Grant Twp. News You Can Use

March 7, 2019

By Supervisor Dan Dysinger

Funding to support schools and improvements

Schools in Michigan are primarily supported by a Foundation Grant which is paid per student to a local district.  That is why enrollment numbers are so important.  Fewer enrollments mean less revenue.  Higher enrollment means more revenue, seems simple.  However lets look at this from the perspective of how much rural schools get for each student and if it has really increased or remained flat.  If we allow the money management experts in Lansing to calculate this we get into real trouble.  The basic grant has never exceeded $8,000 per student at local districts.  Inflation multipliers are never applied. Many schools in the State suffer from declining enrollment.  In 1994 this was never considered a factor, inflation was never considered.

Dan Dysinger, Grant Twp Supervisor

Dan Dysinger, Grant Twp Supervisor

Local Schools are also victims of inexperienced Legislators.  I am rarely impressed by what comes out of the Chambers in Lansing.  The last Legislative session was a prime example; I’ll cover that later in an article exposing boot licking and greasy palms, they all left town knowing they did well sticking it to local taxpayers in many ways, schools were included.

In my last article I outlined about half of Grant Township is geographically located in the Farwell School District. (1165 voters in the Farwell District)  The other half (1170) is in the Clare School District.

Lets get back into Local School improvements, how it’s paid for and what the real costs are.  Beginning last fall the Farwell School Board of Education was urged or began discussing some impending needs for its facilities; they are 2 or 3 years late. They decided to embark on a “performance contract” and two different entities were interviewed, Wolgast Construction and Johnson Controls Inc.  The selected contractor was Johnson Controls, a very large company.  Johnson was slightly lower than Wolgast when costs were presented.

In review of the Bond Application documents we look at the details.  First of all the cost for longer term bonds is high, that is why they are not good bargains.  Secondly, many of the improvements will not last beyond the term of the bond which is a typical mistake that governments make.  Administrations and School Boards are sold a bill of goods, buy into it, voters approve and become short changed as the years go by.  The future Boards and Communities have a toy box full of broken toys and no money for new toys.

Here are some basic facts for voters in the Farwell School District who will decide this on May 7th.

The Face Value of the proposed borrowing is: $24,500,000.   The listed interest rate is 4.55%.  The term is 25 years with the last payment year anticipated in 2043.  The total of interest payments is: $17,273,241.  The anticipated Bond Principal and Interest payments total is: $41,773,241.  The cost and percentage of administration are as follows; Bond issue costs: $422,105 (1.7%).  Architectural fees: $1,353,105 (5.5%).  Construction management fees: $2,142,452 (8.75%).  Election and issue costs: $870,431(3.6%).  The combined fees and costs are (19.55%) or about $4,600,000 of the $24,500,000 borrowed sum.  The actual amount which touches the earth or walls is about $20,000,000.  Let’s look at it this way; the real amount we would pay is $41,773,241, not $24,500,000.  As you can see, the fees and financing have doubled the cost of the project.

Now let’s look at the ballot language.  Local Governments are generally encouraged that any millage issue renewal that is not specifically identical to the original issue should be considered new.  This promotes transparency.  The proposed bond language compounds confusion.  Let’s simplify it, 2.37 mills (expiring 15 year) old bond and 1 mill additional, both require repayment over a 25 year period, therefore all should be considered new.  The millage to retire the bond averages 2.96, with a low millage in the first year at 1.46 but for several years the levy will be above 3.5 mills slowly tapering off in 2043 at 2.17 mills.

Bonds can be good if financed for a short term with low finance costs. Long term financing is poor (longer than 10 years), in less than a few years other maintenance and improvement needs will resurface and taxpayers will be required to layer new financial needs over old debt.  Layering debt is typical government behavior.  Federal and State governments behave this way, it financially strangles many future generations.

For any school which has spread out facility needs, a long term maintenance and improvement plan is absolutely essential, call it a strategic facility plan, whatever name, this is a key ingredient.  Plans should involve community, staff and students. This holds true for any school or government entity.  A long term plan is paramount, if your school doesn’t have one, ask why and insist it has a plan.  Support and encourage reasonable financial management of your Local School, it leads to a better community.     

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