Paying for Capital in Good Times and Bad Roanoke County Public Schools

1. Paying for Capitalin Good Times and BadRoanoke County Public Schools VSBA Conference November 17, 2011

2. Introductions Roanoke County Public Schools Roanoke, Virginia Mr. Drew Barrineau, CPA, School Board Member dbarrineau@rcs.k12.va.us Mrs. Penny Hodge, CPA, SFO, Assistant Superintendent of Finance phodge@rcs.k12.va.us

3. Our Demographics in 2005 • 14,400 students with growing enrollment • 30 school buildings • Average age of buildings -- 48 yrs old • 17 elementary, 5 middle, 5 high, 3 specialty • Completed $71M in school projects since 1997 community study (8 schools)

4. What we were facing in 2005….. • 22 schools remaining with capital needs • Aging infrastructure with no financial plan • County government capital needs growing • Planning for new public safety facility, county garage, recreation center, and library in the works • Debt capacity was exhausted

5. Assignment from Board • Find a way to address future capital needs of both School System and County Government • Identify funding stream to sustain CIP • No tax increase

6. We Needed • New policies to protect plan from yearly fluctuations and ensure sustainability • Win-win solution to address school and county capital needs • Collaboration of both boards and finance staffs • Buy-in from boards and employees to commit to long-term investment in capital

7. Benefits of a Capital Financing Plan • Methodical means of funding CIP • Allocating smaller dollar amounts every year is small compared to the size of the capital needs and the results of ignoring those needs • Easier to give community dependable projections on when projects will begin • Design work can be scheduled just prior to building and not sit on shelf

8. Our Concept hinges upon….. • Compatible and complimentary school and county financial policies • Permanent revenue stream • Annual commitment of set amount of new money • Cooperative relationship between School and County governing boards • Use pay-as-you-go for smaller capital expenditures including A&E and land

9. Past Practices that helped… • In budgeting ……. revenue sharing formula • In year end ……… year end surplus rollover agreement

10. Policies We Approved • Establish School Capital Reserves • Use of School YE Balances • Establish County Capital Reserves • Use of County Unspent YE Expenditures • Use of County Revenues in Excess of Budget

11. Reserves We Created

12. Combined Debt Payment Reserve • Began with $2M annual contribution in 1996 (to build new high school) • Add new $600,000 from county & schools each year (beginning in 2005-06) • Plus debt drop-off over time • Plus economic development incentive drop-off over time • Results in incrementally growing reserve • Limit bonding to 20 years

13. This is how it grows……. * Boards increased contribution this year during budget negotiations.

14. School Major Capital Reserve • Use for projects on adopted CIP • Land as it becomes available • Fund with 2/3 of YE balance • Pay cash for smaller projects • Supplement borrowing for larger projects

15. School Minor Capital Reserve • Use for smaller capital projects (<$500,000) and one-time needs • Fund with 1/3 of YE balance • Plus sale of land and buildings • Can be used for A&E to get CIP projects planned • Can also be used for CIP projects

16. County Major & Minor Capital Reserves • Use for major projects on County CIP and other minor projects • Fund with YE revenues in excess of budget after meeting Unappropriated Balance Policy limits • Fund with YE expenditure savings

17. What can we fund now?

18. Success is based upon… • Properly timed bond issues • Available cash accumulated in Major/Minor reserves (from year end surpluses) • No tax increases needed • Funds $40M for schools and $20M for county over next 6 years (at a minimum) • Ensures funding for future School Boards • Assists County Board in addressing needs of entire county with constituents

19. Projects Funded Since Adopting the Joint Financing Plan in 2005 Schools - $122 million $41M paid in cash County - $107 million $20M paid in cash Plus $10M added to Unappropriated Balance

20. Cash Reserves from YE Surplus

21. Some of the Projects Since 2005

22. Latest School Project • Replace Cave Spring Middle • Construction RFP released in Spring 2011 (still attractive bidding market) • $28 million cost including all soft costs • Paying $18 million in cash!

23. Why the Plan has Worked during the bad years too RCPS lost $17M (21%) in state funding from FY09-FY11 • Committed to not reducing annual contribution even in bad years (treated like a debt payment) • Allowed for 20-25% cost savings over past 3 years when construction costs were reduced due to the economy (bid out 5 school building projects) • Benefits of policy reinforced by ongoing capital projects able to be funded • Bond rating agencies give high marks

24. Board Confidence • Plan for future capital needs in realistic timeframes • Communicate with citizens • Eliminate annual competition for same funds • Relatively simple to manage • Immediate payback for county and schools in CIP projects underway

25. Questions Roanoke County Public Schools www.rcs.k12.va.us