WCSD BOE September 3, 2024 Budget Committee

no Okay show like to call the September 3rd 2024 budget meeting to order stting at 732 uh all board members are here people are there maybe motion to Second all in favor I comments didn't see one public comment which I'm appropriate time were there any other ones Rebecca that agenda it's on facility pardon it's on facility oh I'm sorry that's okay Bo we're just do you have meetings are just causing us all kind of problems that head of the game you were no [Music] so we're going to 23 24 budget up ja so there's three uh I would say more significant topics that we want to try to cover today uh we're not going to be able to get through the depth that we want to get on all of them uh but we'll get to you know the things that need to be looked at today so to begin with uh Rebecca would you mind pulling up the treasures report which is attachment there please so I want to review with the committee what went well in 2324 and what challenges we need to work through uh regarding the treasures report so as far as the the funds that are in a in a strong position uh I'll call your attention to fund 73 the employee benefit trust fund so this committee made a decision in uh early summer to utilize the funds held within fund 73 to make the payment that was required for post employment benefits in 2324 and even with doing that uh fund 73 still saw a change in fund balance of a positive 414,000 so our employee benefit trust fund our fund 73 uh remains in a in a really strong fiscal position uh fund 80 the community service fund I want to touch on that you do see the negative change in fund balance so that was intentional our community service fund fund balance was really too high and it had increased as a result of a lack of activity during the uh the covid years and so as a result we had excess funding within our community service fund so we had had a plan for a couple of years to bring that fund balance down uh which we have continue to do so that was planned uh in fund 40 the capital projects fund you will see a minus 62 million that's normal in a capital project projects fund as Bond proceeds are being spent on projects um so typically what happens in capital projects funds is a borrowing occurs and then the project bills are paid and that fund balance then declines over time so that's very typical in a capital projects fund um Debt Service fund 30 um had a beginning fund balance of 8.5 million and ending fund balance of 7.3 uh basically we have Debt Service payments that are due on October 1st uh we The Debt Service payments change on a calendar year basis in Wisconsin accounting you Levy for Debt Service funds on a calendar year basis so that's the only fund where that actually happens where uh the tax levy goes across fiscal year years and it's calendar year based so every year that looks a little different depending on what those actual payments are in April and October so that fund looks a little bit different uh the concerning fund is fund 10 uh so fund 10 had a decline in fund balance for uh the second year in a row uh that fund balance uh without any adjustments would be 99.7% of of the 2425 expenditure budget uh in fund 10 is going to need some additional discussion beyond what we can do in the next 45 minutes but I'll share with you some of the reasons why the fund balance and fund fund 10 Decline and when this committee gets together in October and we review the fourth draft of the budget we're going to need to Circle back to some of these topics and I feel feel like moving forward we're going to have to start handling these differently um so some of the items that contributed to the change in fund balance and fund 10 is the self-insured dental fund now that was a plan U Rebecca would you mind going back to the notes for a minute I have all of this information in the notes for the meeting uh self-insured dental program so the self-insured Dental Programs fund balance had become quite large it had become over $500,000 in the balance typically that had been in the 35 to 50,000 range again during covid that had really built up uh there was a plan from The District's Insurance committee to increase benefits and bring down that fund balance uh that those benefit changes were approved by the board a year ago in May and it did work the fund balance came down 154,000 and it's still high however the self insured dental program is a part of the fund 10 fund balance so when that declines your fund 10 fund balance declines so it's just a function of uh a change that's occurring in fund balance uh that was planned but that's the net result so another one is the next one down so we allow building and departments question subcribe once it's in there it has to stay in there are we used for that specific cause I've never been asked that question before I'd have to look into that and we've always just left it in the dental fund but perhaps might be an ability to move those funds I'd have to look at it so you could move that right or a move portion of that yeah let let me look into that that's a good question uh the second item on there building department carryover balances as you know we allow building and departments to carry budgets from one fiscal year to the next in the 2324 fiscal year that resulted in a decline of $261,000 in that particular fund balance so 261,000 compared to where it was the year before basically buildings and departments were using their carryover in 2324 which brings down that fund balance the next one which is definitely a budgeting challenge uh in during the audit process we are required to put on our balance sheet enough funds to pay the health insurance bills throughout the summer uh when we received the information from HR Ally and I were surprised at the dollar amount and it was quite a bit higher than the year before so we asked the HR department to take a deep dive into our health insurance bills to really analyze what had changed and what we found is that there were 18 additional Health Plans compared to a year ago on our health insurance plan um and for health and dental historically we budget in September and then it sits for the year but we had a significant number of changes happened to health and metal uh one of the things that when we come back to this topic of funte um it's evident that having a contingency of $100,000 for a budget of our size is just no longer sufficient uh to be able to handle the type of things that do occur during the year so that's one of the things will come back to cash flow borrowing interest this is another audit one so on our balance sheet we don't actually pay our cash flow borrowing Bill until it's due in October however for audit reasons were required to put on the balance sheet funds to be set aside to pay that back um so that was $123,800 [Music] um and in this fiscal year we ended up maxing out or utilizing our full sr3 funding uh we ended up with 138,000 in eligible expenses above and beyond what our allocation was for sr3 so we maxed out our sr3 funding which all along was the plan it's just the total eligibility for cost was about 138,000 higher than the funding Food Service deficit so the Food Service fund 50 is not allowed by state law to have a deficit so if there's a deficit fund 10 has to pay for it so that deficit uh almost is entirely made up of Maintenance and Equipment our kitchens are aging and we have significant issues in them regarding the equipment and the maintenance of that equipment uh so basically like I think it was 57,000 of the 63 was maintenance so that's going to be part of our next conversation under Item B is how to allocate those maintenance expenses and then the next one again that I think budgeting moving forward I think we're going to have to make a change uh I've been here 24 years and we've never budgeted for what's called employee termination benefits however I think we've gotten to the point where we have to moving forward uh employee termination benefits are anything that somebody would have earned it could be a custodian who has two weeks worth of vacation they end up resigning on June 15th and then we owe them that payment it could be an administrator who had Bank vacation days it could really be any employee who had uh in termination benefit benefits owed to them and as Brian has shared with the HR committee the number of folks in the organization now that are over 50 um it is likely that this is going to be an item that we need to be budgeting for instead of just seeing what happens at the end of the fiscal year so there's definitely some budgeting in my opinion some budget changes that need to be made moving forward in fund 10 Ally and I would like to come back to all of this when we have more time which would be at the October meeting but there is something that if the board wanted to do it you could do this at the September board meeting Rebecca will you go down a little bit St go there y you know the Yer funds those are uh you use that money after the fact that you got make the expenditure yes y and those are some costs right so why would they be part of sure so at the end of the year basically what we do is we look at all of the people that were eligible for sr3 funding their salary and their benefits as well as the North American mechanical HBC contract Ali adds that all up and then puts the claim form in now she's been doing claim forms all along but puts the claims in the total I would say eligibility for costs that we could have claimed was 138,000 more than what was remaining in the funding basically so that has to then be covered by The District in effect well we've already covered I mean we have yes it's just not coming back right as a reimbursement uh if you want to scroll down Rebecca so the possible action item for the committee and this is just something that we' want to stay right there for a moment so I've put in the notes as a reminder what the public referendum question was in November of 22 and what's important to note is at the end where where the referendum references District W wide Renovations Capital maintenance and site improvements and Acquisitions of Furnishing fixtures and equipment that gives the board flexibility when it comes to allocating costs for districtwide maintenance maintenance in general and things like equipment replacement so I'll give you the example that I gave you about the kitchen for a moment kitchen equipment brand new kitchen equipment or a repair under DPI regulations can be coded to fund 50 so fund 50 is the Food Service fund if you're fund 50 has a deficit you can pay for that out of fund 10 so fund 10 is the general fund and ultimately fund 10 has to make food service whole or fund 49 if your referendum allows it so our referendum allows it but we have not put those expenses into the fund 49 at this time so what I'm mentioning in the notes Here is we do have about 998,199 currently allocated to fund 10 those costs can be allocated to fund 49 the board could allocate those costs which then would change the fund balances between 10 and 40 uh a very good question would then be okay so if we reallocated those districtwide maintenance expenses to fund 49 what does that look like so so Ali and I put in the notes here that fund 49 currently has interest earnings of 6.5 million so that's from the two borrowing so we have completed two borrowings of the 175 million interest earnings have exceeded expectations and are documented right now at 6.5 million 5 million of that amount has been allocated ated to Capital maintenance projects approved by the board leaving 1, 512,000 in funds that are not currently allocated we also have two future borrowings that will earn interest we also have over $2.5 million in contingency funds remaining from the Heritage Elementary project so I also want to talk a little bit about the timing so next we Friday is the end of the 2324 fiscal year for the Epi so what happens is our Auditors have to go in next week and give the final confirmation of the numbers and that's due by Friday so any decision that you may want to make regarding this topic can be done at the board meeting next Monday night and then our auditor can certify that by Friday so there still is time if there is an interest in doing it so the so the choice that would be there is leave the treasures report the way it is right now which can be done so the numbers remain as they are nothing changes or the board could make a decision to allocate districtwide maintenance and Equipment purchases out of fund 10 into Fun 49 and they'd be allocated against the interest earnings that have been made so that's really the question for the board is do you would you like to see your fund pen fund balance higher than it currently is or are you fine with where it's currently at and you want to leave the flexible money in fund 49 it's definitely a decision that uh would be a board-based decision things that would play into it if I was a board member you have a fund balance policy for fund 10 that has a goal of working towards 15% I will tell you that that is a tremendous challenge right now uh when we see our fun 10 expenditure growth occurring Ali I did a calculation that we would have to go into 2425 and set aside $675,000 allocated towards nothing to be able to keep a 15% goal for fund balance just because the numbers are getting bigger so when you take like 15% of like 65 million versus 15% of 68 million our fund balance is sliding backwards no matter what just by the nature of our fund 10 budget becoming larger our fund balance is sliding backwards so the question then for this committee and ultimately the board next Monday is do you want to take a reallocation approach which you have the authority to do Under the referendum to move districtwide maintenance and equipment from 10 to 49 or do you just want to leave it where it's at basically ja why wouldn't you do that what's that why wouldn't you do that reallocated because uh you you get funds right and what would you use the expense for one reason maybe you wouldn't do it is if the board had something very specific and targeted that the board wanted to do in fund for 9 um so an example of that could be let's say the board wanted to I'll think of something very expensive um go into the existing Middle School building and replace all the windows all the lighting and the clock Bell NPA system which those three things would be over $3 million so let's say the board wanted to do that and that was more important important than moving you know the funds from fund 10 so that'd be an example that the if if there was a larger bigger picture goal uh there's a reason why you'd want to do that but otherwise you have the legal authority to do it and there's still time to make the change if you want to so what are the limitations on use of the interest from the refer yeah questions so I should have covered that in notes so there's three things that can be done with fund 49 uh funds number one they can be used with the legal authority of the referendum question so they can be used with anything that you see up above that the public voted yes on that's the first thing that can be done the second thing that can be done is we can lower The Debt Service Levy in fund 39 so remaining funds and fund 49 can be utilized to uh drop the levy in 39 and connected to fund 39 is we can borrow less so an example of that is the public has given the board the authority to borrow up to 175 million that doesn't mean the board has to do that so on that last borrowing the board instead could say we're going to short this by 2 million or 2 and a half million and not borrow the entire amount of money those are really the three things that can be done with it so in some ways I mean this is a one-time fix for this year uh we get to this point next year we're still going to have to deal with the limitation of funds versus expenses for the 25 26 school year correct I would say Mark we have to address 2425 beginning in October I don't think we can go into 2425 knowing that there are those expenditures that don't have a budget align to them and I think we have to correct that uh and then I think if we correct it in 2425 and it may come through reductions and other line items um then in 25 26 we put ourselves in a better situation moving forward we may not be able to correct it all but I do think we have to begin that process which is why Ally and I want to bring this back the the the topic up above which had all of those cost that contributed to the deficit we want to bring that back in October because we do have to problem solve through all of that uh we can't go into 24 25 knowing we have a $100,000 contingency and just the year before health insurance change is alow and wor 210,000 because otherwise we'll be in the same spot next year so you sit down and say you going to be uh reallocated you put that towards one cost right which up some of the other funding for some of the other as you're looking at all the a lot of the food service equipment we've been talking about about settle being the challenge right so if you could uh put that funding towards one time allocation yeah and I would say there's probably two to three fiscal years of flex exibility for the board on this issue uh 2324 2425 and 2526 are all going to be years where flexibility exists in fund 49 just because of how well the projects are doing and the fact that we have those interest dollars sitting there because we had mentioned in the notes we still have two more borrowings to complete those will also earn interest plus the middle school has a ible contingency as well so fun 49 the strength of it is that it gives us flexibility with districtwide maintenance and the equipment fixtures and Furnishings for the length of the rough rending period so we not only have 23 24 we'd have 2425 and 2526 with flexibility uh for those specific targets the group in the rough so so uh the previous referendum we had AB set aside for and that me right y so are you suggesting in that 300,000 be moved out of fun 10 because that's where it is now right uh into Fun uh no what I the question I I would 3,000 would stay within the the fund yep yep and what we have the ability to do is allocate those in the interest earnings and then ultimately the board will have to decide on what to do with the Heritage savings you can allocate fund 10 districtwide Capital maintenance projects and equipment to fund 49 inste of fun time so you wouldn't touch that I would just not yeah um I'm comfortable with the allegation and I think it's the right way to go um we don't have to cover it today in the interest of time but at some point in time I'd like to revisit the 15% that policy is that the right number it may have been determined at an earlier time and that made sense at that time but doesn't make sense now I would like to come back to that and see if we need to adjust the policy yeah I know I agree totally and yet I part of the reason for having that 15% is credit rating but also these un unforeseen expenditures so that you're you're not scrambling to come up with money coverage so I agree I support the concept U I think we need a robust discussion on what that number should be um but you know I would support that motion all right is that something we're voting on I would like a recommendation one way or another for the board meeting next Monday so we're voting on this here to be allocated uh funds M no maintenance from fund 10 to fund 49 that's a tune of 900 998 998 I have a motion yeah a second all in favor I all right thank you and we will definitely Circle back to the top part of that agenda item which was the causes of the deficit the fund balance and all that we're going to bring that back all right Rebecca let's move on to the next item all right so operational referendum communication plan uh so this is the agenda item where we did receive some public feedback on and I want to just talk to you at a high level for a minute about what we've included in here and what we're looking for at the September Bo so there's a couple of things that are that are really important that I just want to mention uh because I'm going to just keep saying this at all of the meetings that we end up going to just to make sure the public is clear on it this is a 2526 operational referendum 2627 not 2425 so that's one of the most important things for us to get that message out uh because that can definitely confusing secondly the financial information for this referendum is different than the last two so the last two um the board approved a Debt Service defeasance approach which was the board was either going to approve a tax levy that included a Debt Service defeasance which is paying down debt at a faster pce than you otherwise have to or the referendum would have been approved and the funds would have gone one way or the other this referendum would best be described as a more traditional referendum communication where you put information out to the community and you basically say if this is voted for the additional cost is X uh because we know have a death service defeasance on the table uh this would look similar to what we did in 2014 when the Intermediate School referendum was presented to the public so there's two documents that are attached uh we're going to spend time on just looking at one of them uh the timeline is just a document that's going to evolve as we go as meetings get added if you as a board member see something on there that you think we should add in we're always happy to do it um that's just our first attempt at starting to put together you know who we're going to go visit and the information we're going to get out um the second one Rebecca would you pull that up so this is the start I'll call it a draft of a presentation that wa to ultimately put together uh and I want to get to the the tax pie because I think that's kind of the props of the communication Rebeca if you want to move on to the next and keep going keep going right here for just a minute okay so I want to talk about this type of presentation so to begin with 2425 has the information from our third draft of the budget it's important to know as board members know 2425 won't be finalized until October so we're showing 2425 and ultimately when a communication goes out we're going to have to put an aster bu it and say you know third draft of the budget pending final you know October decision but what 2526 and 2627 does is it shows the increase for the amount above the 8.1 million and so I want to be really clear on that uh the 8.1 million that we are asking to renew on a permanent or recurring basis is in the 2425 Levy so when you look and see the 24 25 levies at $916 sense that is in there what isn't in there are the second and third components of the referendum the second part is the million dollars over two years for hourly pay and the third part is the inflationary component which is the nonrecurring part if the board were to approve both of those in the 2526 budget if the public approves it we would see a 32 Cent per th000 increase in property value or $160 out of $500,000 home the feedback that receive we receive through public comments indicated a preference of having 2526 and 2627 shown as a if the vote is yes this is what it would be if the vote is no this is what it would be so that's something for you as board members to be thinking about is the approach that we take to present this information the slide that you're seeing in front of you only adds the amount that's not included in the base tax levy for 2425 so we're not asking for a decision today I'm just asking for you to think about it you can also of course think about the public comment you received uh and this is going to be on the agenda for the September board meeting Jack one of the things we talked about is the inflation and uh there must be you know some projections on inflation next two to three years you know and is there a way that you can present this and say if inflation's going this way tax increase would be X if it's going this way your tax be sure y I don't know if that would be more confusing yeah I definitely know what you're saying U and to add on to this one of the thing I want to mention about this graph this graph takes a conservative approach and assumes no property value growth in 252 6 and 2627 that is a more conservative way to present this Rebecca do you want to go to the next slide just for discussion sake because I wanted you to be aware of it if you go to the bullet point at the very bottom real property growth of 3% in 2526 would absorb 29 cents of the 32 Cent increase in the tax rate just so you have information on like what would real property growth look like but with that being said that doesn't factor in the state budget which is a much larger issue for 2526 and 2627 because the governor has approved $325 per student out for the next 400 years if State a doesn't come along with that that's going to result and a local property tax levy increase so although I put that in there as an example I think a better approach Rebecca if you go to the previous page is not to assume that real property growth is going to take that cost away but instead take a more conservative approach and say that is the true additional cost if these questions were to be approved excluding anything that might happen with the state budget I think the question for the board members is the public comment you receive requested a different look than this which would be in 25 26 and 2627 there might be one color that says yes and that would be the column I have there right now and then there'd be another column that would say if the public votes no and then you would see what that looks like it'd be very easy for Ali and I to add that and calculate it uh but just so you know as board members that's what the public comment was about and it's something for you all to be thinking about um the other thing for you all to be thinking about is we have traditionally sent mailers home to everyone's home those are at least $5,000 a mailer u in 2020 2 we did three of them in 2020 we did two of them the question is are you comfortable with that type of a communication plan and that type of an investment uh or would you prefer that we go other routes to get the information out so that's another thing we wanted to prompt your thinking on is for next Monday night um your thoughts on really the communication your thoughts on the investment should we be doing mailers to people's homes uh and obviously in addition to that we had the plan in there that shows the different locations at least tenative Mark another thing I think we should consider and I I don't know how to do it with minimizing verbiage because that can communicate have skate everything but uh I think somehow we need to remind our constituents that this isn't a surprise referendum for both the previous referendums we said we would have to be coming back because they're not because they were not in curring and so you know that kind of explains where that 8.1 million is and and they need to be aware of if it doesn't pass we don't have the funds in to meet needs and so somehow I think we need to remind the public that this was in the plan all along to maintain our programming as it is uh before we decide on whether or not to do mailers I'd love Annie's perspective um I think that those suit the purpose for a certain um portion of the community that wouldn't see the Alternative forms of communication so I see how at least one may be necessary because that's the only and then there's another segment of the community that instantly recycles things like that and doesn't bother to read them depending on what it is um and I really look personally to electronic communications so you know between the paper electronic forms of communication in the mailers I think we need to strike the balance there and that'll hit um that making that information accessible to everybody so so no requests for action on this just to put it on your your thought process and then we're going to bring it back next Monday for the regular for meeting yeah I guess my comment uh you know does everybody really look electronically or at the newspaper you know if you want to hit this you know um mailer seems to be you know a uh a way to do every so that everybody has a understanding what's going matter recycle it or not um you know it's just like the electronic communication you know I just H at the that so so I think I think you know you have to at least consider I least one that's why I said a balance okay so final topic and we just take a couple minutes on this um so you're going to hear more about this at the September board meeting so on Friday this past Friday Dr Brown Alie and myself met with our legal team regarding this topic we're actually scheduling them to come into our closed session in September uh to talk through the legal issues regarding this program uh to get any board members questions answered regarding the legality of our projects and this program and what would need to be done or not need to be done depending on the type of reimbursement level that we'd be seeking um at a high level we wanted to share this with both the budget committee and facility committee today so you'd have a chance to think about this before next week the the topic here is the inflation reduction Act and a program called direct pay we've put in a two-page overview for anyone who wants to learn more about in general what this topic is about but basically for the first time ever forms of government that don't pay taxes have the ability to receive a direct reimbursement from the federal government for infrastructure costs that are going into improving either existing facilities or new facilities like a geothermal eating system this program carries significant requirements as well in order to meet the legal requirements of the higher reimbursement levels we've been working with a number of people on this topic we've been working with withle which is the CPA firm that the board hired to assist us with this we've been working with a legal team to work through the issues from a legal perspective we've also been working with vogle for quite some time on the program requirements and trying to put costs associated with that uh so we're going to begin with a close session next Monday with the attorneys that we're working with talking through the legalities of this program and making sure that board members can get your legal questions answered because obviously this is one of the larger financial decisions that the board will be asked to make and it's not only connected to the middle school so it's important to note that the school that is opening today for students also could be eligible for federal direct pay program and the legalities are incredibly complicated for Heritage because of the timing of when that project started when it ended when the program requirements came out uh so what you see on your screen is information from the financial lens regarding the Middle School uh but we're still working on that as well because and I are trying to set up a meeting with with the because they are going through the process of identifying what the total scope of the claim could be uh as far as the direct payment back to the district so think about this if you've got questions bring them next Monday uh we will have two attorneys zooming in uh that's their specialty is really this topic uh and any legal questions that you might have or contractional questions you might have um you'll have that opportunity next need to jump into that I guess one of the things I'd like to know is how much you know what there some cost you [Music] know just that assuming that that doesn't include those costs no we can get that for you so more to come on this next Monday night and that's all we have for you today second all in favor hi thank you you