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06.16.2016 Thursday Column

6/16/2016

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2016 Cheese Days promises to outshine last year’s gala.
Picture
Early notices are arriving from all over...

Mike says: For the third year in a row, Art Gallery 505 will celebrate Toledo Makers and the things they make with a show we call "TOLEDO MADE".  
Gallery 505 will be filled with things made by people who call Toledo their home. Those things can be one-of-a-kind handmade arts and crafts, products made by Toledo businesses, or goods and services provided by Toledo entrepreneurs.  This year's show will start at 4 p.m. on Cheese Day Friday (July 8) and will run until July 30.  No admission will be charged.
Come see what we're made of.

***

Recap: Last night’s Toledo School District meeting of the Facilities Advisory Committee summarized the FAC process to date and outlined the next steps, including the Capital Development Budget with Kelly Wilson of Construction Services Group (CRG), and Bond Capacity and Elections presented by Ryan Swanson of Piper Jaffrey, ending with the results of the second Thought Exchange online survey.*

*Paper survey forms were also available at the District Office, as noted in monthly newsletters mailed out to those within the District. Thought Exchange survey now completed.

Setting priorities according to the FAC - stakeholders across the range of Toledo District demographics - and staff and faculty revealed some differences on all except critical points, such as seismic upgrades and security measures.

Updated budget figures for cooling for the Elementary School (Line item M7, HVAC) as follows:
  • Construction Cost Subtotal - $1,100,593
  • Soft Costs** @ 40% - $440,000
  • Project Cost (Constr. + Soft) - $1,540,000

Middle School (Line item M3, HVAC) as follows:
  • Construction Cost Subtotal - $903,000
  • Soft Costs** @ 40% - $361,000
  • Project Cost (Constr. + Soft) - $1,264,000

**Soft Costs include architectural, engineering, financing and other costs not considered direct construction costs.  

High School - 2 existing units above the classrooms operating within range, likewise unit above gym. Older HVAC unit over shop area needs compressor replacement.
High School (Line item M9, HVAC/Plumbing) listed:
  • Construction Cost Subtotal - $903,000
  • Soft Costs** @ 40% - $361,000
  • Project Cost (Constr. + Soft) - $1,264,000

Questions from participants attending last night:

Q: How much “sweat equity” can be utilized to reduce total bond obligation?

A: As an example, demolition and removal of the aged shop building at the Middle School would be likely to involve asbestos removal and related hazardous material remediation requiring licensed, certified contractors.
Fencing at the Elementary School, for instance, has already been completed by community members.
However, Prevailing wages, established for specialty trades and updated twice annually, differ from residential and commercial rates. Capital funding - Public Works Projects - are bound by these rates set by the State, and vary by county based on cost of living and other regional factors.

Q: How do these budget figures differ from actual costs?

A: Budget figures do not equal actual cost, but instead provide early estimates based on historical data and current prices.

Q: How are the differing priorities between faculty/staff and FAC groups weighted?

A: Staff seemed more conservative than FAC on most items overall, but agreed on big issues like seismic controls.

Q: Could the High School gym floor, last sanded 1996, be done under Maintenance and Operations (M&O) rather than construction?

A: Scope and scale of the task deem it better done under a Bond than M&O. According to Kelly Wilson, Construction Services Group (CSG): consider %63 matching funds (under a Bond Measure), for which the District would not be eligible for another 30 years.

Following this Q&A, Ryan Swanson of Piper Jaffrey presented Bond Capacity and Elections, referring to himself as a “number cruncher since 1998. He indicated that Toledo was “well on the way” to getting a bond measure on the ballot February 2017.

In context, consider a bond as a mortgage - the shorter the repayment period, the higher the interest rate (but lower overall interest payout), while a longer repayment term enjoys a lower interest rate (but more interest ultimately paid).

In 1998, the District experienced a double bond failure, garnering less than the required (at that time) 60% vote in both February and April. Such a measure can only be re-submitted to voters once in the same 12-month period.

As 2016 is an election year, influences as far away as Europe and the UK (which will cede from the European Union) affect results on bonds and capital levies.

An overview, explained by Ryan Swanson: Bonds are the primary method used by Washington State School Districts to finance the “local share” of major capital projects:
  • Cash is generated up front
  • Payments may be spread over time
  • Districts have some control over taxpayer impacts

Statutory capacity rate on voter-approved Unlimited Tax General Obligation (UTGO) Bonds is capped at 5%, yielding the original $21 million bond estimate.  

Statutory capacity rate on non-voted Limited General Obligation (LGO) Bonds is 0.375% or approx. ⅜ of 1%, yielding around $1.6 million, which cannot be used for new construction.

A capital Projects Levy operates on a one-to-six year cycle, pays costs to modernize/remodel (such as  technology improvements), and additional capital levy may be authorized for the same time period (such as technology upgrades plus new roof).

These figures ($21 mil and $1.6 mil) are based on assessed property values which are subject to fluctuations.
By way of example, should the upcoming election trigger a bull market, municipal bonds could see a drop in investors - fewer  buying/funding these bonds. September/October signal county property valuations and changes.

Projected Bond rates therefore carry a 1% cushion allowance.

Supt. Chris Rust added: $17.9 million figure is based on FAC and staff, CSG estimates.
Kelly Wilson, CSG, reminded everyone new numbers adding cooling costs to the Elementary and Middle Schools ($1,540,000 and $1,264,000 respectively) raised that number close to the current $21,000,000 (bonding capacity).

Ryan Swanson advised that projects should should reflect life expectancy of upgrades and improvements.

Also, most bonds run 20-22 years, 25 or 30 year bonds are rare. By way of comparison, Mercer Island typically utilizes 15 year bonds, Vashon Island about average - 20.5 years.

Funds are not available until around May, if approved in February.
Projected Bond Tax Rates pages includes data on optional split sales and how to split the sale. Ryan reminded the room that the longer the repayment period, the lower the tax rate. He noted Washington State as the next-highest rating in the country, AA1 rating, and has never defaulted on a school bond, making it attractive to investors.

Note: Qualified homeowners may apply for a senior exemption. Contact Lewis County Tax Assessor, (360)740-1392.

Piper Jaffrey cited survey data from 500 respondents in 2011, 2013, and 2015(2015 listed here), answering the question:

Would you favor or oppose a bond measure for your school district if you knew the funds would be used to:  
  • Add classes for training in skilled labor/technical trades-83%
  • Add classes that students can use for college credit - 77%
  • Improve safety and security - 76%
  • Update classroom technology - 76%
  • Modernize old heating and air conditioning - 75%
  • Reduce overcrowding - 74%
  • Build permanent classrooms to replace portables - 72%

Less effective were:
  • Create construction jobs and help local economy - 67%
  • Remodel schools to meet or exceed current seismic design standards - 64%
  • New schools to replace buildings needing repair - 61%
  • Environmentally friendly designs - 57%
  • Expand central school facilities in schools - 54%
  • Improve athletic facilities - 48%

Each district reflects their community - Vashon Island votes more for art-related interests, Sunnyside for athletics.

Further, the 63% matching funds may be used toward parking, structural, and architectural, value engineering, other soft costs but not athletics

Supt. Rust wrapped up the evening with a report back on the Thought Exchange online survey, which ran May 9 to June 2, 2016, and asked what number the community might consider acceptable for a bond, citing last year’s $2.22/$100,000 assessed property value versus the current $2.40/$100,000.

*Paper Thought Exchange survey forms were also available at the District Office, as noted in monthly newsletters mailed out to those within the District. Thought Exchange survey now completed.

He reminded all present of the 5% cap, which would allow for $2.60 per $100,000, then asked if keeping the number closer to 4%, allowing $1.60 per $100.000 might help in passing a bond measure in february 2017.

One FAC participant commented that the 25-year double sale would meet this estimate...

An overview of the Thought Exchange template categorized the three-step process - Share, Star, Discover - then divided the results. Demographically,
  • 71.8% parents
  • 14.1% school staff
  • 5.9% community member
  • 5.9% non-school
  • 2.9% other

Leading the needs criteria:
  • High school needs upgrades…
  • what does it cost?
  • Does it include college readiness?

Summary: School environment...classroom learning leads...

One small thread included consolidation of high school and middle school as a cost effective move current favoring this concept.

It was noted that 1994 was the last successful passage of a bond, the 2014 bond measure having failed. The effects are summed up in one poignant comment from Thought Exchange:

“End result: we scrimped before and we are behind every school in Lewis County. Let's try and do it right this time.”

All documents will be published on the Toledo School District Website Thursday morning (link here). FAC link here.

In addition, Supt. Rust will be conducting no-tech, face-to-face meetings with stakeholders offering traditional paper graphs, charts, and documentation, one per month, beginning 6 p.m. June 21 at the District office, then following up at different venues such as the library, Senior Center, and other yet-to-be-named locations.

***

Thursday: Toledo School District will hold a Board Workshop to address the 2016-2017 Budget 6 p.m. at the Middle School Library in advance of the regularly scheduled monthly School Board meeting 7 p.m. Public encouraged to attend. Website here. On Facebook here.

***

City of Toledo Planning Commission meets 7:00 p.m. third Thursdays monthly at Toledo City Council Chambers. City website link here.

***

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Photos used under Creative Commons from Stephane's impressions, mtch3l