percent higher is another thing altogether."

Mt. Lebanon's high school-aged student population has dropped by 500 over the past decade. U.S. News & World Report this year has recognized Mt. Lebanon, Upper St. Clair and Peters Township high schools with "silver" awards. The magazine has given only 20 of Pennsylvania's 670 high schools a "silver" rating.

Chart path

"If what the people want is a completely new school, then the only way to get there is to do my plan," Fraasch said. "Why spend $70 million today, when we can wait a few years and get the new school? Let's have this conversation. If the community wants a new school, let's sit down and chart a path to get there."

Fraasch's plan involves making the high school roof leak proof for 10 years and purchasing new boilers. He proposes using the district's $9 million in savings to pay for most of these repairs. Over the next 10 years, the district would pay down the existing debt. At that point, Fraasch said, the district could afford a completely new school.

"We could purchase boilers that use alternative energy, thus saving costs there. Once the new school is built, these boilers could be relocated to another building," Fraasch said.

The long-term bonus would be a modest tax increase to pay for a completely new high school, Fraasch said.

'Impractical delay'

Both Dan Remely and Elaine Capucci, chairs of the board renovation committee, said they oppose putting the plans on hold now. A 10-year delay would be impractical given condition of the building, they said.

Rough construction-only estimates for a 440,000 square foot high school range between $80 million and $132 million. The difference in the estimates reflect renovation, partial renovation and a completely new facility.

Kerry Leonard from Celli-Flynn Brennan (CFB) said those figures do not include any architect or engineering fees, construction testing, furniture, fixtures, equipment or cost escalation.

The present 545,000 square-foot building on a 28-acre tract houses 1,912 students in grades 9 to 12. District administration is also located within the building.

Remely in September presented a plan which cuts 80,000 square feet from the size of the building and features both new and renovation of the existing building. With construction fees approaching $200 a square foot, some $16 million could be saved. Remely told architects to work on his plan.

Board members declined to ask architects to do any study of Fraasch's proposal.

USC's choice

In Upper St. Clair, board members on Dec. 8 voted to proceed with construction planning and design for both Fort Couch and Boyce middle schools.

With $60 million possible in additional spending, the overall debt level of the district will top at $123 million, said bond counsel Mike Bova from Boenning & Scattergood, Inc. This figure includes previous debt.

In approving the final design phase, board members said a decision on whether or not to renovate the two buildings won't be binding until submitted bids are actually approved. Board Member Angela Petersen said when architects complete their designs in July 2009, their work could be used in the future if the board decides to withhold approval of bids or if the economy slips further into the red.

Scalebacks set

In October, estimates by project manager P.J. Dick put costs for both schools at $61.8 million with about $4 million in additional design alternates. On Dec. 8 the board advocated a series of scalebacks and set estimates at about $58.5 million with $4 million in design alternates.

The design alternates include a $1.6 million theater, $270,000 in field improvements and $1 million for artificial turf at Boyce and $1 million for article turf and $254,000 for a gym alternate at Fort Couch. Like the base bids, approval of the design alternates would be at the board's discretion.

This article has a quote from me that I had not put in the proposal or in any of the other previous articles out there. That quote is the following:

"If what the people want is a completely new school, then the only way to get there is to do my plan," Fraasch said. "Why spend $70 million today, when we can wait a few years and get the new school? Let's have this conversation. If the community wants a new school, let's sit down and chart a path to get there."

This one quote, without background information, would raise some eyebrows I think. It is what I said and it is what I believe so I am not in any way saying it was a misquote, I just feel it important to understand why I said it.

As this article points out, and as I have been saying for some time, we are in a different economic reality than the one that existed even a year ago. Two months ago the Audit/Finance Committee talked about how much additional debt this District could add before being forced to go to a referendum. There is a law on the books that says that a school district can have debt up to 225% of its 3-year average annual revenues before being forced to go to a referendum. Any debt that would force us over that 225% level would have to be approved by voters. What we learned at that Audit/Finance Committee meeting was that the "magic" number is roughly $116 million dollars in additional debt over the next year or two before we are forced to go to a referendum. The thinking behind the quote above comes from understanding that ANY high school proposal that requires the District to add over $116 million in new debt would likely fail in a referendum vote.

That is basically the final reason why I believe a fully LEED certified high school building is off the table in the near term. Understand that this isn't an either/or discussion. It isn't either do this proposal or build a new school. Those are not the only choices on the table. I am sure other Directors will make their thoughts known in January. Some of these ideas will include a complete renovation or perhaps a more phased construction approach that has yet to be fully discussed at a Board meeting.

There is a certain irony in this that I think is important to point out. There are many that have emailed the Board and said that the most important thing to keep in mind is that we need to hold our taxes in check so that we remain competitive with neighboring communities. There are also many that have emailed the Board and said the most important thing to keep in mind is that we need a new LEED certified school to maintain our reputation as a community that values education and that a tax increase to accomplish this is well worth the investment.

The reality of the situation is that the current economic environment seems to put these two groups of people on the same side.

Thanks for reading. I will be on vacation starting this weekend so email access will be spotty during the holiday's.

Thanks for reading.

James

Wednesday, December 17, 2008

Email of the Month

Since I am on vacation next week, I thought I would post this email of the month a bit early.

I have been very happy to see the conversation about the possibilities of the high school project take shape. While I took a bit of heat in the beginning for putting out a proposal on my website, the feedback has been largely positive and I firmly believe it was the right thing to do.

The Board receives emails most every day regarding the high school project. Some of those emails have been in support of a low-tax increase approach to the high school project and others are in support of a full brand-new school. There are a few that are in the middle.

Earlier today I responded to a constituent email regarding building a new school versus my "$15 Million Dollar Idea" as follows:

Thanks for the email.

I hope to be able to convey more thoroughly the thought process behind the proposal at one of our future Board meetings.

There are many pros and cons to my plan as there are pros and cons to all the other plans that have been put on the table.

At some point this Board will need to make a decision on what it is willing to spend and at what interest rates it is willing to spend. If bond rates continue to rise as they have for the past six months then the District could be forced into a bond market that might make floating bonds quite costly. We heard from our financial adviser on Monday night that bond rates have risen by 1.5% to 2% since July when we had our last community forum. The cost to float these bonds has risen as well.

Rather than float bonds at these rates, my opinion is that it may be prudent to investigate alternatives that would not hamper the District budget for a generation. That will be a discussion for the Board to have at a public meeting. I may very well be in the minority here and I am fine with that. I simply want to make sure that if we do engage in a large-scale project that everyone is aware of the budgetary constraints that would be placed on this District and its taxpayers for the life of whatever bonds are issued.

While you say the project will cost more if we wait ten years from now, I would suggest that at these interest rates, that might not be true- especially in light of the fact that both the Producer Price Index and Consumer Price Indexes are experiencing declines. The CPI dropped by the largest amount since 1947 in November of this year. Additionally, with a 2% increase (from 4.5% to 6.5%) in bond rates over a 25 year $110,000,000 bond issue, we would see total payments for that debt increase by about $18.5 million. The thing about bond rates is that they are very unpredictable. We do not know where they will be when we are ready for whatever project we do. At what interest rate will the Board deem going forward with a bond issuance impractical and irresponsible? That number exists and it should be defined by this Board before soliciting bids for any bonds.

The proposal I put out there takes a very stark look at what I believe to be the financial reality of where we are right now and puts that reality up against where this country is economically. After combining these two factors, the issuance of a massive amount of debt has me extremely concerned. That approach is but one way to look at this project. I understand that there are other perspectives to take with regards to the high school and I look forward to hearing them.

Best wishes,

James Fraasch

One quick note, I added the bolded part of the response to this website- I thought of it after I sent the response to the constituent.

As our Financial Advisor told us on Monday, we really are in a different economic environment. It is my belief that we have not yet spent enough time on the financial impacts to the District of any given plan. I hope that will change soon.

Thanks for reading.

James

Thursday, December 11, 2008

New Articles in Local Papers

There has been a good discussion going on regarding the high school project. Below are links along with comments I have on each story:

Mt Lebanon Officials Say New School Can't Wait


The Co-Chairs of the High School Project Committee weigh in on what they think of the proposal I outlined last week. I clearly don't agree with some of the comments by the other Directors but I was glad to see that the discussion regarding our options is making the rounds in the local papers.

Students Push Board to Renovate High School


Two high school seniors make their voices heard at the Board meeting on Monday night. It is not often that we see students take to the podium and these students ought to be commended for coming out like they did. It's not always easy, especially if you believe that some of the people standing in front of you don't agree with you. I would have liked to have had the opportunity to talk to the reporter regarding this article since it addresses something I did. However, I was not contacted for the story. I would have simply suggested that every option out there addresses the leaky roof.

Mt Lebanon and Steel Valley Pick Presidents


This article chronicles the actions of the Board at our reorganization meeting last week. I had to get something in here that was not related to the High School!

The discussion that we need to have as a community is starting to take shape. It may not be happening behind closed doors in Executive Sessions, and it may not be happening in the Board room at public meetings, but it is finally starting to happen.

Thanks for reading.

James

Tuesday, December 9, 2008

Mt Lebanon High School Ranked One of Best in Country

US News and World has released its ranking of the nations top high schools. Mt Lebanon ,along with six other high schools in Allegheny County, has received a Silver Award. You can see the Allegheny County list here.

With just 3% of Pennsylvania's 679 high schools being awarded a Gold or Silver award, we are in some good company.

Massachusetts ranked #1 overall with 8.6% of their high school being awarded the Gold or Silver award.

Thanks for reading.

James

Thursday, December 4, 2008

Tribune-Review Article

Reporter Matthew Santoni contacted the Board a few days ago to get feedback on the proposal I put out on Sunday. I think his article takes a fair look at some of the issues surrounding the high school. To be clear, the proposal does delay a large-scale construction project for 10 years but there is a sizable investment in the existing building to ensure its continued operation at levels above where we are today. Mr. Santoni's article is below or you can click here to go to the Trib website:"

Mt. Lebanon board member urges postponing school projects
By Matthew Santoni
TRIBUNE-REVIEW
Thursday, December 4, 2008

Growing debt, meager cash reserves and economic uncertainty have Mt. Lebanon school board member James Fraasch asking his colleagues to consider postponing the $130 million high school replacement project for more than a decade.

Fraasch recently took his case to the school board's audit and finance subcommittee. He argued that the district already is paying $5 million a year on existing bonds and has not set enough money aside for construction to avoid a 15- to 20-percent tax increase.

He said he hopes his proposal -- making some repairs, establishing a construction fund and delaying construction of a school until 2020 -- will be considered in February, along with four other options for renovation and replacement.

story continues below


"People deserve to have an option out there that does not include a massive tax increase," Fraasch said.

He said the board is awaiting revised cost estimates from construction manager P.J. Dick Inc. before determining exactly how much would be borrowed and how much taxes might be increased.

"The subcommittee is not making any recommendations before we get the updated numbers from the construction manager," said Edward Kubit, chair of the audit and finance subcommittee. "We'd rather have accurate information and wait a couple of weeks than rush it and have information that's less than 100 percent."

The district already is deep in debt after borrowing $55 million in 2005 to update its elementary schools and won't start making large payments on that debt until 2017, Fraasch said. And only about $9 million has been set aside for the high school project from budget surpluses in previous years.

"Every dollar you're spending to service debt is a dollar you're not giving to our kids for education," Fraasch said.

Instead of replacing the high school, Fraasch proposed a lower investment of $10 million to $15 million to make essential repairs during the next two to three years, financed with a 1-mill increase in property taxes. A portion of the increase would be set aside to either pay down future debt or be invested into large school projects in the future.

Delaying the high school project 10 years would allow the district to pay down its debts, accumulate money in the reserve fund and recoup some of its investment in repairs to the existing school, he said.

"I have many questions about the assumptions on which Mr. Fraasch bases his proposal and look forward to having them answered so I can better evaluate its merits," said board member Josephine Posti. Her immediate reaction to delaying the project, though, was to consider it "irresponsible and impractical."

High interest rates on the municipal bonds that the district would need are another reason to avoid borrowing and building now, Fraasch said.

Director of Finance Janice Klein has said, however, the district wouldn't start borrowing the money for years, even if the project moved forward quickly.

Matthew Santoni can be reached at msantoni@tribweb.com or 412-380-5625.



I look forward to getting final numbers from the CM and Architect in the coming weeks.

Thanks for reading.

James Fraasch

Wednesday, December 3, 2008

Reorganization Meeting Update

Last night the Board elected Alan Silhol as President and Ed Kubit as Vice-President for the next year.

Congratulations to both of them. I look forward to working with each of them in their new capacities.

James