1. Capital Projects Chapter 11 in Guthrie Dr. Len Elovitz Peabody College Series. Copyright © Allyn & Bacon 2009 1

2. Objective 2  TLWDTAT:  Describe processes involved in constructing and financing capital projects

3. Capital Construction Peabody College Series. Copyright © Allyn & Bacon 2009 3  Outside the normal current expenditures budget  School construction directly related to demographic trends  Changes in building use

4. Demography and School Construction Peabody College Series. Copyright © Allyn & Bacon 2009 4  From WWII to the end of the 1960’s building schools proliferated  Built to accommodate the baby boomers and immigrants  1970’s brought a decrease in the populations straining systems with possible closures of underpopulated schools  Today, shift from Northeast and Midwest to the South as well as the flow of immigration calls for an increase in facilities  Possible quick fix measures include: year-round staggered schedules, renovating existing facilites, and building new schools

5. How do we pay for new schools? Peabody College Series. Copyright © Allyn & Bacon 2009 5  School are built through bond issue rather than through taxes  Capital expenditures of this size on the backs of local and state governments  Larger financial and capacity impact on smaller districts  Big districts - Chicago & New York can smooth out capital expenditures and spend about the same amount each year  Exercise is politically delicate

6. Building a New School Peabody College Series. Copyright © Allyn & Bacon 2009 6  Components  Determining need  Determining location  Land acquisition  Architectural planning  Bidding  Construction  Completion and preparation use

7. Determining Need Peabody College Series. Copyright © Allyn & Bacon 2009 7  Ascertain the extent of the need  Need projections of student population for at least 5 years  Analyses of present building capacity  Investigate alternatives to building  Space in non-school buildings  Consolidate selected operations  Multi-track year-round schooling  Mobile classrooms units (MCUs)

8. ASSA

9. DEMOGRAPHIC STUDY KEARNY SCHOOL DISTRICT Dr. Len Elovitz

10. Methodology  Cohort Survival  Enrollment History  Average survival ratios  Application to current enrollment to predict forward

11. 2005-062006-072007-082008-092009-10 Pre K195209229242230 K332354379396429 1382366383384403 2378384386379406 3358366392391396 4361358374395399 5370 380385402 6357370396388396 7474354389408 8427442380403431 Elementary34393364345935293670 9422433491425421 10468438446506423 11433.5486.5469467503 12405382404386417 High School1728.51739.5181017841764 Sp. Ed.1071791179495 Total5469.55491.5561556495759 Kearny Public Schools Enrollment History

13. SURVIVAL RATIO BIRTH – PRE-K0.519 BIRTH – K0.907 K – 11.054 1 - 21.027 2 – 31.012 3 – 41.012 4 – 51.033 5 – 61.030 6 – 71.031 7 – 81.025 8 – 91.072 9 –101.023 10 – 111.038 11 - 120.857 Kearny Public Schools Average Survival Ratios

14. 2009-102010-112011-122012-132013-142014-15 K429399387388342385 1403452420408409360 2406414464431419420 3396411419469436424 4399401416424475441 5402412414430438491 6396414424426443451 7408 427437439457 8431418 437448450 Elementary367037293789385038493879 9421462448 468480 10423431473459 479 11503439447491476 12417431376383421408 High School176417631744178118241843 Pre-K230221222196220246 Special Ed.95 969799 Total575958095851592459926067 Kearny Public School Enrollment Projections Current Organization

16. According to Town officials, 2 new housing projects have been approved. The Project on Hoyt Street includes 7 2-bedroom townhouses, 36 1-bedroom and 6 2-bedroom apartments. Schuyler Crossing Located at the intersection of Schuyler Avenue and Bergen Avenue is currently scheduled to include 152 1-bedroom, 68 2- bedroom and 12 3-bedroom units. According to the developer, the construction of these units is 1 to 2 years away. In order to project the number of public school students that would result, we used multipliers developed by the Center for Urban Policy Research at Rutgers University. The following table lists the multipliers used:

17. ELEMENTARYMIDDLEHIGH SCHOOL Apartments 1-Bedroom0.040.0120.008 2-Bedroom0.1830.0570.041 3-Bedroom0.4930.2290.109 Townhouses 2-Bedroom0.0810.0210.024 Multipliers Used for Projecting Public School Children The following tables list the projected numbers of students for each project. Numbers are rounded-off, therefore, totals may appear different than the sums.

18. ELEMENTARYMIDDLEHIGH SCHOOLTOTAL Apartments 1-Bedroom1103 2-Bedroom2103 Townhouses 2-Bedroom1001 Total4317 Projected Public School Students – Hoyt Project

19. APARTMENTSELEMENTARYMIDDLEHIGH SCHOOLTOTAL 1-Bedroom6219 2-Bedroom124319 3-Bedroom63110 Total248538 Projected Public School Students – Schuyler Crossing

20. CONCLUSIONS AND RECOMMENDATIONS The cohort survival calculations result in the prediction of an increase of 308 students (5.3%) over the next 5 years. If the 2 housing projects are completed as planned, it would add another 45 students to the projections for an increased enrollment of 353 students (6.1%). Most of the increase is projected at the elementary level (5.7%) followed by the high school (4.5%). The largest increases are projected for grades 6-8 at 10%. This is significant should the district move ahead with plans to redistrict to a middle school The current housing projects should not have that much of an impact. However, it is recommended that the district monitor enrollments coming from these units once they begin to be occupied. The confidence of enrollment projections decreases as we move further into the future particularly when the numbers are small. Therefore, it is recommended that enrollment changes be monitored on a yearly basis.

21. Enrollment Projection  Enrollment History Enrollment History  Enrollment Projection – District Enrollment Projection – District  Enrollment projection – School Enrollment projection – School

22. Determine Location Peabody College Series. Copyright © Allyn & Bacon 2009 22  Where do kids currently live?  Building a new school in another neighborhood could increase transportation costs  What other development is planned for the community?  Do existing infrastructures in the community have the capacity to support the new building?

23. Land Acquisition Peabody College Series. Copyright © Allyn & Bacon 2009 23  There are two basic ways to acquire land  Negotiation with other entities  Can increase the value of the development  Condemnation - eminent domain  Can acquire the land at a court-enforced price

24. Architectural Planning Peabody College Series. Copyright © Allyn & Bacon 2009 24  Choice of architect  Key component of the project – Educational Specifications  Understanding the goals and objectives of the education plan  Knowledge of student population needs  Knowledge of community culture  Preparation of the design sets the budget

25. Bidding Peabody College Series. Copyright © Allyn & Bacon 2009 25  Fair  Transparent  The district is required to accept the lowest responsible bidder  Architect must be a part of the selection team  The contractors’ track records and financial status should be thoroughly investigated – prequalification in NJ  NJ – General and 5 trades,

26. Construction 26  Players  Architect  Supervises project  Calls and chairs all job meetings  Approves contractors invoices attesting to completion of work and/or materials on hand  Approves all change orders  General Contractor and Subcontractors  Full-time inspector hired by the district – Clerk of the Works  Always on the job site  Inspects all work

27. Completion and Preparation for Use Peabody College Series. Copyright © Allyn & Bacon 2009 27  Final Construction step - accepting the building from the architect  Final payment made - although some monies held back for liens, etc.  Equipping the facility - Usually purchased from current revenues rather than bonds - Arbitrage  Surplus facilities created by new construction  Convert to other community uses  Put on the market

28. Long Term Debt 28  Commits repayment over many years – Usually 30 yrs for new construction  Requires a vote of the district residents - referendum  State restrictions on debt incurred  Takes burden off of current property taxpayers  Spreads principal and interest payments out over many generations  Extra millage in other states builds a construction fund that earns interest

29. Authorizing Bonds Peabody College Series. Copyright © Allyn & Bacon 2009 29  The steps involved are numerous and complex. The first order of business is hiring a financial consultant specializing in bonding  Bond Counsel should be secured  A campaign to secure the bond referendum should be mounted

30. Authorizing Bonds Peabody College Series. Copyright © Allyn & Bacon 2009 30  Work of the financial consultant includes  Surveys issuer’s debt structure and financial resources  Gathers all financial information affecting repayment  Advises on the timing and marketing of the bond issue  Prepares an overall financial plan  Prepares and distributes documents to all prospective underwriters and investors – The Official Statement  Assists the issuer in winning over the public  Keeps in contact with rating services  Advises when sealed bids are opened  Supervises bond printing, signing & delivery  Advises on investment of bond proceeds

31. Bond Counsel Peabody College Series. Copyright © Allyn & Bacon 2009 31  Specialized law firm  Ensures that bonds are indeed a legal obligation of the district  Ensures no reasonable legal challenge to the indebtedness represented by the bond  The same firm may serve as financial consultant as well as legal counsel

32. Referendum Peabody College Series. Copyright © Allyn & Bacon 2009 32  “Selling the bond issue”  Moment of truth  District determines whether it is possible to borrow money  Percentage of bond elections has declined while percentage of dollars approved has grown  Rise in population and geographic shift will cause more bond referenda in the future

33. Selling Bonds Peabody College Series. Copyright © Allyn & Bacon 2009 33  If bond approved, must find a purchaser  School districts sell the bonds to a dealer, usually a bank, rather than individuals  Bidding for the bond  Credit rating by bond rating agencies  Bond brochure describes an issue  Assures prospective purchasers that interest and principal will be paid in full and on time

34. Selling Bonds: the use of Moody’s and Standard & Poor’s Peabody College Series. Copyright © Allyn & Bacon 2009 34  Rate issues from highest quality to extremely risky  Ratings determine interest rates of the bond  Looks at debt capacity

35. Interest and Principal Payments Peabody College Series. Copyright © Allyn & Bacon 2009 35  Term bond  Large repayment in the future (maturation)  Only interest paid until maturity  Rather..  Establish a sinking fund annual deposit to pay off the bond  Staggering of bonds’ due dates  Schedules so that sum of the principal and interest payments for the district are about the same each year  Year of maturity, owners present the bond for redemption on face amounts

36. Ways of Financing Capital Improvements Peabody College Series. Copyright © Allyn & Bacon 2009 36  Current challenges  Bond issues way down  Cost of borrowing increasing substantially  Municipal bonds not as attractive to investors  State limits amount of debt a district can take on  Can burden future generations and locality  Property-poor districts with strong instructional programs must make hard choices  Possible solutions  Loss of local control  Lengthen process  Percentage equalizing technique

37. Schools Development Authority 37  On July 9, 2008, legislation was enacted authorizing $3.9 billion in additional funding for the New Jersey Schools Development Authority (SDA).The legislation allocates $2.9 billion for 31 special-needs districts, known as SDA Districts. The SDA manages and funds 100 percent of eligible project costs in the former Abbott districts. The legislation also allocates $1 billion to leverage construction in New Jersey’s Regular Operating Districts (RODs) and includes $50 million for vocational schools. The SDA administers grants for RODs, which manage their own projects.

38. Summary Peabody College Series. Copyright © Allyn & Bacon 2009 38  In addition to the daily operations of schools, system are responsible for siting, planning, building, and maintaining schools. This process is intricate and brings socioeconomic, financial, and political influences into play.