LM May.2021_FINAL

Funding sources for construction or maintenance projects

Issue HLS Bonds for HLS Work – no referendum needed. It is also possible for a school district to issue Health/Life Safety Bonds for work identified on a 10-year Health Life Safety Survey or other work identified as being eligible to qualify for using Health Life Safety Funds. If a project is not identified through the 10-year survey, the district’s architect must submit an amendment to the state for the project to be approved as HLS work. This amendment is typically preceded by a vote by the board of education to move ahead with the amendment submittal. “Back Door Referendum.” The “back door referendum” option has somewhat of a negative connotation, perhaps making it seem as though a board is secretly or covertly issuing bonds (debt) without taxpayer approval. Boards do, in fact, have this authority, and of course all actions are taken by a board of education in open session per the Open Meetings Act. The definition of a “back door referendum” is: The submission of a question to the voters of the School District, initiated by a petition signed by voters of the School District, to determine whether a resolution already passed by the School Board (e.g., bond issuance) will take effect. If there is a referendum, the outcome of the referendum is legally binding on the School District. If the voters fail to initiate a referendum, then the School Board can execute the resolution (e.g., move forward with issuing bonds).

There are a variety of options and funding sources that can be used to pay for construction or maintenance projects. The choice of what funds to use or how to use funds depends upon what funding mechanisms or funds are available to individual school districts. In addition, superintendents and boards of education should always consider what might be most palatable to taxpayers. Each school district in Illinois has its own unique identity, culture and “flavor,” the understanding of which can be key to the success or difficulty of any project. The following are brief summaries of options available to school districts in Illinois. Existing O and M Fund (20), Health/Life Safety Fund (90), or 1% Sales Tax proceeds. One of the easiest and least complex ways to finance a project is to simply use the funds that are readily available to the school district. If Fund 20 (O and M) or Fund 90 (Health/Life Safety) have sufficient funds, those can be used. If the school district is located in a county which enjoys the 1% County Schools Facilities Sales Tax (CSFST), those funds can also be available if they are not being obligated to pay off bonds or abate taxes to taxpayers. Some districts choose to “set aside” a certain amount of their sales tax revenue to regularly invest in facilities improvements. The CSFST is a consistent and reliable source of revenue and can only be repealed through a county referendum in which the majority of voters vote to repeal the tax, combined with there can be no school districts in the county with outstanding bonds that are “backed” by the CSFST. No county in Illinois has ever repealed the CSFST. Transfer excess reserves to Capital Projects for specified projects. If a school district has ample cash reserves/days of reserve, they could, if comfortable, move those funds to the Capital Projects fund for specific projects. In times of financial uncertainty and instability in Illinois, a district should strongly consider whether this option supports the long-term financial health of the organization. Tort Liability Fund. A school district can potentially utilize tort liability funds if the work will lessen liability, risk and/or improve safety and security of a facility. These funds are best used for a part of a facility improvement project, such as a secured front entrance, security cameras, or check-in system.

The “back door” reference refers to a bond issuance “sneaking through the back door” unless voters “close the door.” There are very specific guidelines for gathering the signatures to get the issue onto the ballot. In some cases,

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LM May 2021