Resources to learning about how school construction is financed
“The Name is Bond...Capital Bond”
Just like at home you may decide you need to build a new garage, or we want to renovate the kitchen. The question is how to pay for it. You could pay cash out of savings, or you could take out some sort of loan.
School districts led by school boards or a Board of Education face the same questions and have the same options. They may want a new school or need to renovate parts of ones they have.
A very common way a school district may borrow money is to issue a bond or a long term “I owe you” which works like a loan and ask tax payers for a Bond Levy, or an increase in property taxes. The increased amount of taxes pays back lenders or bond holders and the interest on the loan.
The State has to approve most of these levy requests, especially ones they match money or contribute to. A bank or a financial institution will sell and administer the bond.
Prompted by a major repair, Cleveland had a vision several years ago of providing every student a safe and warm place to go to school, and the school board proposed Issue 14. That capital bond levy would raise $334 million locally to pay back loans the district would need for its share of costs to build, renovate or demolish nearly every school in the city. Part of the tax increase proposal promised a group would be created to watch the way the tax money was spent and the Bond Accountability Commission was born.
Follow the Money…
A school district gets consent to raise taxes to pay for a loan or a bond
A financial institution sells the bonds, another name for an IOU, and gives the money to the school district
The tax money pays back the bond and the interest over several years to the bondholders.
Two different things!
An Operating Levy is used for day to day expenses or for repairs and maintenance or equipment.
Capital Bonds are to build something new, replace something old, or demolish something unwanted.
Glossary of terms used in school finance and construction, available on net.cmsdnet.net
Capital Programs Frequently Asked Questions (FAQs), Posted on ClevelandMetroschools.org
1. What is the Capital Building Program?
The Building Program describes what capital projects are planned for each school building the District owns. It includes demolishing old schools to build new ones and renovating schools.
2. Why do we have a Capital Building Program?
In October, 2000, the roof of the East High School gym collapsed. This event brought recognition that CMSD buildings were deteriorating and were not adequate for 21st century learning. In May, 2001, voters passed a levy that raised $335 million dollars for the Capital Building Program.
3. How many schools has the District built new or renovated since the passage of Issue 14 in May, 2001?
The District used the $335 million raised by the levy to secure 2:1 support from the State of Ohio to create and implement a School Facilities Master Plan to build 27 new schools and renovate 7 schools for approximately 24,000 students. Seven more schools are under construction to be opened this or during the next school year.
4. How does the District receive 2:1 matching funds from the State of Ohio?
When the District creates a school facilities master plan it is given to the State for approval. Once approved the State will help pay for design fees associated with renovating or replacing a building. Other eligible uses include gym and cafeteria space, security and technology infrastructure, and playground spaces and equipment. The OSFC provides 68% or 2/3 of the funding for the overall Capital Building Program.
5. How is the State of Ohio involved in the Building Program?
The Ohio School Facilities Commission (OSFC), now part of the Ohio Facilities Construction Commission (OFCC) provides funding, management oversight and technical assistance to school districts for renovation and construction of school facilities. That help comes in the form of doing building assessments to help the District evaluate the condition of schools. As a partner of the District they also co-approve project design and construction contracts.
6. What is a Locally Funded Initiative (LFI)?
Locally Funded Initiatives (LFIs) are building improvement programs and/or work not funded by the Ohio School Facilities Commission (OSFC). An LFI must be 100% funded by the District and/or other sources of funds. Examples include renovation or construction of fixed-seat auditoriums, athletic fields, land acquisition, indoor running tracks, swimming pools and extra facilities that support community outreach programs.
7. How can parents, neighborhoods and other residents get involved in the Capital Building Program?
It is time to update the District’s Capital Building Program by updating the District’s School Facilities Master Plan. To do this, the District is holding community meetings, launching an online survey and taking general comments from the public to gather input. All citizens are encouraged to respond to questions about what they want to see in their Cleveland schools. Start by visiting www.clevelandmetroschools.org to take an online survey(coming soon) or confirm when the first round of meetings will be held in or near your neighborhood. A second round of meetings will be held in February and March of next year.
8. What is the CMSD School Board’s role in the update of the School Facilities Master Plan?
The School Board encourages the public to get involved in this public process. They also provide oversight to make sure that the capital building program is supporting the District’s educational plan, priorities and approaches. With the historic passage of the Cleveland Plan in 2012 and the District’s goal of becoming a 100% high-performing portfolio school district it is important that senior leadership work together to achieve this goal.
9. What is a Portfolio Strategy School District?
The portfolio strategy is a continuous improvement model for districts that aim to dramatically affect student outcomes at scale. The portfolio strategy is built on seven key components: good options and choices for all families, school autonomy, pupil-based funding for all schools, talent-seeking strategy, sources of supports for schools, performance-based accountability for schools, extensive public engagement. To learn more about this strategy visit www.crpe.org.
10. How does the Portfolio Strategy affect the School Facilities Master Plan update?
In order to create good options for all families we need school buildings that help create the right conditions for learning. Our school buildings must support 21st century learning, promote social and emotional health, and serve as an anchor in the neighborhoods where they are located.
11. How does the District define extensive public engagement?
The District is committed to engaging a diverse group of families, community members and stakeholders on the process of transforming the Cleveland Metropolitan School District. This process has many facets, of which the update of School Facilities Master Plan is one part. The Capital Building Program is an important component of school transformation, as are other operating functions of the District that impact conditions for learning. It is a priority of the District to communicate regularly to all community members about the transformation strategy and progress being made.
12. What are enrollment projections?
Enrollment projections are forecasts of how many children will be attending the District in the future. Enrollment projections are required by the OSFC and are used to plan the Building Program. These projections help determine the number and size of schools the District needs.
Currently, these projections are being updated and should be available in early 2014.
13. What factors determine whether a building is scheduled for renovation, replacement or consolidation?
Although the analysis is complex, the basic factors include the general condition of the building as determined by an OSFC assessment, the suitability of the building for modern day educational purposes (based on the OSFC Design Manual Standards and the District’s Educational Plan and Goals), and the geographic proximity of the buildings to the homes of school-age students.
14. What has changed since in the District and City over the last ten years that might impact the update of the District’s School Facilities Master Plan?
Neighborhood conditions and population have changed in the City. And, new student enrollment projections, which are being updated now, will help inform how many buildings we will need.
15. What is the OSFC School Design Manual?
The OSFC School Design Manual is a 2,200-page book that outlines OSFC requirements for all renovation and replacement work of the Building Program. It provides standards and options for classroom space, equipment, systems, and materials to be used in the design and construction of buildings. Professionals use this book to help standardize investment in Ohio’s schools.
16. What is swing space?
Swing space is temporary space made available for students and staff while a building is being renovated or constructed. Swing space can be inside another building or within the same school. Not all building program projects require swing space.
A guide to basic elements of bond sales, Issue 14 practices of the Cleveland Metropolitan School District. Published by the BAC Bond Accountability Commission 5/19/2009
A video on how and why municipal bonds are issued. Prepared by the Municipal Securities Rules Board. Click below. Available at www.msrb.org click on Learning Center
From Cuyahoga County Treasurer website, explanation of school funding and definitions to key terms. http://treasurer.cuyahogacounty.us/en-us/funding-schools.aspx
Learningmarkets.com video on what are bond markets and how do they work