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Cutting tax rate one option to reduce surplus Prop P funds


By MIKE ANTHONY

Executive Editor

Rolling back the Mehlville School District's tax rate to reduce the amount of revenue being generated in excess of the district's Proposition P legal obligations is one of several options available to the Board of Education.

District voters in November 2000 approved Proposition P, a nearly $68.4 million districtwide building improvement program funded by a 49-cent tax-rate increase. Current district projections indicate the 49 cents will generate nearly $26 million more over 20 years than what is required to retire bond-like certificates of participation issued to fund the Proposition P improvements.

Vice President Matthew Chellis asked at a recent Board of Education meeting, "Can we reduce the tax rate so there aren't any extra funds?''

"That is a possibility,'' replied Randy Charles, assistant superintendent for finance and the district's chief financial officer. "There are a lot of things that can be done. I know one of the things that (new Superintendent) Dr. (Tim) Ricker has talked about his convening a committee representative of the community to talk about these excess funds and what is the best use of those funds.

"I'm sure that is a topic that will be discussed, the possibility of rolling back the levy. You could discuss the possibility of paying the certificates off early, then the levy goes away altogether. You could talk about a variety of things,'' Charles added.

Noting that before Proposition P was placed on the ballot, Mehlville's Citizens' Advisory Committee for Facilities had identified needs throughout the district totaling $150 million, Charles said, "... There are people who are going to want to talk about that. It's a big issue.''

Chellis' question and Charles' comments were made June 23 during a discussion about a proposed revised Proposition P budget presented to the board by Charles.

Under the proposed revised Proposition P budget, nearly $13.7 million in additional expenditures are planned on Proposition P-related projects through mid-2008, bringing the total cost of the districtwide building improvement program to more than $86 million.

Nearly a year after voters approved Proposition P, the board voted to approve a $72.4 million budget for Proposition P.

Interest on bond-like certificates of participation issued to fund Proposition P allowed the construction budget to increase to $72.4 million, which included a nearly $3.5 million master contingency.

Current estimates indicate the 49-cent tax-rate increase will generate $170,165,506 through 2022, while the amount needed to retire the certificates of participation is projected at $144,346,224 — leaving a surplus of $25,819,282 in district capital funds. The estimated surplus does not include any interest that may be earned.

Under the proposed revised Proposition P budget, the total cost of the districtwide building improvement program and related projects would be $86,090,548 through June 30, 2008. That includes the board-approved budget of $72.4 million, plus another $13,690,548 in district capital funds. To date, a total of $4,898,567 of district capital funds has been spent on Proposition P-related projects.

During the discussion of the proposed revised Proposition P budget, Charles noted that contingency funds totaling $2,157,659 currently remain available. That includes master contingency funds, technology contingency funds, remaining site contingency funds and contingency funds from future projects.

Of the original construction budget approved by the board in October 2001, about 83 percent of the work has been contracted and about 67 percent has been completed, while 61.97 percent remains of the original master budget contingency.

"So an interesting comparison, we've actually completed 67 percent of the work and spent 38 percent of the contingency to date,'' Charles said.

Board member Rich Huddleston noted that nearly $5 million has been spent to date of district capital funds. "So when you do the contingency back there, I'm assuming there's no tie in to that at all,'' he said.

Charles replied, "Right ... there's kind of two accounts that we're forced to carry. There is the monies that we received from the issuance of the certificates (that) are on deposit with our trustee, United Missouri Bank, and we have to account for those expenditures separately. Because of the fortunate market conditions and the timely issuance of the certificates and the repurchase agreement, the 49-cent levy is generating revenue in excess of what's needed to retire the bonds and that's generated some additional capital that can be used for capital projects. It has to be within the ballot language and the ballot language clearly spells out what those monies can be spent for ...''

During a recent meeting of the Proposition P Oversight Committee, Chuck Van Gronigen, a former Board of Education member who serves as chairman of the panel, contended administrators had not provided full disclosure to the committee of the total estimated cost of the districtwide building improvement program and related projects. Van Gronigen said at the June 11 meeting that he was unaware of the additional $13.7 million that is projected to be spent on Proposition P-related projects.

However, Mehlville administrators, including Charles, countered that Oversight Committee members were fully aware that additional district capital funds are being spent and the total cost of the Proposition P improvements and related projects will be more than $72.4 million. But district officials conceded that committee members may not have been fully aware that the additional district capital funds being used are being generated by the 49-cent tax-rate increase authorized by voters when Proposition P was approved.

During his presentation of the proposed revised Proposition P budget, Charles said, "... We've given a lot of information to the board and at various meetings, Oversight Committee meetings, through monthly reports, board agenda items, but what's become clear to us is that not everybody pulled all that information together the same way we do when we deal with it every day. So what we want to try to do tonight is to try to pull all that information together once and for all so everybody's on the same page.''

Revenue generated by the 49-cent tax-rate increase "goes into the capital fund, not only the portion of the 49 cents that's used to pay off the certificates, but any excess also goes into the district capital fund,'' Charles said. "So when we came to you, it was, we thought it was clear when we talked about district capital funds, that everybody understood that's the only place the money could come from.''

Three reasons can be attributed to the use of capital funds, Charles said, citing code requirements, hidden conditions and original budget estimates that were lacking in detail.

"As we described in a report to you earlier regarding these types of extra expenditures, we have spent almost $4.9 million on projects that weren't specifically identified in the master facilities plan, but we felt were necessary to deliver on the promise of Prop P,'' Charles said, noting those additional items were funded by the additional revenues generated by the 49 cents.

In presenting a list of those Prop P-related items that carry a price tag of nearly $13.7 million, including the nearly $4.9 million that's been spent to date, Charles said, "Many of those things you will recognize as being board-approved items. As a matter of fact, most of them are being brought to you as being paid for with district capital funds. There are some others that you may not have seen. There were things (when) a decision had to be made quickly and I approved those change orders ...''

Board members also discussed how future Proposition P and Proposition P-related ex-penses should be reported. For example, Van Gronigen noted during the June 11 Oversight Committee meeting that Propo-sition P budgets and expenditures presented to the committee did not include any reference to the additional $13.7 million that is projected to be spent by mid-2008.

Charles said June 23, "Again, there had been some discussion about how to report the expenditure of these funds. We must, in our office, we must track those separately. They can be reported to the general public separately or they can be combined. It's pretty much, it's just a matter, pretty much a matter of addition for us. Again, we're looking for input from the board as to how they feel for us to continue to report this ...''

After further discussion, board members tentatively agreed to have future reports include one page for Proposition P projects funded through the certificate proceeds and a second page for Proposition P-related projects funded through surplus funds generated by the 49 cents.

"We'll bring that format back to you at the next board meeting (July 21) with some explanations of how we arrived at the projected cost in greater detail,'' Charles said.

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