Funding strategies for the proposed high school renovation was presented to the Hampton Township School Board at their regular voting meeting April 8.
A Hampton High School Project Debt Service Funding Proposal was presented by Superintendent Dr. Michael Loughead and HTSD Director of Administration Services Jeff Kline. This presentation detailed possible ways the school district could fund a high school renovation at different cost levels, even beginning as early as next school year.
A debt service fund is a term for the annual funds set aside in the budget for the purposes of paying debt service, according to Kline.
Like school districts throughout the state, Hampton has to fund its budget without exceeding the Act 1 Index, which is an annual millage rate set by the Pennsylvania Department of Education and impacts a school district’s ability to raise tax rates above a certain percentage.
All budgeting items, such as a major project and operating costs, must be funded so the district does not exceed the Act 1 index, which adjusts annually. A school district may vote to go to referendum to allow residents to vote to go above these Act 1 limits, but Loughead said most districts usually try to avoid that option.
For debt service projection purposes, four project costs are being evaluated at $30, $35, $40, and $45 million. These cost levels are estimates by VEBH Architects which provided the high school renovation feasibility study, completed in January 2019 and publicly presented.
The VEBH estimated cost of construction ranges from $35 to 38.7 million with total costs of $42 to $46.5 million, according to the presentation. The board recently hired local firm PJ Dick Inc. to review these cost estimates, which is now under way.
No design plan is yet approved or adopted, but the Hampton administration is investigating funding options now, said Loughead.
Loughead said Hampton has continually and “carefully employed limited millage rate increases to balance the budget” annually and as needed.
The Hampton school district 2018-2019 millage rate is 18.95 mills, and ninth lowest of 42 districts in Allegheny County, Loughead noted. And it’s also below what the state set for Hampton for the current school year, at 19.22.
“The board is very cautious about millage rate increases,” he said.
The previous school year, Hampton had a 18.92 Act 1 millage limit, and the board approved a millage rate at 18.77 for its tax payers. The current school year rate rose by less than 1 percent.
Loughead noted the school district’s with which they like to compare Hampton, such as South Fayette, Mt. Lebanon, Upper St. Clair and Fox Chapel, all have higher millage rates. Another comparatively similar district, North Allegheny, is lower at 18.46 for this year.
Even with the lower millage rates, Hampton’s “educational services remains very high and very competitive, so to speak,” said Loughead
Kline said an independent agency projects the Base Act 1 Index for 2019-20 to be 2.3 percent or a 19.38 millage limit, with projected increases for the following four years.
They are proposing a funding plan that uses multi-year millage increases to raise the required debt service funds under the Act 1 constraints. This would take 3.34 years for $30 million, 3.72 years for $35 million, 4.08 years for $40 million, and 4.40 years for $45 million.
They indicated bond issues will most likely be necessary.
Kline said “fortunately” the school district does not have to pay for the whole project at once.
Loughead said they will be putting this presentation on the school district website, which includes examples of different proposed funding suggestions with millage rate increases.
There is an outside funding option called PlanCON through the state. The window in which to apply is very short and not even certain. VEBH will be submitting this PlanCon application should that window open so they get in the “queue.” If approved, there is a possibility of state funding at 17 percent toward costs, said Kline. This window would be on July 1.
If this opportunity may not happen, Loughead said they wanted to present and plan for a project debt service without Plancon reimbursement at those four different cost estimates.
“We try to be reasonable and conservative about this without being overly optimistic,” said Loughead.
Kline suggested standalone pieces of the project could be done without major renovation construction early on, said Kline. School Board President Bryant Wesley II noted the project would have to be phased regardless, as the school has to remain functional and not completely closed.
Since no final plans have not been approved, they are not sure of the size of the project and will be analyzing and looking for efficiencies, said Loughead.
Wesley said the state-set and directed Pennsylvania Public School Employees’ Retirement System that each school district is required to fund annually is only going to have a bigger line item in the budget for the next few years. This required cost greatly affects other budgeting needs, according to Wesley. He said this formula needs to be adjusted by the state.