When reviewing the capital outlay budget, an annual process for the Newton Board of Education, the request expenditures usually total more than the funding provided to the district. In an effort to grant more requests, the school board began talks of additional funding options in December.
Coming back to that discussion, alternative funding for smaller scale projects was a focus at the first board meeting of 2020, with Bret Shogren of Stifel Nicolaus and Company helping the board understand some of the options that exist — such as using capital outlay bonds or increasing the local option budget tax.
As it stands, the school board has the option to increase the funding from its local option budget to 33% (which it was noted would have an impact of about 2 mills) or potentially dedicate some mills from capital outlay to pay for a special bond, though Shogren noted that would be tricky.
"The process to issue capital outlay bonds is a little challenging," Shogren said.
Several statutes exist that dictate how capital outlay bonds can be used, which has led other districts to seek the advice of the Kansas Department of Education when going that route.
While there are some difficulties, Shogren noted there are some advantages that come with those tax-exempt bonds.
"It allows you to borrow money up front that you would've paid for in capital outlay and lock in construction prices today," Shogren said.
"This would be an option in the short-term to address some of the problems presented," said USD 373 director of business services Matt Morford.
Many needs exist among the capital outlay requests (some left over from the failure of the recent bond issue), and a capital outlay bond could help cover some of that work, but not all of it. Morford also did not recommend utilizing more than 4 mills from the capital outlay fund for such a bond payment if pursued — even though it is is just committing dollars currently received in revenue towards a bond payment, as superintendent Deb Hamm put it.
Local option budget funds are a little different, with the board having the authority to levy up to 33% of that fund (and currently levying around 30%, with increased valuations allowing the board to hold steady in recent years). Because that would be an increase over what is currently being utilized, there would be an impact of roughly 2 mills to local taxpayers. With the structure of the local option budget though, Morford noted more of that funding is spread out among all taxpayers in Kansas.
Hamm noted that, historically, when the local option budget was first established it was intended to pay for "extra things" that state funding did not provide. Over time, it came to be used primarily for operating expenses — but an increase in LOB authority would allow the school board to pursue some of the "extra things" the district needs. It was also noted there is a timeline if the board wants to utilize more LOB funds, with the state needing to know by April 1.
Both capital outlay bonds and an increase in the LOB authority would be subject to a protest period after the publication of public notices and some board members raised concerns about what that could lead to given the failure of the bond vote, especially given the impact on citizens tied to the LOB option.
"Choosing to raise taxpayers' taxes after they failed two bonds of ours is not something you take lightly," said board vice president Jennifer Budde.
Additionally, whatever route is pursued it was noted either one (along with a third focused on energy performance, on which information is still being gathered) would not be enough to substantially address all the work requests. Putting all of that off, though, comes with its own issues.
"Either of those funds will not address all the needs," Hamm said.
"If you don't fix it now, it's gonna be more expensive in the future," Morford added.
Board members deferred taking any official action until the next regularly scheduled meeting on Jan. 27.