South Middleton School District has developed a strategy to finance an estimated $5.15 million in high priority building projects over the next four fiscal years.
Rather than rely on a bond issue that would drive up long-term debt, the district would phase in the improvements using COVID-19 relief funds to free up money in the general fund budget to augment what is transferred each year to the capital reserve account.
In recent years, the district has been trying to shore up its capital reserve through an annual transfer of money. Another goal of the strategy is to ramp up this base amount from the $550,000 transferred in the current fiscal year to $675,000 earmarked in 2025-26.
During a budget workshop on Monday, Tina Darchicourt, district director of business and operations, briefed the school board on how the strategy could work.
Year one
Based on her projections, the district should have about $1,416,171 in its capital reserve account by June 30, the end of the current fiscal year.
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From that, the district plans to allocate $1,199,973 in fiscal year 2022-23 toward a project to seal the roof of the Yellow Breeches Middle School, the highest priority item on the district’s top-five project list.
Normally, that would severely deplete the account leaving a balance of $216,198. However, there’s flexibility in the rules governing how school districts can spend COVID relief funds.
Under the strategy, the district plans to use relief funds to offset the purchase of instructional devices and to pay the salaries and benefits of three math interventionists and two English-as-a-Second-Language teachers during fiscal years 2022-23 and 2023-24.
In 2022-23, this approach would free up $866,954 that could go toward the capital reserve account. At the same time, the district plans to ramp up the base amount of its annual transfer to $600,000. This twin infusion of funds could result in a projected capital reserve balance of $1,683,152 by June 30, 2023.
Year two
That balance would carry-over into 2023-24 when the district plans to allocate $2.3 million to upgrade the HVAC system at the middle school, another high-priority item.
Normally, that project would completely exhaust the capital reserve account, but the district plans to shore it back up with a base transfer of $625,000 plus $595,397 in supplanted funds from its use of COVID relief money. This could result in a balance of $603,549 by June 30, 2024.
Year three
In 2024-25, the district plans to allocate $250,000 toward renovating the restrooms at Boiling Springs High School, which is also on the top-five list. The district also plans to allocate $325,000 toward the purchase of five acres in the 300 block of West First Street, which includes a single-family home that adjoins the district’s main campus.
Though not on the top-five list, the land purchase would enable the district to expand the campus in the future, Superintendent James Estep said Monday. “We don’t have a contract yet.”
The combination of the land purchase and restroom project would reduce the capital reserve to $28,549. However, the district plans to transfer a base amount of $650,000 from the general fund to lift the balance to $678,549 by June 30, 2025.
Year four
That balance will carry over into 2025-26 when the district plans to allocate $1 million toward pool and pool deck repairs at the high school, which is also on the top-five list. That project would exhaust the capital reserve until a base transfer of $675,000 brings the balance back to $353,549 by June 30, 2026.
The fifth project on the list calls for additional security cameras for the middle school and high school at an estimated cost of $300,000. Rather than include that project in the financing strategy, that expense would be included in the general fund budgets for 2023-24 and 2024-25.
What the strategy does not take into account are future increases in the state subsidy for basic and special education, Estep said. In the past, South Middleton School District has been conservative in its state revenue projections, in part because of timing, he said.
School boards are required by law to pass their budgets by June 30. However, approval of the state budget could drag on for months in the Pennsylvania General Assembly.
“You are passing a budget blind as far as state help is concerned,” Estep said. Future building projects could generate a higher level of energy savings that would allow more money to be funneled into the capital reserve account, he said.
Board questions
Board member Bill Hartman asked whether the middle school roof project could be combined with the middle school HVAC project. Hartman said he was concerned that work crews installing roof-top units would cut into and damage the sealant used in the roof repair project.
Darchicourt said a combination project was considered, but ruled out because of problems with financing and the anticipated delay in the shipment of HVAC equipment due to supply chain issues. Work is underway to get the roof project started this spring for completion by the start of classes in late August.
“The number one priority is the Yellow Breeches roof,” Darchicourt said. “It will not survive another year. It [the project] has to happen this summer. We are under a tight timeline.”
The roof is original to the middle school, which opened to students in late October 2000. There have been reports of leaks throughout the building following periods of rain.
“In a perfect world, the projects could be done together if you already had a pre-existing capital reserve account of any substance,” Estep said.
Concerned about how costs could escalate, board member Tony Lucido asked whether it was prudent to wait until 2025-26 to undertake major pool repairs at Boiling Springs High School.
Board President Brad Group said he doesn’t think there’s a risk of imminent failure. “It’s my understanding what’s deteriorating is the deck quality. … All the things that were glued in place almost 50 years ago. They have to be fixed all the time.”
Joseph Cress is a reporter for The Sentinel covering education and history. You can reach him at jcress@cumberlink.com or by calling 717-218-0022.
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