Skip to Page Content Skip to the search box and translation tools

May 3 - Meeting Information

May 3, 2017 - 2018 Levy Development Committee

Agenda

2018 Levy Development Committee, 5:30‐8:00 p.m., Wednesday, May 3, 2017
Administration Building, 565 N.W. Holly St., Issaquah

  1. Welcome and Introductions
    • Ron Thiele and Technical Team
  2. Charter Review and Time‐line
    • Jake Kuper and Technical Team
  3. Operating Norms
    • Jake Kuper and Technical Team
  4. School Finance Overview
    • Jake Kuper and Technical Team
  5. M & O Levy Presentation
    • Jake Kuper, Martin Turney and Technical Team
  6. Transportation Levy Presentation
    • Jake Kuper, Martin Turney, Gayle Morgan and Technical Team
  7. Next Steps and Closure
    1. Technical Team

Mini Summary

Official Action: The committee voted 38 out of 42 that approval from at least 75 percent of members in attendance is the threshold needed to pass a vote, and voting will be conducted by raised hands. To pass a vote, the quorum in 60 percent. No proxy or absentee votes will be permitted. The committee also unanimously decided to approve a single year Transportation Levy in the amount of $2,000,000 with an estimated tax rate impact of $0.07 per thousand of assessed value for calendar year 2019.

Discussion: For the inaugural meeting, committee members introduced themselves and went through the charter and meeting operation norms. The Technical team presented an overview of Public School Finance. They also discussed what Maintenance and Operations Levy funds add to the district budget.

Up next: Committee members will return May 17; they will receive the springboard proposal for the Capital Levy and begin to revise and refine the potential levy package. 


Meeting Minutes

2018 Levy Development Committee

The meeting was convened at 5:35 p.m.

ATTENDANCE
In attendance: Marta Mikkelsen, Jackie Mueller, Martin Buckley, Jennifer Harrington, Joseph Jun, Sarah Manningsmith, Rory Mullen, Carrie Hipsher, Jeff Jarrard, George Metcalf, Amita Mathur, Fred Rundle, Kim Clarke, Rachel Auffant, Kimberly Montague, Andrew Pedersen, Lori Riskin, Jonathan Koshar, Jonathan Grudin, Dawn Peschek, Alicia Veevaert, Leslie Lederman, Jane Harris, Christy Otley, Casey Stookey, Michelle Caponigro, Seth Adams, Sena Camarata, Carrie Reckling, Doug Wolff, Laila Collins, Dana Rundle, Doug Jones, Susie Kelly, John Gorow, Jody Mull, Don Burnett, Damon Muller, Nick Croppi, Chirasmita Kompella, Blake Johnson, Shriya Kurpad.

WELCOME
Superintendent Ron Thiele opened the 2018 Levy Development Committee by welcoming members. He added that this would be a challenging committee in light of the climate in Olympia regarding school funding.

Superintendent Thiele then introduced members of the Technical Committee: Jake Kuper, CFO; Martin Turney, Executive Director of Finance and Support Services; Steve Crawford, Director of Capital Projects; L. Michelle, Executive Director of Communication; Gayle Morgan, Director of Transportation; and Lisa White and Debbie Massaro who will provide administrative support. The role of the technical team is to serve the Committee by providing information, clarification and answers to member questions.

The Superintendent explained that this is a Superintendent’s Committee meaning a recommendation would be presented to him for his examination and then ultimately passed onto the Board for their evaluation. Once approved by the Board, the measure would be placed on the ballot for a February 2018 election. He emphasized that the Board and he appreciate the time, thoughtfulness, and energy that the Levy Committee brings to the process. Although no Board members were present at this evening’s meeting due to another commitment, the Superintendent said members would attend future meetings with him as observers. 

INTRODUCTIONS
Mr. Kuper welcomed the Committee and asked if they would introduce themselves. He noted several members had served on previous committees and he thanked them for serving again. He later noted that the Committee was still in need of a business representative and a government representative. Mr. Kuper thanked the members for completing the application process for the Committee and being part of this work.

Mr. Kuper reiterated the goals of the Levy Committee: the Committee is an advisory to the Superintendent who in turn will recommend a ballot measure to the Board potentially for a February 2018 election. Committee materials are posted to the website and hard copies will be provided to the members. Mr. Kuper noted that although the meeting is open to the public it is not a public meeting and therefore the public does not contribute to the meeting discussion. Community members and meeting observers may provide written comment; an email address has been set up for community members to participate at Levy2018@issaquah.wednet.edu. Mr. Kuper said that as the process moves forward, members should return to their stakeholder groups and keep them informed.

COMMITTEE CHARTER
The Committee was directed to the 2018 Levy Development Committee Charter. Mr. Kuper reminded the group that there were four meetings scheduled. He noted that it would be difficult to know how much we can and cannot levy (particularly as it relates to the Maintenance and Operations Levy) without more definite decisions by the legislature regarding school funding. As noted on the Charter there are three underlying goals for the Committee to determine: the M&O Levy, a single-year Transportation Levy and a Capital Levy which is broken into 2 parts for examination (Critical Repairs and Technology). On the ballot there will be one amount for each year and a resulting tax rate. 

OVERVIEW OF SCHOOL REVENUE
Mr. Kuper discussed how the Committee makes decisions. Historically, the Committee has chosen a quorum requirement and a threshold requirement for what it takes to change, alter and/or put forward the Springboard proposal. The District operates with a Springboard proposal approach to present District administration thinking; amounts are transparent and everything is up for change. Each part of the Levy is voted on separately; a final vote will be taken on the total package as a whole and the resulting tax rate.

A Committee member asked how we break down each section of the Levy. Mr. Kuper said for example Transportation is one chunk and we will give you the background for that proposal. Putting it into perspective, every penny raises about $285K, every dime raises $2.8M on the tax rolls. Over a 4-year period, this Levy will bring in between $250-$350M to the M&O, $50-$60M for the planned Technology Levy and then $14-$15M for the Critical Repairs portion.  Mr. Kuper answered that we will look at each Levy separately and break-out the dollars for each one; Critical Repairs is based on priority and need, Technology is based on what is rolled up and what we consider as enhancements and Transportation is based on a purchasing plan. Mr. Kuper directed the Committee to the Levy Overview document, which breaks out the three levies in the package and provides further explanation and detail.

Mr. Kuper acknowledged that in the media there are many ideas swirling on how to fund public education, but the Committee would stay out of conjecture and political speculation. He stated, “We could only look at what we do know and what we can control”. A levy at the local level provides us some control with Transportation, Technology and Critical Repairs; we may not have complete final amounts for the M&O but the Committee would plan ahead. In some way, this provides a measure of local authority in how we fund schools.

Mr. Kuper then directed the Committee to the document Public School Finance 101. One of the two main school funding sources is a construction bond. Mr. Kuper commented that construction for the Pine Lake Middle School Rebuild, which was approved in the $533.5M 2016 Bond, was underway. The District was moving ahead on property acquisition for multiple school sites; the Clark Elementary project is on schedule for a fall 2017 opening; and two remodels are running simultaneously at Cougar Ridge and Sunset. The construction bond funds all of these and more. The other funding source is a Maintenance and Operations Replacement Levy which provides about 20 cents on the dollar of the District operating budget. Mr. Kuper further noted that school bus levies are a single year measure and he would explain the state’s process for purchasing buses in depth; the Capital levy is split into Critical Repairs and Technology and would be tackled separately by the Committee.

FISCAL YEAR 2016-17 REVENUE OVERVIEW
Moving to the Fiscal Year 2016-17 Revenue Chart, Mr. Kuper added that there are currently 20,000 students and 2,500 full and part-time staff in the Issaquah School District. As indicated on the chart, the Fiscal Year 2016-17 operating budget on the revenue side is $232,306,577. Funding from the State Legislature is 63.9%. The next largest piece (20.3%) comes from the local M&O Levy, which the voters approve locally and we put into our system. The remaining funding includes Local Fees, Tuition, Gifts, Fines and Rents (12.7%). These funds primarily come from the school lunch program, school age care, and gifts from the ISF, PTSA and other groups and individuals. The District receives a small sliver of Federal Funding (2.9%) mostly for Special Education. Mr. Kuper noted that the District receives little federal funding due to poverty because of the community’s socioeconomic status. In response to a question, he said federal funding is based on a sliding scale depending on how impoverished a district may be using Free and Reduced Lunch as a determination; with only 7.85% on the Free and Reduced Lunch Program, we receive $500K in Title 1 funding which is a miniscule amount. 

As noted on the Fiscal Year 2016-17 General Fund Cost Centers Chart, District expenditures are higher than the revenue we receive. This is done for capacity sake so in the event enrollment goes up that causes greater expenditures we do not have to go back to the Board for legal action to extend the budget. Mr. Kuper explained the expenses for the 2016-17 school year; of the total of $235,368,747, the largest amount (76%) is for Classroom (direct program costs) and Classroom Support (which includes salaries for administration, maintenance, custodial, etc.); Special Education (9.1%); Food Service (2.1%); Transportation (3.5%); Other Grants/Programs (8.4%); and contractual services for Echo Glen (.9%) a state funded facility located near Snoqualmie. A Committee member asked how our funding compares to other school districts around the state. Mr. Kuper responded that the Issaquah School District is unique as it is wealthy demographically, but funded near the bottom. Out of 296 districts Issaquah is 268 or 269 in funding; we are 293rd in state revenue per pupil funding. At the peak ISD, was funded at 69% but is now funded at 64%. Mr. Kuper noted that while we get a lower amount per pupil we also face fewer socioeconomic issues. He added that the District has the lowest overhead of administrative staff in King County which allows more local money to go in the classroom which counters our low federal and per pupil funding. Lake Washington School District is very similar to ISD while districts like Bellevue and Mercer Island have higher levy lids that allows them to collect 9% more. Explaining further, Mr. Kuper explained that in the 1970’s the state recalculated funding of education; districts were grandfathered in at the rate they were levying at that time. At the time, Issaquah was a small rural community compared to Seattle and Bellevue and was grandfathered in at a much lower rate than those larger urban districts. The District also receives less per student because we are not eligible for levy equalization funding which is funding that lowers the tax rate in a community. For example, in a dense community like Bellevue it costs only $1/1000 to raise $10M; a community like Tahoma that does not have a lot of commercial development is “property poor” so it would have a higher tax rate to get the same amount as Bellevue ($5/1000 for example). To help those districts, the State says if you pass “X” levy, the state will provide “Y” in state funding and lower your property taxes. This combined with the grandfathered levy rate is why Issaquah receives less funding than other Districts. Looking at our total revenue vs. state revenue, Issaquah also receives less than districts like Bellevue as well as Highline and Seattle that receive additional federal money due to poverty and socio-economic conditions. Mr. Kuper noted that while Issaquah is funded lower than these districts, we also have less complexity of student issues. A Committee member asked what else drives the revenue per student up or down (ours is low although we have a wealthy district). Mr. Kuper answered that a district like Highline is about the same size but receives a massive amount of federal funds that drives their per-pupil funding significantly higher. He further explained that levies are also based on prior year state and federal revenue; consequently, the more federal money a district receives means they can levy more locally as well.

MAINTENANCE AND OPERATIONS LEVY-WHAT DOES IT PAY FOR?
Mr. Kuper acknowledged that his goal is to provide “transparent ambiguity”; we provide the Committee with as much information as we have even though we do not know what our levy authority will be. This situation has occurred before. In 2010, the Levy Committee approved in advance of the legislature’s decision on funding, to run a higher levy lid. We brought to the Superintendent, Board and community two levies amounts (28.97% and 24.97%) in advance of the law changing. 

Currently, 28.97% is our levy lid or authority, which means we are allowed to levy 28.97% of our prior year state and federal revenue. This amount was set to expire in 12/31/2017, but the legislature put forward an extension to 12/31/2018. This is the last year of the current levy; this Committee is working on 2019-2022. However, after passing the extension, both chambers then put forth education budgets that cut district levy authority. While the legislature and governor have signed the extension so districts could plan for staffing next year, they are also floating bills that lower the levy authority. This creates ambiguity for the Committee. A question was asked as to what levy lid numbers were being proposed and assuming their funding goes up that changes the whole pie chart. Mr. Kuper answered the proposals are disparate proposals; the Senate is moving to a per pupil model; the House maintains the current funding money model but adds new money into it and rolls the lid back to 24.97%. The Senate has a levy in 2018, no levy in 2019 and low levy authority of 10% in 2020-21. Mr. Kuper noted that on the property tax bill, the Common Schools Levy portion which comes from the state not local authority. The 2nd highest portion is the locally approved taxes. The Senate plan would increase the state’s Common Schools Levy, which in turn increases property taxes collected and lowers the local amount districts can collect. If you are in a property rich district you could have a tax increase, here you could have a slight decrease but it depends on which model which day.

A Committee member asked if our increased property values will bring in more money. Mr. Kuper responded not the way we levy taxes. The District levies taxes on an aggregate amount and project the rate to achieve this. When assessed value goes up, the per thousand lowers but we don’t get to collect any more money. Some taxing jurisdictions do tax per thousand. Our assessed property valuation (taxable property) next year is a little over $28B on 110 square miles but we levy on flat amounts. Two things increase the pie: an increase in new residences or business and appreciation. So if the total assessed valuation is $30B, the District’s goal is to keep taxes as level as possible so the homeowner has some level of expectation. A Committee member commented that with more homes, there will be more students entering the District which means the District will get more money. Mr. Kuper noted he projects 530 more students next year but with that we will be spending more money too.

A Committee member asked who sets mitigation fees. Mr. Kuper answered that mitigation fees under Washington state statute are set in two ways; 1) SEPA with a master mitigation agreement like we have in the Issaquah Highlands; or 2) by the school district in cooperation with city partners using the Capital Facilities Plan. The amounts set in the Capital Facilities Plan are not under the purview of the Committee. Mr. Kuper explained that a developer would need to pay $60-$70K per lot to cover the capital fees needed in the school system; currently they only pay $8-10K per lot. In the end, the homeowner pays for improvements with their initial purchase or through levies. Even if the District proposed a hefty rate, a city would not want to pass this cost onto developers, as they are required under the state’s Growth Management Act to accept their share of growth and provide affordable housing.

To clarify, a Committee member stated the Committee would set a dollar amount for the levy that would be divided by property owners based on the valuation of all houses and business, each paying a percentage of the valuation. Mr. Kuper agreed and said he would present his models for arriving at the figures in a subsequent meeting.

Mr. Kuper stated that over the last 4 years, the district has brought in about $48.1 million into the General Fund from its M&O collection. He directed the committee to the slide M&O Levy: What does it pay for? Currently, there is conversation as to the definition of “basic education”. Mr. Kuper noted that it is impossible to define the term as it depends on where you live and the needs of your city and community; the legislature cannot define it because it is impossible to define “basic”. Mr. Kuper explained that districts historically must fund all things outside the state’s formulas. The district pays for salaries, benefits and salary allocations; for example, we receive $65K from the state for principal salary, but in reality it costs twice that amount to fund one principal position. The state funds about 70% of the cost of our teachers, leaving about 30% from our levies to fund. Issaquah has sued the state of Washington because we must back-fill our special education program by about $4.3M but we lost in the state Supreme Court. In Mr. Kuper’s opinion, when the state says it fully funds something, they only “fully fund their formula”. While the state says it fully funds Transportation, the District is still $2M in the hole. He commented that the state determines the costs and what they will provide based on their accounting; however, their funding drivers do not keep up with the cost of doing business which is where local levies come in.

A Committee member asked if there were any restrictions on what could be funded by the M&O. Mr. Kuper answered you can fund Capital Projects out of the M&O but in Issaquah, “Levies are for Learning and Bonds are for Building”. Capital levies are a hybrid that can be used for repairs, modifications or technology; salaries can be paid if they are related to technology. The Transportation Levy is more limited as you can only purchase buses; it does not pay for diesel or salaries. For further clarification, the Committee was directed to the slide Why Are We Limited to the Amount We Can Levy? Mr. Kuper stated that historically our strategy in Issaquah is to collect as much as we can legally as we must compete in the same labor market with surrounding districts such as Mercer Island and Bellevue. 

The Committee then reviewed the slide, February 2018 replacement M&O Levy which provided the two different models for funding the Levy; one model at 24.97% and the other at 28.97%. Mr. Kuper noted that the spread was .30/$1000 of assessed value which was not insignificant (about $150 on a $500K home). This will be discussed as it relates to our current tax rate.

The Committee was then asked to take a short break to determine how it would make further decisions. Mr. Kuper noted that historically the group had a 2/3 quorum requirement and then a requirement for changing the Springboard proposals. Typically the District has not used proxy voting. 

When the Committee reconvened, a motion was made and seconded to adopt a 60% quorum of members present with 75% threshold to amend or change the Springboard proposals. 

The Committee then discussed the historical size of the quorum on the last levy committee which was a 70% quorum and 75% approval. Further discussion included the impacts of a higher quorum on taking a vote and that a higher approval threshold sends a stronger message of support. 

A vote was then taken on the motion. By a show of hands, the vote was 38 in favor and 4 not in favor of adopting the 60% quorum of members present with a 75% threshold to amend or change the Springboard proposals.

Mr. Kuper notified the Committee that the meeting was being recorded for purposes of taking accurate minutes; the recordings would not be used for podcast or any other purpose.

SCHOOL BUS LEVY SPRINGBOARD PROPOSAL
Mr. Turney directed the Committee to the slide School Bus Levy Springboard Proposal, noting that transportation lives in its own world and there is just one fund for buying buses. The Issaquah school district is a large district which services 110 square miles and transports students over 1.4 million miles per year; about 10,000 students are transported each morning and afternoon with a fleet of 167 small and large buses.

Noting the slide How is Transportation Funded? Mr. Turney said that the state funds 74.5% of the cost for drivers, fuel and tires and the remaining comes from the M&O Levy; this year the District will spend about $8.32M for transportation operations. Buses are purchased using monies from the state funded depreciation schedule; each year the District receives money back from the state toward previously purchased buses. The District is generally on a 12-year replacement cycle which historically funds 40% to 60% of the cost for a bus. Transportation levies are usually shorter with a specific amount requested to purchase buses over a four-year cycle.

Mr. Turney presented the 2019-22 Purchase Plan to show what the Transportation Department anticipates it will need over the four-year cycle to purchase buses. The department is requesting up to 76 buses (some small, some large) which equates to approximately $11.27M.  A Committee member asked why we are replacing over half our buses in a 4-year period. Mr. Turney responded that we may have purchased more buses in certain years, causing some to age off at the same time. We are also going to be growing the fleet over this period; our fleet will increase to approximately 187 buses. Another Committee member asked if the bell times and growth in the district had been factored into the numbers.

Mr. Turney responded yes this had been considered; 19 more buses were needed due to the bell time switch and the rest is due to growth. He noted that the District will receive $7.9M in this 4-year cycle from the state to purchase buses. The District will use its reserves and levy dollars to make up the difference. The requested amount is $2M for this Transportation Levy; the previous levy was $1.7 million, so with anticipated growth Mr. Turney feels this amount is reasonable. Based on assessed values, this will be a rate of $.07 per thousand in calendar year 2019.

In response to a question, Mr. Turney noted that buses generate funds over a 12-year cycle adding up to $7.9M. It is not a 1:1 calculation; it is generated over time from the fleet of buses. A Committee member stated that perhaps older buses might be less efficient and so getting new buses might cost us less to run; is there any levy advantage to purchase more buses to lower our costs? Mr. Kuper responded that the savings would not be that great since the cost of diesel is currently low. This would have been a consideration when diesel was considerably higher; we are still unable to pencil out savings from hybrid buses. Our buses cost about $20k more than what the state provides over a 12-year period due to the fact we must upgrade the transmissions for our hilly location. We also choose to add “insta-chains” and self-sanding features due to our climate as well as a GPS system on our bus fleet. Mr. Kuper agreed it is not worth the “squeeze” due to the way the state funds buses. Buses are purchased off the state contract and we do not pay federal excise taxes on the diesel we purchase. 

A Committee member asked if the District considers moving bus stops further apart to save dollars. Mr. Kuper responded that we did lower service levels during the recession. The District does not transport students within a 1-mile drive of school unless the walk is unsafe (no sidewalks, no shoulders etc.); based on their location, these students are not funded by the state. It is a delicate balance of what the community expects and wants; we look at the cost/benefit relationship and bus routes are a consideration.

A Committee member asked while it is not currently viable to purchase electric or biodiesel buses, are we on a glide path to consider this in 4-5 years if the additional cost adds only 10% more to the cost of the bus? Mr. Kuper responded that it is not the initial bus cost but rather building a fueling station that does not pencil out. Ms. Morgan noted that hybrid buses are getting closer, but they still do not have enough horsepower. In addition, in Washington state, there are no electrical buses approved by the federal government for school use. Mr. Kuper believes we are still a ways off from purchasing hybrid or electrical buses noting that fuel prices and the cost to construct compressed natural gas fueling stations also play a part in the discussion. He acknowledged that these options could be considered in 4 years.

A Committee member asked if an increase in buses would address having middle school and high school students on the same bus. Ms. Morgan stated that this issue has been considered but due to the number of remote areas in the District (Cougar Ridge for example), we cannot accommodate this with the long drive times. More buses would be necessary if middle school students and high school students were placed on separate buses.

A Committee member asked if we would be able to provide more transportation for science tech and Merlin students. Mr. Kuper and Ms. Morgan responded no; a lack of bus drivers makes it impossible to increase routes. Mr. Kuper reminded the Committee that the more we spend on transportation the more we spend outside the classroom. The community has decided that bell times were worth this trade off. 

A Committee member asked if we had room to house 19 additional buses. Ms. Morgan said they are looking for places on school property to house more buses. Mr. Kuper responded that we are acquiring property for school sites and hope to have parking for buses available on these sites. 

A Committee member asked how we will get through next year with the schedule change when this levy won’t purchase new buses until 2019. Mr. Turney responded that we will retain buses through next year and that we had monies from previous levy cycles that we can access.

A Community member asked if fewer parents took their kids to school would this impact transportation funding. Ms. Morgan stated she gets more revenue the more students that ride the bus. Mr. Kuper stated that per the state of Washington we are running at 100% efficiency. They incentivize us to run full buses, so we are routing efficiently to maximize our operating dollars.

A motion was made and seconded to approve a single year Transportation Levy in the amount of $2,000,000 with an estimated tax rate impact of $0.07 per thousand for calendar year 2019. 

A Committee member asked what the cost per thousand was in past years. Mr. Kuper responded it was $1.7 million with a cost of .09 per thousand. Mr. Kuper restated the motion of $2,000,000 and $0.07 per thousand. 

A Committee member asked for more clarification on the cost and length of the levy; why are we only asking for just one year instead of four. Mr. Kuper referred to the purchase plan chart in stating that we receive revenue over time, but for cash flow purposes, we need a local injection of money every 4 years to purchase buses. The total amount needed is $11.27M and the state provides $7.9M; the remaining comes from previous years’ depreciation schedule and District reserves.

A Committee member asked how comfortable the District was in its Transportation Levy request based on the site selection of new schools. Mr. Kuper responded that this was considered noting that bus routes will change with the addition of buildings; some schools may decrease their need for transportation while others may require additional runs. Ultimately, this will just be a redistribution of resources; there may be an incremental increase in transportation needs but not exponential with new facilities.

A Committee member asked for an explanation of the bus purchase process. Ms. Morgan responded that the state puts out bids every year, with three manufacturers submitting bids. Issaquah always buys off the state contract so we get the best price possible. We have a committee of mechanics and drivers who review the options available to purchase and we order from their recommendations.

As there were no further questions, Mr. Kuper asked the Committee to vote on the motion. 

By a show of hands the motion was unanimously approved.

CLOSING NOTES
Mr. Kuper told the group that before the next meeting they would receive the District-prioritized request on the Critical Repair Levy. He commented that the Critical Repairs list is solicited form the buildings and maintenance staff over several months. In addition, the Technology Levy springboard will be presented by Kathy Cropp, Director of IT, and Diana Eggers, Director of Instructional Technology. The Committee will receive the tax rate chart with data and graphing. He reiterated it may be difficult to determine a final M&O request with the uncertainty in Olympia regarding school funding.

Superintendent Thiele thanked the Committee again for their time in participating on the Levy Committee. Mr. Kuper noted that the minutes and handouts from the meeting will be posted to the 2018 Levy Development Committee webpage on the District website. In addition, Committee members and the Community are encouraged to send questions or concerns to the Technical Committee using the Levy Committee email Levy2018@issaquah.wednet.edu

The meeting was adjourned at 7:33 p.m.


Materials