December 7, 2023 at 7:30 AM - Budget Committee Meeting

Description:  The purpose of this agenda item is to discuss the topic of 2024 bond proceeds management. Regarding the November 2022 referendum, the school board has approved borrowings for $9.9 million and $99 million of the $175 million approved by the voters. There are different federal requirements that apply to each of the above borrowings. This discussion will focus on the $99 million bond issue. Attached please find documentation on this topic from our financial advisor PMA.

The attached document estimates interest earnings of $5 million from the investments related to the $99 million bond issue. The district, working with our financial partners (PMA and OCB), has successfully invested the funds since January of 2023 to maximize interest earnings. The budget committee made a recommendation to the board in February 2023 regarding our investment strategy. 

Our interest earnings could exceed what is allowed by the IRS. The IRS requires specific spending targets in order to retain all interest earnings when said earnings exceed the rate of borrowing for the bond issue. In our case, the estimated interest earned is $5 million and the estimated maximum allowed is $3.6 million, unless the spending targets have been met. The spending targets are as follows for the $99 million bond issue:
25% by August 1, 2023 (have met this requirement)
50% by February 1, 2024 (on track to meet this requirement)
75% by August 1, 2024 (behind schedule to meet this requirement)
100% by February 1, 2025 (behind schedule to meet this requirement)
We are seeking board member feedback on 3 potential paths for planning in 2024:
1) Seek lower rate of return investments to reduce overall interest earnings. (Ex: tax-free municipal bonds)
2) Continue current investment plan and spending plan with the understanding we will not meet the 75% and 100% spend down requirements and will need to return $1.4 million in interest earnings to the IRS. 
3) Continue current investment plan and accelerate our spending plan with a goal of meeting the 75% and 100% spend down requirements. If this approach is preferred, administration will need to present capital maintenance expenditures of a significantly larger scale over the next couple of months. We will also have to work with Vogel Bros. to seek opportunities to lock in costs for middle school supplies, materials, equipment, etc. 
We look forward to hearing your feedback on this topic. 

Description:  The purpose of this agenda item is to review the federal energy efficiency programs that are available in 2024. Attached please find information on both the Energy Policy Act of 2005 (179D) and the Inflation Reduction Act from August 2022 (Direct Pay). 

This discussion is directly related to the prior discussion. In the event there is an interest in following path 3 from above, energy efficiency projects will be a significant component of our approach. Our total utility spending in the last 3 years is as follows:
2020-2021: $1,042,198.91
2021-2022: $1,278,471.00
2022-2023: $1,309,499.15
Total utility spend is a function of several factors including weather, cost of the energy, and amount of usage. A good comparison to make is our utility expenditures compared to similar organizations. We can make this comparison through Frontline Comparative Analytics. Our overall educational expenses are the 3rd lowest among comparable Dane County districts. However, our utility expenditures rank 4th highest when compared to those same districts. Please see the attachment.

Utility expenditures will improve in 24-25 because of the replacement of the Heritage complex with a new energy efficient Heritage Elementary. Annual savings are estimated to be $30,000 to $40,000. Our largest expenditure in the utility category is electrical costs. Outside of specific targeted projects, the district has not invested in modern energy efficient lighting throughout our older facilities. 

Attached please find initial proposals from Westphal on updating the lighting at Prairie Elementary and the High School to modern lighting systems.  We will also need proposals for the Middle School and Arboretum. 

Energy efficiency projects will have multiple benefits in 2024:
1) Reducing utility expenditures in fund 10
2) Improved classroom lighting throughout all 4 older facilities
3) Opportunity to pursue both state and federal energy efficiency incentives
4) Environmental impact of reduced energy usage

Administration is not requesting approval of these projects at the December meeting. If there is interest by the board, administration will vet these projects out for compliance with applicable state and federal incentive programs prior to seeking approval. Administration will be requesting feedback from the budget committee on the professional partnerships necessary for this work (legal and accounting).

In addition to energy efficient lighting projects, other projects like solar systems, HVAC systems, and EV charging systems are also eligible for these federal incentive programs. The new Heritage Elementary design includes a geothermal system, a solar system, and EV charging stations for both district and staff/public use. Administration will also be pursuing all available federal incentives for our energy efficiency efforts at the new Heritage Elementary school. 

Regarding EV charging stations, the district will need to have a policy regarding our approach to electric vehicles not belonging to the district (staff, visitors, general community use). We are seeking board member feedback regarding the best approach to create a district policy for these EV charging stations. 

Description:  The purpose of this discussion is to review building and department carryover balances. Please see the attached report that identifies carryover balances as of June 30, 2023. You can find this information in the first column on the left. 

Description:  The purpose of this agenda item is to review natural gas purchasing. Attached please find documents from Symmetry. The district purchases natural gas directly from Symmetry instead of purchasing through our local utility provider MGE. Our symmetry rep, Dan Navin, will be in attendance at the meeting. Natural gas rates are lower than in recent years and we have the opportunity to lock in rates for a portion of our natural gas purchases for 2024. Dan will review options with the committee. We are seeking your feedback on how to proceed. A decision would be necessary at the December 11 board meeting in order to lock in natural gas purchases for January 2024. 

Description:  The purpose of this agenda item is to review the projected end of the year balance. The 23-24 Fund 10 budget approved by the School Board in October was balanced and included a $100,000 contingency. As of the end of November, the school board has not approved any costs to come out of the contingency budget. 

There are three other items to note: 
1) The utility expenditures could exceed the utility budget by a significant dollar amount. 2022-23 expenditures were $1.3 million while the 2023-24 budget includes $1.12 million for utilities. 
2) Transportation fuel clause expenses could result in an additional budgetary impact of $75-100,000. 
3) Postemployment benefit payments have not been budgeted for the last several years. The budget committee makes a decision on this payment towards the end of the fiscal year. 

Description:  The purpose of this agenda item is to discuss the draft of the 2024-2025 budget process. Attached please find the budget timeline. 

Description:  The purpose of this agenda item is to review enrollment projection scenarios. Attached please find a document that includes historical  Third Friday in September counts and several enrollment projection models. Administration is recommending a budget planning process utilizing the 5-year average for enrollment planning. The most significant take-away from the attached document is that we will have a reduction in our student count of 113 students by moving our existing enrollment from one grade to the next. The 5-year average is projecting an increase of 100 new students, which nets out to a -13 overall. Administration is seeking feedback from the Budget Committee on this topic.

Description:  The purpose of this agenda item is to take a first look at a high level five-year budget projection. This budget projection assumes the following:
-Enrollment changes per the 5-year average enrollment projection model
-School finance system continues with $325/student increase in the revenue limit formula
-Non-recurring operational referendums that total $8.127 million continuing past 2024-25. You can add $8.127 million to the deficit for each year past 2024-25 if you assume the non-recurring operational referendums do not continue.
-Expenditures increase at a CPI level for salary plus compensation systems, health insurance increases at 3%, transportation and utilities increase at 5%
-ESSER funding is removed

The five-year budget projection provides an initial look at the deficits that are created because of the difference between revenues increasing at $325 per student and inflationary increases in expenditures. 

Description:  The purpose of this agenda item is to discuss next steps for 2024-25 budget planning. The major milestone for the January 2024 board meeting is the approval of open enrollment capacity. Administration will be using the enrollment projections and FTE planning to identify open enrollment capacity following existing school board policies. We do intend to present information on the middle school with the 4 additional FTE for the scheduling change and the associated class size/open enrollment capacity. 

Description:  The purpose of this agenda item is to discuss a School Perceptions community survey on the topic of operational referendums/long-term financial planning. Attached please find a proposal from School Perceptions. 

At the board retreat this past summer, we discussed the concept of a School Perceptions community survey to receive feedback on a variety of financial planning topics. Administration would recommend a survey to be released prior to spring break with a draft presented to the budget committee/school board in early February. We look forward to your feedback on this topic.

Description:  The purpose of this discussion is to discuss the proposal from our audit firm Wipfli for a five-year agreement. Please see the proposal attached. 

The school auditing environment is challenging. Fewer accounting firms are conducting public school audits. The last two audit firms for our district, prior to Wipfli, left the public school auditing field. Administration would like to secure the services of an audit firm for a longer time frame. Wipfli stepped in when our previous audit firm declined to continue school auditing. The audit proposal for 2023-24 has a base price of $24,000 which can be compared to a base price of approximately $20,000 for 2022-23.

Description:  The purpose of this agenda item is to discuss the proposals for accounting and legal services associated with federal energy efficiency programs. Please the attached proposal from Wipfli for the accounting services. 

The district needs to secure both accounting and legal services in order to pursue the federal energy efficiency programs referenced earlier in the agenda. Our auditing firm, Wipfli, has a department dedicated towards this work. We have also discussed the legal services with a Madison based attorney, Michael Allen, from McCauley Lyman LLC. Michael's rates are $382.50/hr and $162.50/hr for paralegal work. The majority of the work is accounting based, but legal assistance would be required for contracts. Administration is recommending approval of these partnerships. 

Description:  The purpose of this agenda item is to discuss a proposal from Traffic Analysis Design Inc. Attached please find the proposals. One proposal covers the new schools ($49,776) and one proposal covers all of the existing schools ($37,095).

Administration shared a presentation regarding transportation at the November board meeting. One of the topics from the presentation was hazardous transportation areas. An initial proposal for traffic studies was shared with the board in November. Administration requested a revised proposal based on the discussion that took place in November. Administration is requesting approval of the proposals. The traffic study is expected to take 3-4 months to complete. Administration intends to fund the new school proposal out of referendum funds and the existing schools proposal out of the general fund. 

Description:  The purpose of this agenda item is to review our contract with Lamers. Our seven-year contract with Lamers expires at the conclusion of the 2024 summer school session. We need to make a decision to either extend the existing contract or seek proposals in early 2024. 

Administration is recommending a three-year contract extension for the 2024-25 to 2026-27 school years. The district will be opening two new school buildings during this period of time. In addition, the district may be conducting a traffic study and considering other policy changes. A full request for proposal process would be less challenging after we get through the opening of the two new schools. Administration is requesting permission to request a three-year contract extension to present to the budget committee in January. 

Description:  The purpose of this agenda item is to review the 2022-23 financial audit and supporting documents. Attached please find the draft audit provided by Wipfli. Administration will provide a high level overview of the information that has been attached. 

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