Capital Reserve Funding

1. Capital Reserve Funding Douglas County School District Presented to the Board of Education Thursday, February 7, 2008

2. Capital Reserve Program Agenda • History of Capital Reserve Program - DCSD • Insights learned from 20 years • Hypothesis and options for future • Test hypothesis

3. Capital Reserve Fund The Capital Reserve fund is a revenue account that can be used to account for the acquisition of land, construction of new facilities, alterations and improvements to existing structures and the acquisition of school buses and/or other equipment.

4. History - DCSD Capital Reserve Fund • DCSD has always funded cap reserve at the minimum legal level • State determines per student allocation operational monies to be spent on capital reserve projects annually • Minimum funding level allows for more money available to be spent on other operational expenses • 2006 bond package included $11.6M in capital reserve projects, but $17M had been requested

5. History – DCSD Per Pupil Allocation for Capital Reserve Fund

6. Capital Reserve Program History - Allowable Expenditures • O&M - Facility improvements & equipment • Vehicles – buses, white fleet • Technology – software & equipment • Security support – cameras, radios, equipment • Mobile classrooms – purchase & relocation • Risk Management - insurance

7. Annual School Finance Act required Transfers from General Fund to Capital Reserve Fund

8. History – DCSD Capital Reserve Fund • Capital Reserve exclusively utilized for building maintenance & improvements, insurance reserve, buses, vehicles, and mobile classrooms • Late 1990’s technology equipment started to erode Capital Reserve funds • Early 2000’s security communication equipment began being funded from Capital Reserve • 2006 first bond election to transfer Capital Reserve Funding needs to bond revenue stream • $11.7M was moved, but $17M worth of needs • 2006 - Charter Schools promised $2.6M of Capital Reserve Funds over 3- year period

9. History – DCSD Capital Reserve Fund Distribution

10. History – DCSD Capital Reserve Fund Distributions

11. 5,970,324 5,589,408 • Includes: • Schools • Mobiles • Leased space • Support Facilities 5,272,229 4,947,862 4,811,815 4,535,952 3,972,686 3,904,340 3,512,454 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 History – DCSD Growthin Facilities Square Footage

12. History – DCSD Growthin Acreage (grounds to maintain) 1,179.54 1,231.94 1,301.94 1,134.14 1,112.32 1,021.32 961.43 951.48 829.71 2003-04 2004-05 2005-06 2006-07 2008-09 2002-03 2007-08 2000-01 2001-02

13. History – DCSD Building Modification Team • Formerly Capital Reserve Committee • Cross Functional team – wide representation • Meets quarterly to review and prioritize building modification requests • Authorizes emergency expenditures • Maintains priority list of capital improvement needs as required for E.L. 1.8 Protection of Assets • Meets in the spring of each year to determine which projects will be funded from capital reserve for the following year

14. History – DCSD Capital Asset Mitigation • Capital Asset mitigation are revenues collected from Developers to mitigate the impact of growth on DCSD. • All revenues collected funnel through Capital Reserve Fund • Cash in lieu of land • Voluntary impact fees collected • Land dedication

15. History – DCSD Cash-in-Lieu Transfers made to General Fund

16. History – DCSD Impact Fees • 1984 Town of Parker began collecting fees as a condition of annexation • Collected $1M • Not subject to later court ruling because contractual agreement • 1992 Douglas County Trust Fund Foundation established & voluntarily contributed $10.5M to mitigate impact of development on DCSD • July 1992 – Intergovernmental Agreement between Douglas County and DCSD established Douglas County would collect impact fees on behalfof DCSD to mitigate the impact of development on school facilities • $.42 - $.83 sf – max. of $3,486 for home more than 4,201 sf. • $21.5M collected (but DCSD had to pay back $11.5M after Court Ruling in 1996)

17. History – Impact Fees • October 1993 – Builders sued Douglas County, stating one governmental entity could not collect funds for the benefit of another governmental entity • July 1994 – District court ruled in favor of builders • March 1996 – DCSD appealed court decision • January 1997 – Colorado Supreme Court ordered DCSD to refund fees ($10.5M) • Refunds begin May 1997 • March 1997 – Builders sued for interest

18. History – Impact Fees • January 1998 – Supreme court orders payment of interest on impact fees • January 1998 – DCSD appeals court decision on payment of interest • February 1999 – Board of Education resolves to begin payment of interest • District still was able to keep $10M voluntarily contributed by the Douglas County Facilities Trust Fund

19. Insights we have learned . . . • Capital Reserve Fund Industry norm = 2% of building replacement value • In 2007-08, industry norm for DCSD equaled $19.5M • DCSD capital reserve budget was $7M ($12.5 short) • 4 track, year round calendar reduces time available for capital improvement projects to be completed • Emergency Capital Reserve contingency funds have not increased proportionately • When Capital Needs project load exceeded available funding, some bond interest was shifted to Capital Reserve Fund

20. Insights we have learned . . . • Increased Legal Code Requirements • Fire • In 2007-08, $450k was expended to bring fire alarms into compliance with new codes • Building codes • In 2007-08, mobile decking and ramp inspections and expectations increased costs (estimated $100k) • Materials • Labor

21. Insights we have learned…. • In 1984, HB1006 addressed rapid growth counties • Allowed County Commissioners to authorize additional tax revenues for School District Capital Reserve • 2% additional capital reserve, if two conditions met: • 3% over 3 years in DCSD enrollment growth • 2% growth in Douglas County building permits • DCSD only District to receive these funds in Colorado • 2007 DCSD enrollment meets 3% growth threshold, but County building permit growth does not • Loss in DCSD capital reserve revenue estimated at $1.7M for the 2008 calendar year

22. Insights we have learned…. • Support Space Needs Analysis was conducted in June, 2004 • Little has been done to mitigate these needs • Resulted in need for more leased space SITE 2004 needs 5-year 10-year Wilcox Building -21,769 ft2 -30,069 ft2 -31,519 ft2 Purchasing/Warehouse -1,331 -5,370 -13,496 HR North -327 -898 -1,079 Cantril -2,391 -3,172 -3,143 UC Chaparral -349 -912 -1,021 Trans West -4,930 -4,930 -5,081 Trans North -10,370 -11,035 -11,035 Trans East -297 -448 - 24,269 TOTAL-41,764ft2 -56,834ft2 90,643ft2

23. Insights we have learned . . . • Capital Reserve Requirements have increased exponentially in last 10 years • Increased need for mobile classrooms (118 for schools) • Increased leased space (nearly 40,000 sf) at an annual cost over $600,000 • Two Certificates of Participation (COP) which are paid by C.R. • Lone Tree Elementary • DC Oakes Castle Rock • Technology – now accounts for 60% of Capital Reserve expenditures • Security – did not exist prior to 2003 • Buses and white fleet vehicles

24. Hypothesis - Future Needs • Increase the amount of funds transferred to the Capital Reserve Fund in future bond packages • A “fixed mil” budget authorization will provide additional operational revenue eliminating the need for future mil levy override elections • Increases as Douglas County assessed valuation increases • Additional operational $ could be used to support Capital Reserve Fund • All proceeds from disposal of District assets should be used to support the Capital Reserve Fund • Reduce dependence on leases as prudent • O&M East • Stadium #3 – multi purpose

25. Hypothesis – Test Questions • Would the Superintendent and Board of Education endorse policies predicated upon the hypotheses? • What other questions does the BOE have?