Board Special Meeting
August 28, 2007
Page 3
COOS BAY PUBLIC SCHOOLS August 28, 2007
COOS BAY, OREGON
SPECIAL SCHOOL BOARD MEETING
The Board of Directors of Coos Bay Public Schools met on August 28, 2007, at the Milner Crest Education Center, 1255 Hemlock Avenue, Coos Bay, Oregon, for a Special School Board Meeting.
Chairman Kathy Murray called the meeting to order at 5:00pm with the pledge of allegiance.
Board members present: Don Blom Donna Opitz
Wally Hazen Andy Post
Kathy Murray
Board members absent: David Ford and Randy Miles.
Also present were: Superintendent Bob De LaVergne, Attorney David Dorsey, Rod Danielson, Mary Bjornerud, Jennifer Haliski, Lynda Sanders, Jessica Musicar of The World.
Resolution to Participate in OSBA Pension Bond Pool – Business Manager Rod Danielson provided a short history of the PERS Unfunded liability and the efforts of the Oregon School Boards Association and Seattle Northwest Securities Corporation’s to provide a program to allow school districts to refinance that liability. The goal of that program is to save the districts money by allowing us to access bond money at a lower interest than through other markets. Referring to a savings analysis table, Rod said savings would start immediately – an estimated $73,000 adjustment by November this year – and total over $3.2 million over a 20-year period.
Rod explained that the unfunded liability came about because the PERS Board had not been prudent in their handling of the PERS Fund, as they were not using current actuarial tables. The benefit structure was too large; the more they paid out, the more they went into the red. PERS Reform was one of the biggest subjects in the 2002-03 Legislation. In 2002, they provided a study of where the school districts/municipalities would be in that unfunded liability. For Coos Bay School District, we were $25 million short of paying our obligation for those employees who have retired from our system.
The legislature created Tier 3 for new employees hired after a certain date. They stopped giving cost of living increases for several years, and, using the savings achieved from that, they bought down the liability. Investment returns have also decreased that liability to the point that CBSD’s portion is now about $11 million. Because of legislative action, districts and other public entities are allowed to take out a loan to pay off the unfunded liability at a lower interest rate. Right now, we are paying 8% interest on that unfunded liability. The OSBA Pension Bond Program allows us to borrow at a lower rate, 6.5% or lower, and pay off our unfunded liability at the lower rate. Rod said that, so far, the District has only paid the interest rate on the unfunded liability.
Rod explained that Resolution 2008-10 was a very long, but “tried and true,” resolution provided by the same banking institution which provided our last bond. Over 100 school districts have adopted this resolution already. Rod said that, basically, the resolution says our unfunded liability is estimated at $11,738,400. It doesn’t obligate them to borrow the total amount, it just authorizes them to borrow what we need. The Resolution authorizes the issuance and sale of bonds, whose proceeds may be used only to pay the unfunded PERS liability, at a maximum interest rate of 6.5%. The bond cannot be paid off early. Payments on the bond would be automatically paid out of the District’s SSF payments before the balance is credited to the District.
There was extensive discussion of the proposed bond. Wally Hazen said some of the districts that entered into this sort of agreement earlier are paying less than 1% interest right now. His concern was approving a loan at 6.5% interest and then seeing interest rates drop.
Kathy Murray commented on this “soft” money, saying it would be prudent to put additional money in to help save money in the future. Don Blom agreed that it was a prudent way to go. The savings would be about $100,000 a year.
Donna Opitz said she does not want to have expenses related to other districts or other problems of the trustee. Rod felt that, as a boiler plate resolution, tried and true, this is likely not an issue. Donna asked to know more about the expenses mentioned in that particular paragraph of the document.
Wally Hazen moved to adopt Resolution 2008-10. Don Blom seconded the motion, authorizing participation in the OSBA Pension Bond Program. Board members continued discussion.
Don Blom commented that, as the Board, they have a fiduciary responsibility to use the District’s money in the most reasonable method, and, if they have a possibility of saving the District money, he would be “hard pressed to go against that.” The superintendent was asked his thoughts. Supt. De La Vergne said that, coming from a small district, they didn’t entertain the program but said he felt safe with it and trusted Rod’s judgment.
Wally Hazen said he feels the savings available means they should get in it as soon as possible. If the District didn’t get into this program, it may be another 6-12 months before the chance comes up again and the interest may be higher.
Donna Opitz declared a potential conflict of interest. If bonds become available, they may come through her workplace. She also expressed her opinion that 6.5% is high for these bonds and the interest rates may be lower when said and done. However, she added that a small bond offer of $11 million does push costs a little higher. She would like to see lower interest rates. She said that, if the Board passes the resolution, they agree to go forward. When the final amount and interest rate has been determined, then Rod would make the decision or look to the Board for direction.
Kathy suggested that they consider keeping the savings from this program for the days when things are bad – a rainy day fund. Rod said the savings from a year would be dealt with by the Budget Committee the following year.
A vote was taken on the motion to adopt Resolution 2008-10. The motion passed by the majority of Board members – Don Blom, Andy Post, Donna Opitz, and Wally Hazen voted yes and Kathy Murray voted no.
Interdistrict Transfers
Supt. De La Vergne discussed the current situation with Interdistrict Transfers between Coos Bay and North Bend. He explained that, in 1998, the two District superintendents signed an agreement to transfer students on a one-to-one exchange. Since then, charter schools have been formed and the IDT process has not included students attending them, as they do not require interdistrict transfers to attended. He advised the Board that he‘d given North Bend a list of our students in our schools who have North Bend addresses and was able to get a list from them. The list included students attending ORCO Tech, and there were 36 of those students. ORCO Tech is a “charter school within the district,” and many of those students take non-computer classes at the middle/high schools – not in the charter school. Those 36 students mean we are “giving” them those students at the equivalent of about $6,000 each.
Bob said he is working with David Dorsey on a new agreement with a true one-to-one student exchange. He explained that he authorized transfers for (1) those students who were already in the North Bend District, (2) those who had siblings in the District, and (3) those who had extremely extenuating circumstances. He mentioned several others that needed approval and said that, other than these, he was refusing new transfers. David Dorsey said it was the ORCO Tech program that created the disparity. Bob said, “There are no special skills that North Bend School District can teach that we can’t. We have woodshop, welding, computer technology, and marketing. We just need to market our programs better.” The superintendent added that a coach reported he was told by several students that they were “recruited” to North Bend by being told they could take one course at ORCO Tech and then participate in North Bend athletics.
There being no further business, Chairman Murray declared the meeting adjourned at 6:32 p.m.
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Kathy Murray Mary Bjornerud
Board Chairman Board/Superintendent Secretary