Saturday, March 01, 2008

Olentangy Levy: hiding money under the mattress

The Olentengy School District claims that it is in dire need of another property tax levy. Things are bad, and the district is running on a shoestring. Yet ...

Comprehensive Annual Financial Report (CAFR) is the audited document that details the financial position of the Olentangy School District. It's lengthy and a little esoteric for average readers, but it is a wealth of information.

The CAFR -- available on the district and state auditor websites -- is addressed to the board and community. In a representative form of government, the community gives the power and responsibility of governance to its elected officials. So, board members need to read the CAFR and understand all of its nuances, yet I would bet that all but a few of past and current board members have ever taken the time to read this important report. The nonreading board members simply allow the administration to run the schools. These board members take their pay but do no work. Shameful.

In addition to the CAFR, the district is required by state law to create a
Five-Year Forecast every October, with an update every May. In addition, the district is supposed to update the forecast whenever a significant change occurs to its financial position.

The board approves the Five-Year Forecast and any subsequent updates, after which the forecast is sent to the state department of education (ODE). The latest version of the forecast is available on both the district and ODE websites.

A momentary diversion. The district earns investment income from surplus operating funds -- cash -- invested in a number of investment vehicles. The income from these investments is deposited back to the operating fund. The district also earns investment income from the cash received from the sale of bonds; cash that has not yet been used to pay construction costs. The income from these investments is initially deposited into the building funds.

School districts cannot use revenue generated from the sale of construction bonds for operating expenses, but districts can use the investment income resulting from these bonds for any purpose, subject to board approval.

OK, we have a CAFR and a Five-Year Forecast, as well as investment income from operating surpluses and bond sales.

The Five-Year Forecast is reporting an approximate $2 million shortage for FY 2009. This is the reason for the dire need for a March 2008 levy. However, the 2006 CAFR reports over $3 million in investment income resulting from construction bonds. They more than wash.

Keep in mind that additional investment income was generated in FY07, with more being generated this fiscal year.

It is prudent for the district to hold onto some money as a contingency should something occur during construction. However, since the majority of construction will be completed by the start of FY09, the majority of the investment income will be freed from contingency planning and available to be moved to the operating fund.

The administration will certainly recognise this money once the levy passes. That's what they did when I served on the board. The investment income simply appears when the superintendent has a pet project to fund. This year will be the same.

So, the questions to be answered in just a few weeks are these: Why has the district refused to recognize its stash of bond investment income as operating funds in order to wipe away the FY09 negative balance on the October Five-Year Forecast? Why are the superintendent, board, and now Olentangy for Kids, pushing an issue that is not needed? Don't they respect the community anymore?


Anonymous said...

You are still ignoring the cash flow issue and are only looking at the balance of the savings account. The district's costs are still higher than their revenue. Without the levy, the money is not replenished and even more significant cuts would be needed in 2010. They could hold off in 2009 but then they would need an even larger levy in 2009 to replenish the cash balance for 2010 when large deficits occur. No one would run an operation the way you propose.

Taxpayer of 3 kids said...


Please share with folks who haven't voted no yet (like me) how much of a bonus Mr. Davis has received this year and may receive should the levy pass.

Thanks for keeping the community informed....I can't wait for the dialogue after this issue crashes hard.

Will they snub their noses at the will of the people and implement the cuts? Or, will they listen to the voters and balance the budget this year...then come back to us with a more logical levy?

Jim Fedako said...

It appears that the superintendent already received around a $45,000 bonus. I say appears because the contract language is murky and the treasurer will not give me a straight answer.

Though, my belief is that when a government official refuses to give a straight answer to a simple question, assume the worst possible outcome.

He will get no additional contractual bonus should the levy pass. That saud, the board can do anything it wants over and above the current contract.

Jim Fedako said...


This is not business, this is government schools in Ohio.

All levies in Olentangy are built on deficit spending in the out-years. The levy on the ballot is structured the very same way.

The first year(s) build the cash balance, the out-year(s) spend it down.

There are other levy mechanisms (such as step levies, etc.) to bring the actual millage closer to the supposed need, but they aren't used here.

As far as the size of the levy in 2009:

First, the district can control ASSUMED costs during its current contract negotiations.

Second, the treasurer just reported to the board that revenue is up and expenditures down. The net effect is over $2 million.

Apply that $2 million with the $2 million that can be avoided through tight contracts, and you have accumlated $8 million for the ending balance of 2010.

That alone will significantly reduce the millage.

Keep in mind that the currently assumed (without any changes due to the treasurers report or contract negotiations) fiscal situation of the district in 2010 is not as bad as the situation faced in 2003 while looking at 2005.

A 2009 levy will be for less mills than the 2004 levy. Why the cry for early cuts? The district did NOT make such cuts in 2003 or 2004.

Of course, a different board and a different superintendent.

Keep in mind that most taxpayers would rather have their tax dollars in the OWN pockets longer.

I assume that you would rather hand your money over to government as early as possible. That is no way to run a household. Or to control government for that matter.