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Did the school district's 2013 bond issue stay within its budget? A look at what voters were told then and now
When it comes to budgets, I know the one in my household works best when it is written in pencil. However, I’ve maybe picked up a few other pieces of budget knowledge over the years as I’ve covered a variety of governmental budgets in Douglas County.
That’s why my curiosity has been piqued for a few weeks now as I’ve heard more about the Lawrence school district’s budget for its $92.5 million bond issue that was approved by voters in 2013. It became more piqued as I discovered numbers that showed construction spending at one Lawrence school was off more than 70 percent compared to what voters had been told prior to the election, and several were off more than 30 percent. As school district leaders work to convince voters to approve a new $87 million bond issue — the deadline to deliver your mail ballot is noon on Tuesday — a key selling point has been that the 2013 bond issue was completed within budget.
As I’ve looked at that question — was the bond issue on budget? — I’ve come to the conclusion that it really depends on what budget you look at and how you define the phrase “within budget.” One point that is clear is that the district has made good on what was likely its most important pledge: to not raise the tax rate to pay for the 2013 bond issue. The tax rate has not gone up. (To be clear, it is projected to rise about 2.4 mills, if the new bond issue is passed next week.)
So, if the tax rate is all you care about, there is not much else for you to see here. But, if you want more details on where the dollars were spent and how that compares with what voters were told prior to the 2013 bond election, here’s a look:
• Budget No. 1: At Monday’s school board meeting, the board and public were provided an update on how much bond money has been spent at each school as part of the 2013 bond issue. The chart also shows the bond issue budget so you can compare how close actual spending was to the budget.
|School||2013 Bond Issue Budget||Bond Revisions and Interest Earnings||Total Adjusted Bond Budget||Expenditures 4/13/2017||Balance of Bond Funds|
|Food Service Equipment||1,000,889||183,318||1,184,207||1,184,207||0|
|Total Bond Issue Expenditures||92,500,000||4,468,312||96,968,312||96,673,019||295,292|
As you can see, the chart conveys that the district was almost spot on with its budgeting. It shows that in 20 out of the 23 individual projects, the amount the district spent matched exactly the “total adjusted bond budget.” (More on that phrase in a moment.) The few that didn’t match were only off by a few dollars. Such accuracy is tough to do.
• Budget No. 2. An important point to remember about Budget No. 1 is that it is not the budget that was presented to the Lawrence school board in December 2012 when it agreed to put the issue on the ballot. A different budget was presented to the board, and, importantly, it was this different budget that was used to communicate the size and scope of projects to voters prior to the 2013 election.
Getting my hands on that different budget was difficult. But after a couple of weeks of thinking, I finally figured out the right document to ask for — a 2013 bond master plan — and it included a copy of the building-by-building cost estimates that were presented to the board when it agreed to move ahead with the bond campaign.
The chart below is one I’ve created. It shows the 2017 spending figures, compares them with the 2012 budget as presented to the board, and then shows how much over or under spending is compared with the budget.
|School||2017 Spending||2012 Budget||Over/Under|
|Broken Arrow||1,354,637||1,683,100||UNDER 328,463|
(under 19 percent)
(under 5 percent)
(over 32 percent)
(under 5.2 percent)
(over 3 percent)
|Langston Hughes||3,212,943||2,442,856||OVER 770,087|
(over 31 percent)
|New York||5,669,155||5,739,500||UNDER 70,345|
(under 1.2 percent)
(over 1.9 percent)
|Prairie Park||893,740||1,983,483||UNDER 1,089,743|
(under 54 percent)
|Quail Run||4,342,190||2,645,496||OVER 1,696,694|
(over 64 percent)
(over 4.3 percent)
(over 36 percent)
|Sunset Hill||9,274,931||9,371,657||UNDER 96,726|
(under 1 percent)
(under 2.3 percent)
|Food Service Equip||1,184,207||945,000||OVER 239,207|
(over 25 percent)
|Career and Tech Education||7,006.041||5,747,416||OVER 1,258,625|
(over 21 percent)
|Free State||4,037,855||4,239,893||UNDER 202,038|
(under 4.7 percent)
(under 7.8 percent)
|Liberty Central||336,871||1,061,384||UNDER 724,513|
(under 68 percent)
|South Middle||365,639||424,322||UNDER 58,683|
(under 13 percent)
|Southwest Middle||406,627||682,720||UNDER 276,093|
(under 40 percent)
|West Middle||1,578,420||911,165||OVER 667,255|
(over 73 percent)
(over 20 percent)
This chart looks quite a bit different from the district’s chart. None of the projects exactly matches the budget, and eight of them are off by more than 30 percent. One of them is off by 73 percent.
• Total spending. It would be unreasonable to expect a pre-bond budget made in 2012 to exactly match actual construction spending that won’t be completed until later this year. Master planners don't have the benefit of detailed construction plans. Those come later in the process. As you get into a project you are going to realize some buildings are going to cost more than you expected, and you are going to have to trade money from one line item to another. A natural question is whether the total amount of spending matched the 2012 budget.
It did not. The total project cost presented to the board in December 2012 was $92,622,220. At its meeting in December 2012, the board instructed the 2012 budget to be lowered to $92.5 million. As of April 13, the district had spent $96,673,019.
The $92.5 million price tag is what was advertised to voters prior to the vote, and it is still how the 2013 bond issue is commonly described. Total spending, though, has come in at $96.6 million. District officials contend, however, that it has stayed within budget.
The key to understanding that claim goes back to the phrase you find in Budget No. 1: “total adjusted bond budget.” What didn’t show up in the 2012 budget is that the district received about a $4.4 million bonus in bond money. That is primarily bond interest money. (There is also something called a bond premium.) When the district issues bonds, it gets an infusion of cash upfront from bond buyers. That large amount of cash is put in a bank account and earns interest.
Thus far, it has earned about $4.4 million in interest. This was not an unexpected windfall for the district. It was known beforehand that the bond would generate interest, although an exact amount wouldn’t have been possible to know. The district notes that state law allows it to spend bond interest money on bond projects. That is accurate.
There are other ways the district could have dealt with the bond interest money. The district could have estimated how much it would be and added it on to the 2012 budget, which would have given the public a more complete picture of expected spending levels. In an email exchange, Superintendent Kyle Hayden said that issue was never considered by the district. He said because the district didn’t know exactly how much that money would be he was uncomfortable including it as a part of any budget. The district also could have chosen not to spend the bond interest money on projects but rather used the money to help pay off the bond debt. Hayden via email said that option also was not considered. He provided no explanation why it was not considered. In a separate email board president Marcel Harmon said he thought that option wasn't pursued because the board knew there were additional needs to be met, and it would be cost-effective to use the bond money to pay for them.
• Shifting spending, shifting priorities? It is not uncommon for construction project costs to differ from initial estimates. In fact, most construction projects have contingency funds built into them to help cushion against unknown costs. However, some of the differences in the 2013 bond project were striking.
Improvements at Prairie Park Elementary are an example. The 2012 budget estimated that $1.98 million worth of improvements would be made at Prairie Park. Instead, a little a more than $890,000 in improvements were made. Prairie Park parents may be wondering if their school received all the improvements that were originally envisioned in 2012. Hayden, via email, said that both Prairie Park and Southwest Middle School, which saw its spending decline by 40 percent, both received appropriate improvements.
“We met the scope of both projects without sacrificing any program elements,” Hayden said.
But in a separate question asking how the Prairie Park initial project estimate could be off by more than $1 million — 54 percent — Hayden answered in a way that suggested some of the originally envisioned improvements at Prairie Park didn’t happen.
“Pre-bond planning provides project cost estimates based upon the anticipated degree of improvements,” Hayden said via email. “Numbers can change significantly once design and construction teams go through a more detailed assessment of needs and work with district staff to address those needs.” An attempt to interview Hayden to clarify what that that specifically meant for improvements at Prairie Park was unsuccessful.
What happened to the more than $1 million in cost savings from Prairie Park? It was not booked as a cost savings. Instead, those dollars were applied to other projects in the district.
As for why some schools had budgets that far exceeded 2012 estimates, district officials made the post-election decision to add two classrooms each to four schools based on projected enrollment trends: Deerfield, Quail Run, Langston Hughes and Sunflower. Those costs, which weren’t budgeted in 2012, were paid for through the unbudgeted bond interest money, from cost savings at other schools or a combination thereof.
Details about why other projects exceeded the 2012 budget weren’t readily available, Hayden said.
Harmon, via email, said much of this issue goes back to understanding the difference between a master plan and construction planning.
"The master planning process is a visioning exercise of what could be, not a design exercise of what will be," Harmon said.
Hopefully, voters understood that. Harmon thinks they did. Regardless it is something for voters to keep in mind as they look at the master plan for the 2017 bond issue and decide how to cast their vote.
If the new $87 million bond issue passes on Tuesday, voters will have a new set of numbers to examine in a few years. If history is a guide, when voters go to reconcile what they were told prior to this election with what actually was spent, it is likely that more than $87 million in bond funds will have been expended. It is likely that the amounts expected today to be spent at individual schools will be different.
I am not saying that is inappropriate. But I am saying it is something that voters should know. Hopefully, the next time around, the information will be easier for all to understand.