Minutes of the Meeting of the District Finance Committee

MINUTES OF THE MEETING OF THE DISTRICT FINANCE COMMITTEE

November 14, 2012

1:00 pm – 3:00 pm

1. The meeting was called to order at 3:35 pm by Mr. Sternshein.
   In attendance were:
2. Committee Members Mr. Frank, Mr. Sternshein, Mr. Young, and Mr. White
3. Staff members Dr. Woods, Ms. McCabe and Dr. Murakawa-Leopard
4. Visitors Mr. Safier, Mr. Buresh and Ms. Coleman

1. The agenda was reviewed. Mr. Young moved to approve the agenda, and Mr. Frank seconded the motion. The motion passed with a unanimous vote.

1. There was no public comment.

1. Parcel/Sales/User Tax
   Dr. Woods explained that the Board of Education gave direction to move forward in preparing a resolution to place a parcel tax on the ballot for a March election at its meeting on November 13, 2012. This direction came after the Board’s study session on budget reductions and restoration efforts. The Board indicated a desire to address the state’s ongoing reductions in school funding by seeking more local control over the District’s budget.
   Because of the short timeline between now and the March 5 ballot deadline (88 days prior to election day), the Board established some initial parameters. Based on an estimation of 10,000 parcels, with 65% participation (based on a senior exemption), at $499 per parcel, a parcel tax could generate approximately $3.2M per year over 5 years.
   The Board further indicated an interest in placing half of the funds generated into a special reserve fund. The point was made that this would mean that tax revenues would only eliminate half of the reduction and that voters might object to this use.
   A question was asked about weighting a parcel tax so that people who bought their homes more recently might be exempted; Dr. Woods indicated that he was not aware of any language in the law that would allow such an exemption.
   If there are generally 5,000 voters in a City Council election, meaning that the District would need approximately 3,500 supporting votes for a 2/3 majority; the focus on the campaign would be getting the “yes” voters to go out and vote on election day. Generally, an election might cost approximately $160,000; however in running this measure as part of the local City election, costs could be significantly less in this specific case.
   It was emphasized by committee members that the possibility of a parcel tax or other potential sources of revenue (BHEF is planning a fundraising campaign asking for $1000 per family with a goal of $1.7M) does not eliminate the need for the district to plan for reductions to enable the district to “live within its means” should these revenue generating ideas not come to fruition.
   Committee members also expressed concern about the lack of public outreach related to the potential bond acceleration, ongoing expenditures related to Metro, and the benefits the District realized as a result of the salary increases . A number of other issues were raised, including the average private school tuition of $20,000 per year plus gift/fundraising contributions, the fact that the District is 18th in the state and wants to be better, and that SMMUSD has a users tax as well as a parcel tax. It was pointed out that residents who don’t have students in the District – as well as residents who do have students in the District but who are uninvolved – are generally uninformed about the challenges facing the District. It was suggested that the District might explore engaging a communications consultant.
   The Finance Committee indicated that it is supportive of the District/Board moving forward with a Parcel Tax but only if this involves an appropriate public outreach and communications effort. Committee members also indicated a concern that the effort needs to be “first class.”

1. The minutes from the meeting from October 24, 2012 were reviewed. Mr. Young moved to approve the minutes. Mr. Frank seconded the motion. The minutes were unanimously approved as revised.

1. Budget
2. Election Results – while Proposition 30 contained no language guaranteeing funding for education, Governor Brown has made a commitment through his approved Budget, not to reduce education funding in the current year further than it already has been reduced. For BHUSD, this brings the reduction from $6.2M to $3.56M
   
3. Food Services – with the transition of Chartwells out of the District, the District now contemplates a current year impact of approximately $200,000, and an ongoing impact in future years of between $300,000 and $400,000, as compared to a pre-Chartwells impact of more than $500,000.
   
4. Local Property Tax Calculations – Ms. McCabe has discussed this topic with the Assessor’s office. AV is up approximately 6%. Unsecured taxes come in at the end of November. Ongoing communication with the Assessor’s office, including asking challenging questions, is critical. The District is also in continual communication with the County. The Committee discussed the AB8 factor and how it is applied.

1. Fundraising – Permanent Reserve
   Mr. Sternshein suggested that there is a need for the District to change its approach with the local business community and to encourage such entities to “adopt” the District so that, rather than the District or BHEF constantly going to businesses to ask for contributions, the business community comes to the District to offer its support. Thoughts such as sponsorship programs were discussed. Committee members suggested outreach to organizations such as Rotary. There was a concern regarding the relationship between the District and BHEF and whether such an approach would infringe upon BHEF’s efforts.
   
2. Reports and Updates

1. Internal Audit – Ms. McCabe provided a draft scope for an internal auditor. The committee agreed that the framework was appropriate. The challenge is to determine how to find a person and the resources to complete this work. The Committee recommends that staff complete the internal control manual and that staff take the proposed scope to the Board to ask for approval to engage the services of a part-time internal auditor.

1. Business Procedure Manual – this project has been delayed due to the transition in the Food Services program.

1. Other Matters
   The First Interim Budget will be presented to the Board during its regular session on November 27. Staff will provide the documents to the committee during the week of November 19. The Multi Year Projection and proposed reductions shown in the November 13 Study Session were shared with the Committee.

1. Future Items for Discussion
2. Fundraising Update
3. Parcel Tax Update
4. Internal Audit Update
5. Audit Report Review
   
6. Public Comment

A question was asked about whether the entirety of revenues raised locally (through a parcel tax or GO Bond, for instance) would come to the District; the answer is yes.

1. Future meeting dates are calendared for third Mondays except as noted – December 17, 2012; January 28, 2013 (4th Monday); February 25, 2013 (4th Monday); March 25, 2013 (4th Monday); April 15, 2013; May 20, 2013; June 17, 2013; July 15, 2013
   
2. Mr. White moved to adjourn the meeting at 2:36 pm. The motion was seconded by Mr. Frank and approved unanimously.