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KCRT Letter to D38 Board on 2007-08 Budget

The Kenilworth Committee for Responsible Taxation recommends that the Kenilworth School District 38 Board of Trustees not approve the proposed operating budget ("Tentative FY 08 Budget") in its present form as submitted by D38 Staff for the following reasons:

1. The operating budget as submitted is not an operating budget but a mixture of a 5 year capital spending plan, operating budget and deficit financing of $965,060. We believe that the presentation is highly unorthodox with the inclusion of 5 years of capital spending and should therefore be refined and amended by including far more detail so that it is more easily understood by voters resulting in more transparency.

2. The annual operating budget has only one line and one item, "Expense for Support Services for $8,250,000" in the budget for capital spending which has no detail nor time frame attached to it. Each project of the capital spending plan should be separated out and the corresponding amount appear in the year's budget that the funds are to actually be spent instead of in one lump sum. Borrowings should also be spread out more evenly as opposed to one lump sum shown under "Principal of Bonds Sold" in one year for $8,250,000.

3. By approving the one lump sum expense and borrowing now of $8,250,000 with no capital budget detail, the voters of D38 are and will be deprived of the opportunity to thoughtfully review, examine, ask questions and understand how monies are being spent on each project. Complete transparency will gain all Voters' confidence.

A. Capital Bond Referendum

Also, if the capital spending plan is indeed a 5 year plan, then it makes no sense to have $8,250,000 borrowed all at once sitting in a bank account somewhere earning low rates of interest when all of the monies are not needed until several years hence. As background, a request was made in April of 2007 requesting a 5 year capital spending plan by project with the corresponding time line(s) in order to understand the request for $8,250,000 in borrowings and hence spendings underlying the Referendum request.

Only at an August 26, 2007 Building and Finance Committee Meeting for D38 was it revealed that in fact a detailed "Long Term Facility Planning" report by "OWP/P" (an architect, design and engineering firm) dated August 24, 2006 to D38 was in existence. This is the capital spending plan. This report details the total of $8,250,000 of proposed spending broken down into 3 phases by their priority of importance:

A constructive suggestion by KCRT is to make available to the voters the above capital spending budget in detail going out 5 years by project before it is automatically approved by the Board with the one number of $8,250,000 in one fell swoop as is being proposed with the presentation of the "Tentative FY 08 Budget". The "Long Term Facility Planning" (capital spending plan) projects list should be posted on the Internet for all voters to examine and for any interested bidders to begin examining.

Constructively, KCRT recommends that the above groupings of projects in 3 phases and therefore borrowings be done separately over the 5 year time frame spoken about. In essence, spread them out in at least 3 phases so that more effective management of the projects takes place, money is spent with maximum caution, voters have a chance to examine, ask questions and fully understand each phase of spending. Any spending efficiencies attained by a more manageable work flow will hopefully result in less expense and hence less real estate tax increases for voters. In addition, savings on capital spending can perhaps also be attained by not building all of the Priority 2 projects (the third phase) when the time comes for that phase given that they are Priority 2, the lowest priority ? Stretching out the spending gives everyone more time to analyze the need for all of these Priority 2 projects.

Voters need to better understand the process each step of the way. Only by breaking down the great number of projects into smaller groupings will this be accomplished. There should be complete transparency in the bidding process for each phase with the project list displayed as public information open to any bidding entity so desiring to submit a bid.

Questions about the process also need to be answered. For example, was the work done so far by "OWP/P" (an architect, design and engineering firm) in preparation of the "Long Term Facility Planning" report dated August 26, 2006 put out to bid? What have been "OWP/P"s fees to date and where are they in the budget(s)? What will "OWP/P"s fees be going forward ? What were the other bids on this same and future work? Architect, design and engineering costs are not broken out in the August 26, 2006 Report but should be known by voters?

Another question on process is how the underwriter of the bonds is going to be selected? Have bids been submitted to date and what are they? What has been spent on advisory and or legal fees to date for the proposed bond offerings and where do they appear in the budget ?

Another constructive suggestion by KCRT on Process is to consider having separate committees, one for Finance and one for Building instead of the current combined "Building and Finance Committee ". These two distinct functions are usually separate and with the upcoming workload, clearly a change should be made. Just the Life Safety Projects and Phase 1 Projects alone totaling $5,022,410 include 61 separate projects spread over 3-4 years. It would seem that the workload would be more evenly divided with separate Committees while also improving communication with the voters of D38 from each Committee.

B. Operating FY08 Operating Fund Referendum

There is no backup detail provided in the proposed "Tentative FY 08 Budget" on the assumptions used for salary negotiations as referred to in the last Board's meetings Closed Session part of the Agenda-Upcoming Contract Negotiations. Since this is the biggest part of the Operating Budget, we recommend all discussions and negotiations be made public information from the very beginning including the assumptions on contract proposals used in preparing the "Tentative FY2008 Budget".

A constructive suggestion by KCRT would be to emulate other school districts in Illinois who have successfully used outside negotiators (usually lawyers specializing in this area of practice) to negotiate contracts with the Union that are fair to teachers, the Board and the voters/taxpayers. The 7% per annum amount negotiated for the last D38 contract could perhaps be improved for future contracts with the benefit of a professional negotiator armed with data from around the State as well as the status of a "third party". Also, the Board would gain access to an expert whom is accountable to them but has the benefit of handling negotiations full time with current live data available on an ongoing basis. Often times these outside negotiators require that all negotiations are public information from the onset which of course would help win voter's confidence and achieve transparency.

A final question on the current "Tentative FY08 Budget" is how and why a deficit of $965, 050 is being presented versus a balanced budget? At a previous Board meeting, reference was made to moving certain "Contingency Reserves" in and out of the operating budgets. To what extent does the movement of such reserves increase or decrease impact the projected deficit?

KCRT RECOMMENDATIONS TO VOTERS AND MEMBERS

Members of KCRT should consider this a Must Attend meeting.