| School Planning in Debt Issuance |
PLANNING IN DEBT ISSUANCEThe purpose of this article is to examine the nature of the planning process in debt issuance and to see what kinds of information is required by school boards when financing improvements. School Boards must plan and control their School District’s operations. School Boards exercise control over their operations:
Control always begins at the planning stage. No other technique controls the district's destiny as planning does. The difference between effective and ineffective planning can be so great as to overshadow the effect of all other control techniques combined. Planning is the process of deciding on a course of action, of finding and choosing among the alternatives available. It takes three basic forms:
The relationships between the project planning, program planning and the periodic planning are complex. The decision improve one building and not another is made in the process of periodic planning.
However, both these kinds of decisions may also be made later, when changing conditions give evidence that this part of the periodic plan can no longer be carried out effectively (the district has great high school but the elementary fail to meet state standards). Some districts do not consider the future in forming policy. Let us call these types of districts the "short term district". The short term district's policy formation often takes a simple "no tax - no fee" approach. The short term district provides education on depreciating assets without providing for their replacement until the assets are unable to provide the educational services requested of them. This type of planning is referred to as “crisis planning”, that is “no planning until crisis”. The crisis often begins years earlier when predecessor boards do not plan for the future. School Boards should ask themselves what will the replacement or improvement cost. When determining the replacement or improvement, one must determine the useful life of existing assets of the district and the estimated date of replacement or improvement. The following illustrates a simple future value of current replacement costs assuming a four percent inflation rate.
Most school boards do not think in terms of replacement until the replacement decision is upon them. Many times the school district has outstanding debt which limits the project. Therefore in the analysis, a school board should also determine the school district’s indebtedness and the limitations it will create on future boards. Debt payments use taxes and revenue which may be needed for future improvements.
When a district plans to issue debt, it must analyze how the current debt issuance would affect all the district's assets. All assets’ useful lives, replacement costs, debt and income should be studied to determine whether a crisis exists or is in the making. Sometimes, education of the public can lead to easy decisions. By educating the public that certain improvements will need to be made at a future date, when the future date arrives it is taken as a forgone conclusion. If nothing else is taken from this article: “The district should work within the political and economic realities to provide a policy and a plan which will see the district through to the next major improvement project and beyond.” Todd Meierhenry |
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