0. Capital Needs and Resources of Nevada’s Public Schools
Nevada Rural School Districts
Legislative Committee on Education – July 15, 2014
VII. Discussion Regarding the Capital Needs and Resources of Nevada’s
Public Schools
School facilities can form first impressions of visitors, businesses, potential employees, parents, students and general public. Much like a potential employee is judged by the clothing he/she wears for an employee interview, schools and communities are judged by the condition of their school facilities. In rural areas schools are the pinnacle of each community rural communities and are pivotal for economic development. The condition of a school facility speaks volumes of a community’s investment in education and poor conditions can hamper educational quality, business development, student behavior, property values and public safety.
Paul Johnson, CFO
White Pine County School District
1135 Avenue C
Ely, Nevada
(775) x125
(775) (fax)
(775) (cell)

1. Nevada Rural School Facilities
Over 1,000 rural school district facilities
Includes multiple facilities on one campus
Includes support facilities (i.e. Transportation, Admin Offices, Storage, etc.)
9.3 million SF of building space
$1.7 billion estimated value
NPAIP Replacement Cost – Based on appraisals
47,751.6 weighted students
NRS report FY2013
15 counties covering 95,587 square miles
School ages range from 129 to 4 years
Gathering information from the 15 rural school districts proved to be a bit challenging over the summer months. The Nevada Public Agency Insurance Pool (NPAIP) insures all 15 rural school districts and agreed to provide their database of insured school district property for all 15 rural districts. The values in the NPAIP database are based upon intermittent appraisals however the replacement costs provided by NPAIP may differ from current values or construction costs. This database was used as the basis for the statistics and information in this presentation for discussion only. School districts may keep track of, value and report school facilities in a different manner.

2. School Facility - Ages
The NPAIP database lists each building on a campus as one school facility instead of combining them as one school campus. For example, the Carson High School has 15 buildings on one campus. Although this is one school campus it has been counted as 15 facilities.
Based on the NPAIP database, approximately 15% of rural school facilities are over 50 years old. The 75 and 100 year old facilities are also included in the 50+ count. Sixteen percent (16%) of the 50+ buildings are also 75+ years and 5% are 100+ years.

3. Estimated Replacement Costs
The replacement costs in this slide are based on intermittent appraised values obtained by NPAIP and may not reflect current market or construction prices; however, they can be used as a point of reference for discussion purposes. Recent bids obtained by the Elko County School District for proposed school construction were significantly higher than the replacement costs in the NPAIP database.
In terms of replacement cost, the 15% of school facilities from the prior slide represents 26% of the replacement cost. Approximately $450 million in school facilities are 50+ years old was a great year, not just because it was the year I was born.
Rolling Stones’ first tour as a headline act
President Lyndon Johnson delcares “War on Poverty”
“Meet the Beatles” album was released in the U.S.
Muhammad Ali (Cassius Clay) TKO’s Sonny Liston in round 7 for heavyweight title.
First Ford Mustang produced
1960’s Inventions
First audio cassette
First hand held calculator
Computer mouse
RAM (random access memory)
1910’s
Automatic transmission
Air conditioning
Motorized Taxis first in widespread service
Prohibition nears as 24 USA states vote against alcohol
Automatic Toaster
First American radio broadcast station opened by Westinghouse, in Pittsburgh

4. Condition of Facilities
Requested the District indicate conditions as good, fair, or poor.
Received responses covering approx. 74% of school facilities
Approx. 50% of rural school facilities are in need of improvement
This assessment was not based on a common set of objective Arch/Eng criteri
Poor
139
17%
Fair
266
33%
Good
411
50%
In order to obtain an idea of the condition of school facilities, the NPAIP database was provided to all rural school districts with instructions to indicate whether the facility was in good, fair, or poor condition. This is somewhat subjective but the best we could do in such a short time frame. A more scientific method with objective definitions and standards could be developed but would be expensive and time consuming to coordinate the efforts of 15 counties.

5. Other Common Demands Equipment Replacement Transportation Technology
Heavy Equipment, tools, etc…
Transportation
School Busses
Fleet vehicles
Maintenance
Technology
School Safety
Facility assessments and improvements as a result of school shootings.
As a result of the increased frequency and risk of school shootings, school districts are reassessing facilities to improve campus security and improve public safety. Improvements range from relatively low cost items such as window blinds to more costly physical barriers, electronic surveillance and/or early detection systems. The Nevada Public Agency Insurance Pool is currently collaborating with school district officials to determine a common method to assess risk and provide recommendations for facility improvements. Implementation of any improvements would depend upon available resources and project costs. It is possible that some school districts simply will not be able to afford facility improvements regardless of apparent need.

6. Deferred Costs - Examples
Douglas CSD
$450,000 annual deferred maintenance
$72 million construction/improvements
Other Capital Needs:
Bus fleet replacement – 800,000 average miles
Vehicle fleet – 34% poor or fair condition
Technology
Operations Equipment
Food Services Equipment

7. Deferred Costs - Examples
White Pine
$10,520,226 in deferred facility improvements
Concrete, asphalt, asbestos abatement, clean and repoint masonry, etc…
1913 White Pine Middle School Replacement
1908 David E. Norman Elementary Replacement
Other Capital Needs
$1.4 million bus fleet replacement: Purchased 4 new busses in Other replacements have been used vehicles from other districts as they have been rotated out of inventory.
$1.3 million Technology/Telecommunications/Internet
$300,000 equipment
The example provided for Douglas CSD and White Pine CSD are similar for most rural school districts. Unfortunately, each school district’s methods and abilities to track, monitor and value deferred projects for property, plant and equipment (PPE) varies. In addition, the criteria for conditions such as good, fair, or poor are subjective in many instances. There is no global, objective criteria used to evaluate the condition of facilities and need for improvements or replacement.

8. Funding Options for School Facilities
Primary source of funding is Property Tax
Property taxes for school facilities require voter approval
Cap on overlapping tax rates limits tax rate access
11 counties at or within pennies of the cap
Abatement caps limit revenue increases
10 year rolling average of assessed value growth (one of the factors in calculating the cap) could be less than 1% for many districts in a few years
Other revenue sources are imposed by county commission or legislature – not by school district
Fund to assist schools with capital improvements (NRS ). No funding currently available.
The first five bullets were provided by JNA Consulting Group, LLC. The final bullet was added for the purposes of this presentation. NRS became effective in 1999 as a result of requests for financial assistance from White Pine and Lincoln County School Districts. Approximately $20 +- million was appropriated to this fund to construct and improve school facilities in White Pine and Lincoln County. The actual amount appropriated would have to be verified. The projects in White Pine were administered through the Nevada Department of Public Works in consultation with the school district.
G.O. Bonds are often issued based on voters willingness to increase their tax rates. An objective assessment of the facility and capital need should be the determining factor of whether a facility should be improved or replaced.

9. Current Tax Rates and Voter Authorization
Debt Rate/
Voter
Highest
District
CPT
Authorization
Overlapping Rate
Carson City
$0.4300
Rollover (2020)
$3.5600
Churchill
$0.5500
Rollover (2018)
$3.6400
Clark
$0.5534
none
$3.4030
Douglas
$0.1000
$3.6600
Elko
$0.7500
CPT (2022)
$3.6567
Esmeralda
$0.0000
$3.0195
Eureka
None
$1.9896
Humboldt
$0.1350
$3.1716
Lander
Lincoln
$0.2231
Traditional (2014)
Lyon
$0.5867
Rollover (2016)
Mineral
$0.3500
Nye
$0.5850
Pershing
$0.4000
$3.6592
Storey
$0.1447
Rollover (2022)
$3.4607
Washoe
$0.3885
White Pine
$0.2490
The average combined rate for Nevada counties in the early 1980’s was $1.94 per $100. The average combined rate listed above is $3.46.
JNA Consulting Group, LLC

10. G.O. Debt & Ad Valorem (Exc. NPM)
This table provides the following information:
total assessed values (TAV) for all 15 rural counties
estimated annual principal and interest payments on a $20 million bond for 20 years at 5% apr
estimated tax rate necessary to cover annual payments
current combined rates, and
estimated combined rate if the estimated debt rates were added to the current combined rates.
The purpose of this slide is to show the limitations currently imposed by the tax cap of $3.64 and the potential impact to each combined rate to cover a $20 bond. This is roughly the cost to build one school and is simply provided here as a point of reference. The actual cost of a school facility will vary based on the level of instruction, student enrollment and other factors.

11. G.O. Debt & Ad Valorem (Inc. NPM)
This table provides a similar analysis as slide 9; however, this table includes net proceeds or minerals.

12. Other Sources .125% Sales Tax (NRS 374A) .25% Sales Tax (NRS 377B)
Only available to districts utilizing the Fund to Assist School Districts (NRS )
.25% Sales Tax (NRS 377B)
Imposed by county commission
Allocation of funding determined by county commission
Few districts have seen any money in the seven counties levying the tax
Residential Construction Tax (NRS 387)
Must be reviewed every 4 years by Tax Commission
Room Tax (NRS 244)/Real Property Transfer Tax (NRS 375)
Approved by Legislature in 1997 for Clark County
JNA Consulting Group, LLC

13. G.O. Debt & Sales Tax
Sales taxes or the local school support tax (LSST) are another significant revenue source for school districts. The table above compares the debt requirements of a $20 million bond issue with the revenue generated by an additional 0.25% sales tax. The purpose of this comparison is to illustrate the difficulty rural school districts would have generating sufficient revenue from sources other than property taxes.

14. Availability of Other Revenue Sources
.125% Sales Tax
.25% Sales Tax
RCT
Room Tax
RPTT
NRS 374A
NRS 377B
NRS 387
NRS 244
NRS 375
Carson City No
Churchill
Levied – No
Clark
Yes
Douglas
Elko
Esmeralda
Eureka
Humboldt
Lander
Lincoln
Lyon
Mineral
Nye
Pershing
Levied - ?
Storey
Washoe
 No
White Pine
Available
Prohibited
JNA Consulting Group, LLC

15. Revenue Challenges
Per Capita Taxes do not generate sufficient revenue for demand
Property Tax Base is insufficient to support capital demands of multiple local government entities with competing interests and “allowable” rates.

16. Construction Challenges
Construction companies have to relocate and pay per diem costs to their workers.
Logistics can increase mobility costs
The long distance can increase costs for even simple jobs. 
The freight costs for everything shipped also adds to high repair costs. 
Experience difficulty getting competitive bids
Big jobs can exceed local contractor’s bonding capacity
Local vendors can not provide supplies to construction projects so materials must be shipped
Voter Approval
Unfortunately general ob

17. Nevada Studies 1954 – Peabody Report 1971 – Governor O’Callaghan Study
1994 – Legislative Commission’s Subcommittee to Study Public Elementary and Secondary Education (S.C.R. 52 Committee)
1996 – Legislative Commission’s Subcommittee to Study the Realignment of School Districts (S.C.R. 30 Committee)
Nevada School Needs Assessment (ISES Corporation Study)

18. Nevada Initiatives State School Construction Relief Fund (1955-1979)
No continual funding source was established and the fund was eliminated.
Account for State Assistance for School Construction ( )
Fund to Assist Schools With Capital Improvements (1999 – Present)
No continual funding source established
All of the programs contained specific criteria to qualify for funding and limit state liability
Other legislation has been confined to specific appropriations

19. Learning Environments
Research has confirmed that there is a consistent relationship between the condition of a school facility and student performance.
The cognitive requirements for learning and teaching are affected by the physical surroundings where they take place
(Do School Facilities Affect Academic Outcomes ?; National Clearinghouse for Educational Facilities; Mark Schneider, November 2002)
The amount of natural light, the indoor air quality and temperature impact student learning
(Prioritization of 31 Criteria for School Building Adequacy; Glen I. Earthman, Professor Emeritus, Virginia Polytechnic Institute & State University, January 2004)
Poor building conditions greatly increase employee absenteeism and turnover that directly affect the quality of education
Growth and Disparity: A Decade of U.S. Public School Construction, October 2006
Quality school facilities matter. Research supports that there is a direct link between the quality of a school and the quality of education.

20. Impact of Quality Schools
School quality has a direct and positive impact on property values or tax base (Kane et al. 2003);
School quality affects the quality of life and ability to attract businesses and workers (Salveson and Renski 2002);
Investments in the construction and maintenance of school facilities bring money into local economies through job creation and supply purchases (Economics Center for Education Research 2003);
Investments in a community have a multiplier affect that indirectly affects local merchants, local tax revenue, and the labor force.
New or well-maintained school facilities can help revitalize distressed neighborhoods (Local Government Commission 2002)
Environments that are in a well ordered condition may stop vandalism as well as crime (
Growth and Disparity: A Decade of U.S. Public School Construction, October 2006
Schools can positively influence economic development and diversification.

21. Discussion Points
Each school district has there own unique capital demand and financial hurdles
Existing sources of revenue are insufficient to meet demand
Deferred construction, improvements and maintenance will continue that may adversely affect economic development, property values and student performance
As capital demand continues to outpace funding, more and more capital projects will be deferred making it increasingly difficult to maintain facilities
All school districts regardless of size are financially stressed to meet operating and capital demands
Smaller school districts may never be able to replace or construct school facilities