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Capital Reserve Fund Proposition Questions and Answers

CHESTER UNION FREE SCHOOL DISTRICT

Capital Reserve Fund Proposition

Tuesday, January 18, 2022

8:00 a.m. – 9:00 p.m.

Chester Academy

 

On January 18th Chester Union Free School District voters will be asked to authorize the creation of a Capital reserve.

 

CAPITAL RESERVE FUND PROPOSITION

Shall the Board of Education of the Chester Union Free School District be authorized to establish a capital reserve fund pursuant to the provisions of Section 3651 of the Education Law, to be known as the Districtwide Construction and Improvement Reserve Fund, which shall be for  the purpose of paying for all or a portion of the costs of renovation, construction, reconstruction and improvements to various School District buildings and facilities, including planning costs and site work, original furnishings, equipment, machinery, apparatus, appurtenances, and site and incidental improvements, and expenses in connection therewith, at an ultimate amount of $10,000,000 plus accrued interest and investment earnings, to be transferred from (1) unexpended unassigned appropriations in the general fund at the end of each fiscal year; (2) funds transferred from other existing reserves; and/or (3) legally available funds available to the District, to the Districtwide Construction and Improvement Reserve Fund 2022, for a period of ten (10) years.

 

CAPITAL RESERVE PROPOSITION QUESTIONS AND ANSWERS

 

 

What is a capital reserve?

 

Essentially, this capital reserve is a “savings account” for future capital construction needs.

 

 

Why is the District proposing the creation of a capital reserve?

 

The District is presenting this proposition to the voters on January 18th to take advantage of the CARES Act pandemic funding that is provided from the federal government. By offsetting certain costs with federal aid we will generate savings that will help fund the reserve. Further, by using those savings for capital needs, we can leverage the New York State Building Aid to make each dollar provide a greater benefit.

 

For example: a (hypothetical) $3 million capital project would cost the local taxpayer $1 million.

Total Cost

$3,000,000

NYS Building Aid (66%)

($2,000,000)

Local Share

$1,000,000

 

How is the capital reserve funded?

 

The capital reserve would be funded over ten years through unspent budgeted funds, excess revenues and/or from existing reserves.  This reserve addresses our issue of excess fund balance as was noted during our external audit for the year ended June 30, 2021.  Anticipated savings from the use of CARES Act federal grant monies will also fund the reserve.  The district would not, directly levy a tax to fund the reserve.

 

 

What can the reserve funds be used for?

 

The authorization of the capital reserve DOES NOT give the district the authority to spend any money, simply to put the money away for future capital construction needs.  The district would need to ask the voters for authorization in a subsequent vote to spend any reserve funds.

 

 

Why hasn’t the District provided detailed plans and budgets for this vote?

 

This vote is not for a project, rather it is to establish a reserve that can be used for future voter approved projects.  This vote provides NO authority or plan (budget) for expending monies.  When the District develops plans for a capital project to spend reserve monies a detailed plan and budget would be created, discussed and presented at that time for voter approval.

 

 

Why do we need a capital reserve?

 

Based on the age of our facilities there will be the need to do large repairs and replace aging equipment in the near future. The monies in the capital reserve will offset any local costs of future capital projects that are authorized by the voters.  A capital reserve will also reduce or eliminate the need for the District to borrow money or raise additional taxes for future voter approved projects.

 

Future voter approved capital projects could include (Covid related) improved air filtration, and maintenance and improvement projects. Our active school buildings are approximately 20 and 50 years old and have aging structures and equipment that will require ongoing repairs and replacement.  In addition, new mandates addressing environmental and sustainability concerns require an ongoing investment in our buildings and grounds. 

 

 

What if the capital reserve does not pass?

 

The District would not have the authority to reserve funds for the purpose of future capital project needs. This would not affect any other funds reserved for legal purposes such as tax certiorari proceedings, unemployment claims, rising retirement system contributions or insurable losses.

 

 

If the District does not have a capital reserve do they still receive state building aid on approved projects?

 

Yes, the school district would still receive state building aid on voter approved capital projects with or without a capital reserve fund.

 

 

Why is a capital reserve a good financial strategy?

 

A capital reserve is a prudent financial strategy for the district because it would reduce the district’s need for financing (borrowing) for future capital projects and assuming associated financing costs, including interest.  Having a capital reserve would also reduce the need to raise taxes for any future projects.

 

 

 

Vote Tuesday, January 18, 2022

Chester Academy

Band Room

8:00 a.m. - 9:00 p.m.

 

In accordance with New York State regulations,

and to keep our election workers safe, face masks are required.

 

 

 

 

For more information about the Capital Reserve Fund Proposition

visit our District website: 

 

www.chesterufsd.org

or contact: 

 

denis.petrilak@chesterufsd.org