The Partial Observer: What Is the Cost of ‘Saving’ a School?

The Partial Observer

What Is the Cost of ‘Saving’ a School?

Further Thoughts on the Schenevus-Worcester Merger

Schenevus/Maryland/Westford friends:
As a community, we have gone back and forth about whether or how students would benefit from an annexation merger with Worcester. We have sincere disagreements, despite all wanting what we believe to be best for our community’s children. Many want an answer to whether the district can or can’t be “saved.” This is an honest question, but not the one I believe we should be asking. Sure, with enough money, the district may remain independent. We can agree to disagree about the quality of the educational program. Many are quite satisfied with the status quo, but how much will it cost to retain that? How much can our community afford and can we know what the impact of voting a particular way would be?

We do have at our disposal a simple example that removes many of the variables that discussing the educational program brings with it—a building project. By now, everyone should be aware that the Schenevus Central School building is in dire need of some critical repairs and has been for some years now. Past and present boards have—in my opinion, wisely—chosen to wait until after all merger votes to present a project to the public. Why is this? Because the financing of the project, and thus the scope of what can be done, will be vastly different if the voters choose to merge with Worcester. Here, I provide an example of how that cost will vary if the voters choose to remain an independent district.

To put things into context, let us consider what happens when a capital building project is needed. Every time a construction project is considered, the board of education is presented with a list of items and a cost estimate. Most of the items are necessary repairs or upgrades, but some are “wish list” items that would enhance safety, security or function of the building. If cost is an issue, the board usually goes through the list and eliminates some items to reduce the size of the project before presenting it to the voters for their approval.

To get an idea of the impact merger incentives can make, let’s look at two scenarios: the first, in which the district remains independent (the voters say “NO” to the merger) and the project is reduced to only the essentials; the second, in which the voters say “YES,” Schenevus joins with Worcester, and the merged district receives the benefits of incentive programs. These include a lump sum payment of more than $10 million in incentive aid and increased building aid for 15 years. In the second case, we will assume that no cuts are made to the project and all of the “bells and whistles” are included. This example will show how both students and taxpayers are better off with the financing we would get as a merged district.

In Case #1, the district remains independent and proceeds with a simplified project with no “bells and whistles” and perhaps a corner or two cut on repairs. We will estimate the project cost at $3 million. The current amount of building aid we would get from the state, which is based on our (declining) student enrollment, is 84 percent. Before any financing and having to pay interest, district taxpayers will need to shoulder a $480,000.00 burden. This is a minimum estimate (because it does not include interest) and it is also likely that a second project would be necessary in years to come. If, for example, instead of replacing the entire roof with a new roof, a portion of the roof is repaired, that repair will not last as long as a new roof, so a project to replace that portion of roof will be needed before the debt from the first project is paid off.

Remember that the $480,000.00 does not include any interest that we would need to finance the project. The $480,000.00 should not be taken from district reserves because those are needed to cover the district budget shortfall.

(Last year, the BOE used $303,000.00 in reserves instead of raising taxes enough to cover the deficit. Thus, we will need to deplete the reserves by at least that amount this year unless the budget decreases, which it will not, given that employee contracts include well-earned salary increases, and insurance and fuel costs continue to rise.) Note also that the state aid for the project will not come all at once. It will come in equal amounts over the loan term, whether it be 20 or 30 years. Thus, the taxpayers will feel a significant impact from the project in an independent district.

Now let’s look at Case #1, and what happens if Schenevus and Worcester merge. As part of the merger incentive package, the state will pay 98 percent of the cost for any building projects that occur within the first 15 years of the formation of the new district. In this case, what would it cost taxpayers to go with a complete project—no cuts and including several safety and security enhancements? Let’s say the project cost before financing is $8 million. At the new aid ratio for the merged school, the district taxpayers would have to pay $160,000.00, which is one-third the cost an unmerged district would pay to get LESS work done.

Also, remember that the merger will come with more than $10 million in a direct incentive aid payment. The generally accepted advice to school boards is that this aid be divided into three parts: one to save, one for program enhancement, and the final third to be used to ease any tax adjustments caused by the merge.

For example, if the board of the merged district wanted, they could use a mere 1.6 percent of the incentive aid and the cost to the taxpayers for an $8 million project would be ZERO. Remember that this version of the project not only repairs the problems, but also provides enhancements (e.g., things like a more secure building entry or a water treatment system that would make building plumbing last longer). Even if this fund was not used, the cost for a complete project would be one-third what taxpayers in an independent district would pay for a partial project with nothing special and no improvements. Also, this amount would be spread over a larger taxpayer base in a merged district. For the curious who want a direct comparison, the $3 million version of the project would cost district taxpayers $60,000.00 with the building aid ratio for a merged district (one-eighth the cost to an independent district).

Our community is shrinking. We recently learned that we are losing yet another business on Main Street, one of the few that is left. The student population is declining. Even four years ago, when there were almost 100 more students in the school, taxpayers were asking questions about whether it would be more responsible to increase collaboration with surrounding districts to economize. The example I provided above relates to building projects, but voters should be aware that regular state aid to school districts is strongly tied to student enrollment. Thus, as enrollment continues to decline, the taxpayers must shoulder an ever-growing portion of the costs or programs must continue to be cut. A district that is always in survival mode cannot provide our students with the education they deserve and puts a larger than necessary burden on taxpayers.

We have an important decision to make. For many reasons, I believe that voting YES on the annexation merger with Worcester is the most responsible path forward. Others may disagree, but I hope they do so with a good understanding of the true cost.

Kelly Gallagher served on the Schenevus Board of Education for 15 years, from 2005-2020, and was president from 2018-2020, when the board first voted to engage in a merger study with Worcester.

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