District in NLR urged to cut costs
Adviser outlines $5.9 million hole
Posted: August 3, 2014 at 3:35 a.m.
The challenge of paying for school construction projects in the North Little Rock School District is ongoing, even as the new and extensively renovated schools get closer to completion, a financial adviser to the school district said Saturday.
Scott Beardsley of First Security/Beardsley Public Finance, a division of Crews & Associates, told the North Little Rock School Board that cutting $5.9 million in operating expenses -- including as many as 100 district jobs -- remains necessary in the next few years if the district is to make its annual payments on construction loans.
The district is in the midst of what started out as a $265.5 million capital improvement program that will reduce 21 campuses to 13, most of which are being built anew or extensively remodeled.
The district's new Meadow Park Elementary will open to pupils this month. New buildings for Amboy, Boone Park and Lakewood elementaries will open later this fall or by the start of the spring semester. Renovations are well underway at Indian Hills and Crestwood elementaries and at North Little Rock High School-West Campus. Planning and work also are being done at other district campuses.
The district is paying for the construction with the sale over time of up to $200 million in bonds financed with the proceeds of a voter-approved 7.4-mill property tax increase and an anticipated $8.3 million in annual savings in district operating costs.
Additionally, the district is approved to receive about $27 million in state aid for school construction, which is less than the $66 million the district initially sought.
Beardsley was one of the presenters at a 41/2-hour Saturday work session held by district administrators to bring the School Board up to date on all aspects of the district's operations and plans for the 2014-15 school year.
He told the board members that there are "hard choices" ahead.
"The district still needs to eliminate $5,869,000 in expenses to get to the $8.3 million" in operational savings to support the construction, he said. "About $3 million of those cuts are in the plan to be in place at the start of the 2015-16 school year. Any cuts that are delayed from 2015-16 really start to compound the problem," he said.
"The nonfun part is about to start," he said, adding later that the $3 million translates to the elimination of 50 positions at the elementary school level. Notice to the employees holding those jobs would have to be given next spring "or we are not going to hit the goal."
Initially, the district had planned to open four new elementary school buildings this month instead of just one. As a result, the district won't immediately benefit from the anticipated savings to be generated by the new schools, Beardsley said.
The district will be saving only about $93,000 this year from the opening of Meadow Park and the permanent closing of the Lynch Drive Elementary campus. It is saving money because of the loss of a principal and some janitorial staff, but the district must continue to pay for the vacated building's upkeep. All of the teachers at old Meadow Park and Lynch Drive are keeping their jobs and moving into the new school.
If the district doesn't make the $3 million in cuts for the 2015-16 school year, it will have trouble paying its debt on the construction bonds, Beardsley said. If just part of the savings is realized, that will help, he said.
More operational cuts are planned for the 2016-17 school year, including savings generated by a reduced number of employees after opening a single middle school for all sixth-, seventh- and eighth-graders in the city.
Currently there are two middle schools -- Lakewood and Ridgeroad. The plan was for the Lakewood school to be a citywide middle school and Ridgeroad to be remodeled and converted into an elementary school. The plans for construction at the Lakewood site have been delayed indefinitely by the failure to get state funding for the project.
"Whether there is a new middle school building or not, are you going to have middle school savings by consolidating programming?" Beardsley asked about 2016-17 school year. "If you don't have $2 million in savings there, the negative number is growing."
The district finance plan also anticipates eventual savings of $1 million in the high school operations -- again from staff cuts -- once grades nine through 12 are on one campus.
Beardsley said there are some positive changes since the inception of the construction plan, such as the district's tax base increasing from $719 million to $754 million, which will generate more tax revenue.
Additionally, the interest rate on the construction bond issues has been 3 percent to 3.5 percent rather than the anticipated 5 percent.
The School Board can choose to use the $1.5 million a year it is saving on debt payments to offset the $5.9 million that needs to be shorn from district operations, Beardsley said. Another option is to use the money to finance bonds for the construction of a new middle school building.
Denise Drennan the district's chief financial officer, reported to the board that the district is seeking to cut an additional $2.2 million a year in expenses to offset the loss of $7.6 million a year in state desegregation aid that will end after the 2017-18 school year.
The reduction will be realized in part this year with the salary savings resulting from an early retirement incentive taken by 81 district employees. That will save the district about $5 million over eight years, Gregg Thompson, the district's senior director of human resources, said.
Superintendent Kelly Rodgers said he and his staff likely will recommend the payment of one-time bonuses to staff members in lieu of increasing salary schedules because of the financial demands on the district in regard to construction costs and the loss of the desegregation aid. Increases to the salary schedule can't be reversed and become a yearly obligation of the district.
Metro on 08/03/2014