Project+Funding

Pennsylvania Department of Education (PDE) reimburses school construction on a twenty-year cycle. Every twenty years, school buildings become eligible for state reimbursement in a PlanCon program aimed at keep the schools current and up-to-date with today’s teaching and energy standards. Accordingly the Lockley building would have been first eligible for reimbursement in 1974. Lockley is approaching its 57th year without major renovations. All work done at Lockley has been paid entirely with local tax dollars. The same can be said about Thaddeus Stevens, West Side, and John F. Kennedy. PDE encourages Districts to comprehensively improve existing schools where practical. Districts that embark on minimal upgrades outside the Plancon reimbursable project shoulder the entire cost locally. The most economical path is to comprehensively improve our schools using the eligible PDE reimbursement.
 * PROJECT FUNDING﻿ **

The district was selected, based upon an approval application, to receive $15 million in qualified school construction bond money with zero interest. This funding is to be re-paid over a 15-year period. These funds became available through the American Recovery Reinvestment Act. The remaining $4 million will either come from the district’s reserve fund or through a taxable general obligation bond to finance the project in it’s totality of $18 to $19 million. This project also qualifies for 20% state reimbursement.

In essence, the district will be borrowing $15 million at 0% interest over 15 years and would only be obligated to re-pay approximately $13 million. The merit of the 0% financing on $15 million has provided the district with an opportunity to have better control of staffing, removal of older inefficient buildings, and greater educational value. Please see illustration on Table (3A).

In compar ﻿ ison, on a normal general obligation bond issue in the amount of $15 million financed over 15 years for renovations to bring the existing buildings up to standard; depending upon the structuring of the debt, the district would pay back approximately $16 million. A summary of the projected options is provided on Table (3B) and Table (3C) for a clearer illustration.

In summary, the district would have a projected overall annual savings of $1.2 million and annual net debt service payments of approximately $875,000 to $950,000. This will generate a minimum average annual savings of between $250,000 to $325,000.

If the district takes no action at this point and still opted to operate under the current structure of four (4) elementary buildings, the costs will remain constant. The duplication of staff and services will remain a financial burden to the district budget, thereby resulting in no cost savings and the continued budgeting of staffing and operating costs of $1.2 million.

In addition to this, the district was recently audited relative to compliance with the American’s with Disabilities Act (ADA) which resulted in numerous reported deficiencies in each of the four (4) elementary schools. The projected cost to bring the elementary schools into ADA compliance will range between $650,000 to $1 million per building. These repairs are required by federal law.

Please keep in mind that these ADA renovations will only make us compliant with the law. It will not upgrade the facilities, reduce staffing, nor does it provide for the necessary replacement of heating and energy systems. The Lockley project will include many highly efficient, energy saving systems that will minimize operating costs and allow the District to control energy consumption while improve the indoor air quality. The project will use a geothermal heating and cooling system to reduce energy consumption capturing the earth’s energy to heat and cool the school. Without the new project, the school district would still have many of the same costs as illustrated in Table (1) and Table (2)

With the required ADA compliant issues, and if the district were to choose to upgrade the energy efficiency components (Roofing, Windows, Electric and Heating systems) of all four (4) elementary buildings; the projected costs would range from $12 to $16 million. The costs of the overall net debt service would range from $19 to $25 million with annual net debt service payments from $640,000 to $855,000. The pay back is based upon a 30-year amortization schedule, which is most standard for public school districts.

In this type of renovation, state reimbursement can and would be in jeopardy. This forfeiture of reimbursement will cost the district anywhere between $2.4 to $3.2 million.

**__ Many of you may be asking, "Why now?" __**  The opportunity of borrowing $15 million at 0% interest will not be available in the future. In addition, today’s current market conditions and competitive bidding climate will afford the district even greater opportunity for savings.

In addition, as in past consolidation, the District has been able to sell and return to the tax roles most of the prior-used buildings. The same process would be undertaken and any revenue would initially offset a portion of the anticipated project costs. Those properties returned to the tax roles would provide an ongoing revenue stream that currently does not exist.