Good evening.
I'd like to call the Finance Committee meeting to order for the October
25th, 20 2021 meeting.
My name is Kathy Stricker, and I'll be the I'm the chairperson
for this meeting because I'm the treasurer of the school board.
I'd like to welcome a board.
We have some new advisers to our to their first meeting tonight.
We have Michael DAVIES, Brian Estella.
And. Paul Latham.
So thank you for joining us.
We did attach
the budget calendar to that portion of the agenda.
Just so you know,
kind of the timeline that we go through with the Finance Committee.
The Finance Committee is a subcommittee of the school board.
There's four school board members on this committee.
And what we do is kind of do a deeper dive into the budget.
We do a deeper dive into the budget,
into any other things that we want to look at.
And I will go over and review the goals that we set
for each year as well.
But what we'll do right now is take a roll call.
So go around the room and just introduce ourselves and our role on the board.
And if the new citizen advisors, if you want to say
something about yourself, you're welcome to do that as well.
So I already introduce myself.
Kathy Secker And we'll go to the left.
Lindsay Drew, School Board director
Stacy Winslow, Superintendent.
Paul Latham
I'm the new one of the new advisors
here.
Terri Singer School Board member Regis Bergen Administration.
Psychology. Board Secretary.
Mike French Business Manager.
Michael DAVIES Citizen Advisor.
Thank you.
Kip Shaw School Board Member.
All right.
Thank you very much.
Attached to
the agenda is the summary minutes from our last meeting on September 27th.
Can I have a motion to approve the summary minutes?
So move. Lindsay Drew.
Second. Terri Singer.
Is there any discussion?
All those in favor say aye.
All right.
All those opposed say now.
Okay.
The summary minutes are approved.
And just for the new Citizen Advisory.
For anyone who's listening, we set annual goals for all of our committees.
And this year we have four major goals.
We have a goal to quarterly review
the Milton Hershey Trust Fund, which we will get an update on tonight,
a quarterly review of our food services budget as we're watching that closely
and its impact with COVID
long term capital planning.
That goal has been a Finance Committee goal, But we But MHS Drew,
the president of the board did create an ad hoc committee
that is doing a deeper dive into long term capital planning for the district
right now, and they can give us updates as they work through items.
And we also have a goal to monitor current and future revenue expenses.
And the 2223 budget projections
do. And does anyone have any questions
about those goals?
And if there's anything that is new to
you as a citizen advisor, as we move through,
you can always email me and we can talk after the meeting as well.
Okay, So new business we're get we are going to get our quarterly update
on the Milton Hershey Trust
Fund from Fulton Financial Advisors, and there is an attachment there as well.
Thank you.
I'll get started.
I'm Sherri Leo
from Fulton Financial Advisers, and I handle the administrative side.
Of this. Trust.
And then I'm going to turn it over to Liz Parris,
who is a portfolio manager, Sushi Investors Trust.
But I think for the two Citizens advisors, a really small, brief history.
This was originally set up by Milton Hershey and the Hershey Trust Company
was trustee of the fund originally, and I believe it was because of a merger.
They went through Hershey
Trust Company, wanted to resign and not be trustee of the funds anymore.
So they when they resigned, I think several institutions were looked at.
And Fulton back in 2012 was fortunate enough to become the successor trustee.
So this is a fund where really the bank, Fulton Financial Advisors,
has all the liability, all the responsibility is up to us
as trustee to make sure this is invested properly,
that we're making the distributions that the trust tells us to do
and that we're treating the district, the school district,
as the beneficiary in a very fair way and doing the best job for them.
So from the standpoint of the funds for the school district,
it doesn't fall under any kind of fiduciary liability
for you all to be to be watching these funds.
But our biggest thing is to communicate with you
what are your needs, What are you going through?
And we really did a lot of that in the last two years because of COVID.
It had a huge financial impact on the school district.
So those conversations
were super important to understand the school district as a beneficiary.
What are the needs and then what can we do with and guidelines.
So there are guidelines and statutes that we have to follow.
And there was one that literally came about in the middle of those discussions
where the Pennsylvania legislature said if you have a Pennsylvania trust
and the beneficiary or the trustee or both really feel like
you need a bigger distribution than usual, there was a statute put in place
through 2022
allowing for that so that you could take some bigger distributions
and make some changes.
So through discussions, realizing that this district lost a lot of revenue
due to Hershey Park being shut down and tourism being in such a bad way,
it really worked
out well that we as trustee can listen to the needs
and for at least a one year period of time we changed the distributions.
So we have been around 4% of the value of this trust
being paid out every year to the school district.
And Mike did some budgeting, I guess the whole committee
did some budgeting, but Mike presented me with the budget.
I went to our trustees committee
and they said, yes, there's definitely a need here.
So at least for one year, we're going to pay out 7% from this trust.
But there was a lot of discussion
about that that probably that shouldn't continue
or we may start to deplete the value of the trust.
So I'll show you in a moment how nicely this is growing.
And we're up over $50 million now.
But again, this is money that is restricted by the trust,
restricted by Pennsylvania law.
And then we as trustee really have some guidelines that we have to follow.
So it's not like we could just, you know, give out any any amount of money.
So just to give you some idea what we did through the calculation,
we took five years of market value as of March 31st.
And that's really to smooth out the market gyrations.
You know, the market's been up, up, up.
But we all know there's years when it's down, down, down.
So, you know, we want to make sure that,
you know, any one year it doesn't impact us greatly.
So five, five years worth of market values we averaged and then we took the 7%
and basically that comes out to be about $3 million a year.
And the payment each quarter, which you're paying in September,
December, March and June on the 20th
is 765,006 35.
So just a little background on how it works and and what it is.
We did file a 990 return, which is what we have to file for this kind of a trust.
And I'm actually ready to probably email it
to Mike later this week so he can look at the 990 that we filed.
But as trustee, we do follow a 990 return for the trust.
So any questions administratively before we show you the market value and
returns for the trust?
Hopefully I gave an explanation of what it is.
It's a little different than a just investment
management account or a foundation account that belongs to the school district.
It's a little bit different.
Just real quick question.
This is Terry Singer.
So the the distribution
leaving the core in place, you said, is about 3 million a year.
So what you said.
The distribution for this current year.
So it is just for a one year period.
We did calculate 7%.
So it is 3 million.
In the past it's been more like 1.6, 1.5.
Again, it's been a five year average.
But yeah, this year we increased it quite a bit
to try and make up for some of the shortfalls.
Okay, thank you.
But it could go back to four.
I think that'll be a discussion.
We'll have to have in probably February or March.
We'll talk about where do you want to go.
We may go right back to four.
Maybe we have to go to six or five or, you know, maybe stay at seven.
It will have to.
Yeah. We'll work with you to figure that out. Right. Okay. Thank you.
Well, thank you.
You do have the right slide up.
I'm going to talk to the market value and talk about the performance,
as well as how we are allocating the fund at this time,
given the current market and economic environment.
So our target for this account
is 65% in equities because that is
what we expect to earn
a 7% return for the long term.
And that, of course, is based on a 4% distribution rate.
We have had seen considerable
success in the performance of the portfolio over
the near term as well as the long term, which gave us some freedom to then
increase that distribution to 7% for at least the one year period.
You can see here today the market values
at 53.8 million.
And then we did the distribution of the 765,000 over
October 1st, I think something like that.
So you're now down to 53 million as of the end of September.
You can see the performance year to date is up 8.7%.
We compare ourselves to an index that is comprised
of the Barclays Intermediate Credit Index,
which is a fixed income index that is 35% of our benchmark.
The remaining 65% is gauged
against an equity, a global equity benchmark,
and that would be the MSCI Acwi index
that index returned on that 6.87%.
So we've outperformed by 200
basis points or by 2% so far year to date.
A lot has
contributed to that outperformance.
First, within the fixed income markets, our strategy
this year has been using credit
this year, including high yields.
Our exposure to the high yield markets as well as the corporate credit
has certainly contributed to the performance.
Also on the equity side,
because what we have seen moving from an early recovery
in the economy to a mid-cycle recovery, we continue to overweight
the domestic markets as opposed to the international markets.
Also at the beginning of the year, we were overweight
or I should say we were evenly balanced between what we call our growth style
equity and a value style equity.
We now change that back to where we are
towards our long term target of being slightly overweight.
The growth, I will tell you in the past week we have reverted
back to that being balance between the two, and that's
because what we're going to see is probably zero
or maybe even a negative GDP growth for the third quarter
and we expect to see a rebound given that we are starting
to see the supply chain disruptions start to mitigate.
We've also seen a resurgence post-COVID.
We had that surge in COVID and now we're seeing the numbers decline.
So the economy and the engagement of the consumer is picking up again.
We're going to see robust growth in the fourth quarter.
So therefore, we went back into a value style.
You also kept our maintenance position in the small cap
and we'll continue to do that
until we see the economy move into what we called the long term growth
that is expected to happen towards the end of next year.
We will be towards that long term growth.
I also want to make sure you understand
we are currently on top of where we think inflation will be.
We do not think inflation will.
This will be pi transitory, but I think in the near term
you will see elevated inflation going forward
and it's not so much the supply chain that will dissipate itself
within the next year, but we are seeing more pressure in the labor markets.
We do not have confidence
that the labor market shortage will resolve itself in the near term.
That could take longer to happen.
We're also seeing pressure in real estate with their rents.
They are starting to climb also.
So we're going to see longer term inflation trends
with those two components being labor and real estate.
So expect your inflation to come down to maybe two and a quarter, two
and a half percent by the end of 2022.
And then we constantly evaluate this
and if
things change, will we make the adjustments necessary
to protect the portfolio or to enhance its growth?
The other thing I want to talk about is longer term,
and this is in some pages further back, but we'll just keep it here.
As Sheri said, we opened this account
in September of 2012 and during that period
the portfolio has returned 9%,
just under 9% for the long term.
Because of that really strong growth that has made it the decision
to increase the distribution to 7% a lot easier.
So we've been able to allow the portfolio to grow over
and beyond the expenses and over beyond the distribution
as well as the inflation rate during the period.
Are there any questions from members of the committee?
This is Kathy Sikka.
So we're doing this 7% and then I we were just going to go back to the 4%,
but were you saying that we still can decide to not just go back.
It can be evaluated and will evaluate that at the end of this year,
beginning of next year to see how what your budget is, what your needs are.
Okay.
So in December or January, we should be thinking about
whether we want to go back to four.
But you mentioned we could go to five or six.
We can certainly scale it back.
We can keep it at seven or scale it back.
Depends on what your needs are.
Yeah, we because originally we had said
we were only going to do it for that one year.
But are you saying that because the market,
the value of the fund is so good and we didn't like suffer
as much with that 7% that it's a good idea to consider it at this point?
Now, I'm not making that conclusion.
It's all based on what your needs are as a school district.
If you're still having financial
because of your decline in your your other revenue sources.
Okay.
But there's there is more
flexibility because the portfolio has done extremely well.
So very
happy to.
Lose 2%
in this number.
So we can expect to get it to the.
Right. Size.
I think that's giving us room for is the market
so that, you know, there may be periods when taking some of that way too much.
And I think what Elizabeth, it was a question.
So what you guys are ahead of. Me it showed up in your.
Financials. Yeah.
So yeah, I think you know next year if you have a need, but that's all
you need a 5% or 6%.
Look at that.
The concern would be is what's in the market for averaging instead of
was I was in six
take it over the course of what I see is the balance.
Yeah.
Making for really lets it grow that every year
you should get more and more out of it 4% of portfolio.
But Mr.
friend at this point for
what we were considering for next year, were you budgeting us to go back to four.
Yes. Everything that we've been looking at so far is going back to the 4%.
Okay, Thank you.
I think I also want to mention is that we have had very robust returns
over the past few years, and this has had allowed a lot of individuals,
as well as organizations
to meet or exceed their financial needs.
And, you know, looking forward, this amazing
growth in the equity markets, it will abate at some point.
So when I look at the long term
equity returns past ten years, I don't have it on me.
But the last five years we've had over 13% equity returns when our long
term expectation for equities is about eight and three quarters to 9%.
And my guess is they will come down.
And the
other thing is when we do, we will review these expectations
for equity returns, fixed income returns, and reconfigure
what we think would be the expected return for the long term.
It may actually decline going forward because we look at future
expected returns.
This is Kathy sticker.
You mentioned you expect inflation for 2022 to be around 2.5%.
It will come down to 2.5%.
What is it this year?
Right now, it's running 5%, a little bit north of 5%.
Okay.
And it depends on supply change,
disruptions and the resolution of the supply change disruptions.
Okay.
Thank you.
This is Terry Singer.
I'm sorry.
Oh, could you go over the fees?
So the one 3977,
that's for you today Through
four.
Through 930. 930. Okay.
Sure. You want to help with the fees?
You're the same person.
Yeah, I know.
One of the one of the things that we talked about,
I don't know, maybe it was a year or so ago
during review and discussion was a
I think the number of different funds and maybe consolidating.
And could you talk a little bit about that?
So I'll cover the fees first, just since that was the first question.
So I'll cover that.
So when we took over as trustee, it was in the documentation that we would
we basically did a customized fee schedule given the size of this fund.
And just what it was going to be. And once I got to.
So we charge 30 basis points on the first 40 million
and then anything that's over 40 million is at 25 basis points.
So that's Fulton's fee, that's what we make
and that includes trustees fees and investment management.
So it includes all those services, all the tax returns,
all the stuff that we have to file.
And then as far as managers list comprise, speak to that.
But there also are some fees that show up in statements
that are the managers fees that goes directly to the manager.
There isn't any markup or anything that makes
and all of those fees are already netted out of the returns.
So that's why we don't show them here as a separate item
is because they don't impact your returns, because we've already we've already
it's like an expense ratio. We've already net at about.
So I think from the fee standpoint, if you compare to mutual fund expense
ratio to the managers fees, they're pretty negotiated and very similar
to what a mutual fund expense
ratio would be. It's just that you happen to see them
because we report them and pay them directly.
And then you want to talk about the number of investments you.
So part of
our process with the number of managers is we,
we look for the best manager that we can find
based on the risk return parameters that we have.
So we look for the best managers within each of the Yes subclasses,
and that includes fixed income, it includes all the elements of fixed income.
It can be a core portfolio, a high yield portfolio, international bonds.
We do the same thing on the equity side where we
then look at large cap growth, large cap value.
We also look at multi small and mid-cap.
There's international managers
to the developed as well as the emerging.
And then we also use alternatives or what
we sometimes calls other diversifier.
So I like to do an analogy is, you know, when you are building your home,
you don't have one contractor, you don't have three contractors, you have
someone come in, you have the architect,
you have the excavator,
you have the plumber, you have the air conditioner,
man, you have the kitchen appliances, you have all these specialists.
So we hire specialists with each of these different asset classes.
So I'm not I don't know how many managers we have in the portfolio at this time,
but we have one manager for each of those asset classes
that we do when we bring in what we consider to be
the best risk return reward within that asset class.
So it could be a dozen, I'm not sure.
Okay. Okay.
Thank you.
Anyone else?
Well, thank you for your time.
Thank you very much.
Appreciate it.
Okay.
Now we have a quarterly update on the food service side.
And there's two attachments there, Mr.
Friends.
Thank you, Mr..
Yes, thanks for you.
So what we have on the screen in front of you
and something that we'll update
similar to this or a quarterly basis
are the revenues and expenses
just of the food service fund.
And for
the new individuals coming to the committee?
Mostly the mostly everything
that the district purchases is is purchased through the general fund.
And when you hear us talking about budget
and developing the budget, we're talking about the general fund.
We have offshoots of that fund
one being one.
You may have heard us talk about
at the General services meeting is talk about the Capital Projects Fund.
That is a separate fund. That money was set aside.
And once
it's in that capital Projects fund, it can only be used on capital projects.
So we can't use it to pay salaries.
For example, another fund that we have is the cafeteria
fund and school code requires
the expenses and revenues for the cafeteria
to be accounted for separately than the general fund.
And a little bit of that is because the cafeteria
fund operates just like a business.
Revenues expenses includes depreciation.
We boil that down here because in the fund accounting world,
we're more concerned about revenues and expenses equal to each other.
Something like depreciation comes to us through replacement of capital,
but it's not a real number when you kind of charge it back
because it's not something we're paying on a yearly basis.
It's just a number to denote the age of the equipment. So
for a very long
time, the our cafeteria fund has been self-sufficient in that
through sales money that they get, through sales of lunches.
There's also state and federal subsidies that come along with those.
When you combined all of those numbers
together, they had historically been able to offset all of their costs.
So there was no cost to the general fund for the operation of cafeteria.
One of the things that started to change that is our retirement
teachers.
Everybody is attributable and any school employee
qualifies as in in pizzas and currently pizzas.
The cost to the district is 34.9%
of our payroll goes to that pizzas as well.
So you can imagine for a something that we're labeling for profit,
we went to them and said, you're now going to have to attribute this 35%
that started to throw that out of whack.
And, you know, introducing covered made that even worse In that last year,
we lost a little over $300,000 in cafeteria operations.
Students need to be need to be fed.
That is very much core
to what we believe in and taking care of the students.
So our job is to make sure we can deal with those losses.
And that's why we're looking at this a little more intently
on a quarterly basis to better monitor that, understand what's going on.
And fortunately,
when we look at the current months or the current quarter ending in September,
now this is a little bit skewed because as you can see, there's
obviously some expenses in operating
the food service program, regardless if we're serving food or not.
So as you see some expenses
in July and August as we start to ramp up and then finally in September,
we're the whole month is includes food service.
The when we look
at it just on that cash basis, how much money came in in September.
And as of the end of September and how much money did we spend
as of the end of September, you can see there's quite a large loss noted there.
However, we are,
as was last year and currently this year,
the federal government changed the requirements
the in prior years for a student to qualify for a free lunch.
And in that means that the federal government pays
for the lunch for that student or provides subsidy for that student.
Families had to be within certain economic guidelines to qualify for that.
When coronavirus hit us, the federal government last year and this year
made the requirement or made the change that every student is universally free.
So if you come to a public school, you will get a free lunch
regardless of your family's ability to pay.
That has really
helped increase the revenue from
from this.
So at the bottom of that form, you'll see that
we submitted four claims for September.
That will bring in a total of $161,883 to the district.
Those were meals that were served in the month of September.
We'll actually recover that money here in October.
But wanted to show you, lining up the revenue for the month
of September with expenses for the month through the month of September,
just to show that the current
currently the cafeteria fund is operating
just at a very small in the positive,
just a little over $24,000.
So I think from this quarterly update
and one of the things that we were seeing because we were very concerned,
we had taken this the the food service
program in total last year.
We had to furlough quite a few employees just because we weren't serving
food to the level that we had.
So we reduced staff pretty well.
Mr. Hummel, our director of Food
Services, has been operating
under those same limited restrictions with employees.
So we already know that we're as we're
at the minimum level of employees that we can be at
and still provide the level of service that we're providing.
The other thing that is is hampering us
or that we're seeing as we're all probably seeing in our own
grocery bills, is food costs are have gone up drastically anywhere from
15 to 20% in some ways in some instances as to what we're dealing with.
And one of our major concerns was we know we were already kind of on a thin,
thin line to begin with.
What's that food increase and food costs going to do to us?
What we're seeing right now
is because we are experiencing
such a a great participation rate by our students,
that is what's driving our ability to maintain
operating the food service fund that,
you know, at the existing level that it is
we could even incur
some more food costs or increases in food costs
as long as it does not hamper or interrupt the service of food
that is.
Talking with Mr. Hummel.
That is going to be the thing that would cause the most disruption
and be something we were not able to build back from if we were to lose
certain periods of portions of a month to be able to serve students food
because we know we already have certain sunk costs
that we're going to have to provide regardless of service. So
in talking with with Mr.
Hummel, that is the theme he's feeling and feels comfortable
looking moving forward that yes, we are increasing
or seeing an increase in the food costs anywhere
from 15 to 20%, which is drastic.
However,
keeping food here and able to be serving is the main goal
and as you can see, I think keeps us level funded.
We'll keep an eye on the food service fund as we move forward,
but those are some of the things to keep in the back of your mind.
We did.
This does include through the end of September,
we did have the elementary school in which no food service
was provided for that last week of September.
We were also interested to see if that would have a huge effect.
It didn't have.
But once again, that was only for four service days
that they ended up missing from from that standpoint.
So Mr.
Hummel noted that
they're trying to make small tweaks in adding additional staff
very slowly, obviously because we don't want to,
he wants to continue to ensure the food service
operation is is funding itself to the
best it can.
But once again, to reiterate that
serving the students food is is one of the most drastic things
and one of the things we need to to help continue to occur
piece of information that he shared with me.
So last year through September,
he averaged serving 200 lunches per per day,
which is very minimal.
We are we're averaging just over a thousand lunches per day.
Correct, District wide? Yes, it is.
And included the take home lunches.
In it was all reimbursable meals.
Okay.
If you could scroll back up
to the just the revenue portion,
I placed the budget numbers in there for for the food service
fund once again to kind of show where this is coming from.
And this is unusual for us.
Normally, the federal subsidy provides about half
and then our daily sales and sales to the students and everything else
provides the other half.
As you can see, the way we've been
operating is is truly, really on that federal subsidy.
And so as long as universal free
remains in effect, which it will through the end of the school year,
and as long as we don't have any and these are things we know we don't have
control over, but as long as
the food service doesn't
get into interruptions of service, be that because of a shortage of food
or be that because of a building
closure for a long period, longer period of time,
confident that hopefully we will not see.
We had budgeted for $150,000 loss of the food service fund.
If everything stays very well,
I think we can look at not having that.
I do want to qualify that in that we're just looking through the end of September.
We have a lot of school year left to go and we are by no means
out of the out of the weeds on this, but it is looking looking
very good.
Any questions or or comments on the
future? Mr. Francis is Cathy Decker.
We did go back on the Federal Healthy Lunch Program
throughout the whole district
because we had discussed that at length at some period of time.
So I'm wondering if maybe maybe we should just talk about this later,
whether we was all about the ala carte sales and whether the kids
were going to like those options, not the high schools that
I guess we'll have to wait to see how this year pans out.
Have you gotten any updates on that or heard any anecdotes or.
I think one of the things that that Mr.
Hummel shared was,
you know,
one of the concerns and I don't know that this
was directly back, but one of the concerns we've had
with that switch was was our ala carte sales
and maybe having to offer or less having less choice being offered.
Well, because of our our labor constraints and what we're dealing with,
students are now have less choice.
And he's not seeing that having a detrimental effect on sales.
So I think that is one anecdote to take away is that he thought as choices
were taken away, maybe would see participation start to wane back.
And once again, we are only one month into,
you know, going through this process because all of last year was
was very much a different learning experience for everyone there.
But I think that might be something to look forward.
I don't think after going through just
instance, though, I.
Think.
This was not something that you contemplate when you're thinking,
should we be on or off the program?
We made the best decision to put ourselves on the program
because if we were not, these high school lunches would not be free
and we would be in a lot for.
So I don't I don't know that given our experience, maybe
there is not a reason to go back off of the program.
And it may be to stay on just for certain,
you know, catastrophic protections that it may provide.
Yeah, well, we can move past that conversation at this.
Point.
When I think that.
But I do think that it's helpful, you know, looking back in hindsight,
putting that in motion to review
the fact that we were opting out of the plan and,
you know, making the decision to go back on it
was helpful because it had us ready to be able to participate
in the reimbursement program this year, where it would have been a lot harder
for us to shift gears and get on there.
I also read, I believe if you can confirm that
because of some of the supply chain issues, there is some leniency
on the reimbursement.
If we're not able to get items to fully satisfy like the,
you know, the grains and the type,
like the number of fruits and vegetables, correct?
That's correct, Yes.
So that won't impact us adversely
in being able to collect the reimbursement if we're not able to get. The.
All the items needed. Correct. Great.
Thank you.
Does anyone else have any questions about food services?
Is the the elevated participation and because of the free lunches,
is that maybe also
you said that the choices weren't
because the limited choices weren't hindering the or were hindered by that. Is
part of that because it's currently free for all for with the federal subsidies
that saying that once it's not free
and when the choices will the choices then become an impact.
So I don't know and I can only provide this
one piece of data for that in terms of here.
So one of the things that was brought up when they started talking about
food costs and
Mr. Hummel did a little piece for for one of the news entities.
He provided an example of pizza and that the pizza,
he didn't provide these numbers.
But I can, you know, before we were, we could generate
a slice of pizza for about $0.80 a slice.
Now it's about a dollar a slice.
However, they sold 420 slices of pizza
at the high school, and this would have been October the 20th
and 365 of those equal to complete meals.
So there were over 60 slices of pizzas
sold to those children,
would have bought a slice of pizza regardless of whether it was free or not.
And it wasn't free because it would not have constituted a meal in that expect.
So I think some of these are things that we're cognizant of trying to
and one of the things we'll talk about maybe trying to to
concentrate on to see if those those things move,
but that was just one piece of data that he shared with me on the pizza.
That's that is an item that the students were probably going to to purchase
regardless if it was a free meal or not.
And it should be noted that that pizza does fit within
all of the dietary and regular guidelines that that he has.
Okay. Thank you.
All right.
Next, we have a monthly update on the general fund revenues and expenses.
There is an attachment to review of revenue expenses
as of September 30th, 2021.
Mr. Friend.
So once again, I'll go a little bit more in depth.
Just be for some of the newer committee members.
This is something new that we'll have on at each one of our.
Yeah, if you could open up the dock
of each one of our committee meetings and this is really just
referencing back
so the link on, on this document links back to our board agenda.
And every month on the board agenda, we have to provide
a list of all the bills paid, a summary of expenses.
And so this is just providing a little bit of context to the reports
that are that are in there
for the revenue section.
As noted,
we are we are right on par to to collect the revenue that we would assume
we would at this point of the year.
And for the members, I always do
comparisons on prior years just because
from a financial standpoint and a money standpoint, things are kind of consistent.
And so if we know we've been operating or
finishing prior years at our certain level,
if we've met certain things along the way, I do the same comparison.
So the revenue
just a little over 41 or just shy of $42 million
as of the end of September, that's 62%
of our entire revenue budget.
And as you can see
there, the average three years is just a little over 63%.
So what I see when I look at the revenue collected through the end of September,
it's meeting the same requirements or the same goals as revenue
that we've received in prior years through the end of September.
So feel good about that.
We've always either hit our revenue number or exceeded it,
and no information here showing us that that's the case.
Two pieces that we're keeping an eye on, real estate taxes,
that is the largest source of revenue in our budget
and current
collections for the month of September are a bit higher
than they had been in historically in the past.
So barring any large refunds that we may have to
issue because of changes
in assessed value, barring any of those, definitely our real estate
tax collections will be at or above our budgeted number
as we get here to the end of our calendar year.
Amusement tax is the other one
I heard Liz and Sherri make note that that was one of the reasons
amusement tax under normal Non-covid type
circumstances provides us about $1.5 million per year
for our operations last year
because we were so, so much in the hole, we only collected $500,000.
We were $1,000,000 under where we would normally be.
And so the concern was, when's that going to come back?
So we keep track of it here.
And really fortunately it looks like that is coming back
a lot quicker than we had anticipated.
We pulled our budget
back to about 80% of what it normally is,
and we are we are right at
those those numbers.
So very much
hopeful that will continue to
that will continue to move as it has moved.
We've kind of come of the obviously the Hershey Park season and also
the concert season is somewhat ending, but that just starts the Bears games.
Hershey Park in the dark and all those kind of things that move inside.
So we do get
for every ticket sold for anything
at a Hershey event,
the township and us, we receive $0.85 that we split,
so we receive about 42 and a half cents for every ticket that is sold to anything
through Hershey Entertainment or at at Hershey Park.
So once again, that's very,
very good news that that continues to rebound
and hopefully there's no hiccups there.
So that's encouraging on its own.
But then also should be indicative from the giant center operations as well,
especially if everything on their schedule is, you know, proceeding at capacity
and kind of returning to, you know, quote unquote, normal operations.
We should hopefully start to see
an uptick in the hotel tax revenue to get that pilot back.
Right. We absolutely should.
I think it just comes down to how kind of late in the year
that everything came back.
So I think 2021 is still kind of a goner.
But we're we're thinking
that maybe 23 was the first time we were going to see the pilot money.
It's looking really strong.
Like 22 should be the first time that we get to see
those dollars roll back in.
If you remember this, Drew, I think it was
April of 20, 21, 800 shared with us.
They had nothing scheduled in which I believe they didn't.
But but here we are sitting in October
and there's games are going on and concerts will be held in there.
So I think those are all really, really good signs.
I'm hoping that they
perhaps because it's been since the spring and I believe it was in October.
Of. 2020 that we got the first update
about, you know, the revenue
on the hotel tax, that we should see an update soon
to kind of gauge where they are.
This is Cathy Seger.
Can we ask for an update?
We usually usually just wait for them to update us.
Historically, that communication has come
through, had come through to me through Mr.
McFarland.
So I don't know when that.
But those communications have always been from
HD and our to us and not the other way.
But there's nothing to say that that's.
We couldn't. Ask.
I think at times two it was usually
after like an ICD meeting
or that they had updated the township that it prompted that. So
that could have something or.
The ICD has scheduled meetings.
Is that what you're doing? Yeah.
And then see if we can
either attend it or
figure out what's going on, because that's what we did last year.
They appear to have has a map, but there are no posted minutes
for all of 2021. So
it looks like it hasn't been canceled since April.
But I think that that's probably where we could.
Yeah, have that conversation.
Okay.
Is there anything else with the monthly update
on the general fund revenue and expenses?
Just the expenses.
Just to hit on those that same as revenue were trending in
when compared to prior years. It exactly.
That's pretty much the same area.
We've spent
just a little over
$12 million through the end of September, which is just under 19% of
our total budget.
And we look through the the three an average
for the three previous years, it's about 18.6%.
So once again,
expenditures are trending where we would expect them to be
at this time of the year.
So we would expect that we would be within our budget guidelines
assuming those trends continue.
Okay.
Thank you.
Does anyone have any questions about that?
Okay, great.
We're going to move on to the budget consideration and planning attachment.
I know, Mr.
Friends, you provided us with four attachments
for considerations.
This is a continuation of a conversation we had at the last
Finance Committee meeting where
thinking about next year
and how we're going to spend our Esser funding on learning loss.
We are considering bringing back seven staff members who we did not
replace positions last year and we didn't an early retirement incentive.
And so to bring the district back to whole and all the staffing,
we would bring back those seven.
And then this is just a projections of what that would do to our budget.
So do you want to go review those documents, Mr.
Friends?
Yes. So
what I've done
is the really two different scenarios,
really just with with the tax increase and no tax increase for each
and one for the the citizen advisors, this part of the budget process
that we're going through is not about setting a tax rate at one
by pay is what we have to budget ourself
or we have to live within the Act one index when we create our budget.
So there's a process in which we have to communicate to the state.
We understand what the Act one index is,
and we would plan to either
live within that index or have to seek exceptions.
So the part of the process we're at now is for the district to determine
if they need to seek exceptions to the the Act one index, i.e.
maybe go above it, or can we just stay within it.
So we talk about the 3.4% because that's our act one index, that's our ceiling.
We can't go above that.
But nothing in this process is setting any of those.
This is more just exercises
of rolling through and walking through those different scenarios,
ultimately recommendations made to the full board
and then work through the process there.
But none of the decisions made by the committee will in any way
set the tax rate.
It is just for us to kind of work through what those are.
So what I attached is the scenarios with the additional seven employees
and then up to a 3.4% tax increase or no tax increase at all.
And just showing the difference of that effect
on the five year budget projection and where we think we'll be
all of the projections.
And as we started out last time, even with no tax increase
because of our Esser three funds
that will be used one
time federal funding that we will use next year, we know that we will
we should be able to balance our budget without a tax increase.
However, we also know that that one time federal revenue will go away.
After next year, it won't be available.
This budget projection model takes that into account
that that that money goes away.
And so if we look at the 2024 year
and the example I do have brought up has the 3.4% tax increase noted,
but you can see as we look to 2024 and beyond, there's a deficit.
And that is really because that one time federal money that's being used
and actually was used somewhat to balance the current year's budget
and would be used next year runs out. So
wanting to put a tax increase
or start to talk about looking at that, to put that in place
and maybe that's something over a
multi-year period,
but this current model,
which does includes the seven additional employees
with a 3.4% tax increase.
If you remember, we were talking
well, so of this was zero.
We're about $4 million for our loss
for next year or projected loss
if we increase taxes by 3.4%
in the current with next year's budget,
that shrinks it to $2.7 million.
So I think that was the question of of wanting to provide these examples
of what does that effect have with employees versus no employees.
So the the the information is provided
to see the effect on those and the differences for each.
Mike Which year does the
the debt service payments go back up after the relief we had received
with the refinancing?
Doesn't it come back up or does it stay level it?
I thought we had a few years where we had.
A. Decreased amount, but then it came back.
I thought it always stays the same. No.
So we're looking currently, I believe that's through the 2028.
So that's not showing on on this one
and that it doesn't doesn't go back up.
As you can see
here,
for example, $4.6 million is what we paid for
debt service in 2019 through refinancing and the things Mr..
Noting we've reduced that number moving forward.
I think it goes up to 4.25 after the 2018 year.
Okay. 2028, 2018.
We're already way past that.
Okay. 2020.
I know too many
things.
Well, this is Cathy Seger.
I know that these numbers are hard to look at
because they always project the worst,
but they we never seem to end up that way a lot of time.
So it's
that's where I struggle with the impact
of what to do, because
we never seem to end up with that big of a deficit.
But, you know, we're projecting five years forward
and a decision might change in 2025, which impacts
the ending projection in 2027.
That these revenues
for the total revenue projected in each year.
Do you have the pilot and the amusement tax returning to normal
in the 2023 years, or is that assuming.
The the
the amusement
tax returns to normal in the 2023 year?
The pilot payment does not return until the 2024 year.
So there's still no pilot revenue
in for the 2023.
But that still had some Esser funding.
No, no.
Esser Funds, Yes.
Yes, yes, absolutely. 2321 absolutely does.
And that has about a little over $4 million of Esser Funds
that are in in in there.
And part of the reason you can see it
with that large increase or surplus of $2.3 million.
But yes, there's
a large portion of Esser funds that are in that year.
And so some of this I think to to more broadly
just maybe answer the question, MiSeq or the.
Two. To really focus for the
you know, until we get to maybe January,
it is really kind of as we step through this before, just noting
everybody understands what 3.4% is
and would we in any way entertain an interest in going above 3.4%
so that we would spend time going through the exception process?
And so it's a little easier question that we're looking at for the
the next really meeting is do we think we're going to need to seek exemptions
just from, you know, everybody in here,
either The eight years I've been business manager, we've never sought exceptions.
And in fact, we only saw exemptions one time in the history of Act One,
and that was the the first year of Act One because there was some uncertainty. So
I think it's maybe a little easier question But like I said,
walking through it at this point in time, as we continue, once we get to February,
we will have all of the actual department needs.
So these numbers may change a little bit.
They won't change drastically because our staffing won't.
We're not other than the seven positions, we are not recommending any change there
in staffing is 75% of our entire budget is our staff. So
as if that's going to stay constant, some of the other things
may change a little bit as we get the actual program needs and things
from from the building levels at that point in time.
But really just looking at this from that standpoint of
talking about it, looking at that contemplation
of a tax increase, what we may need, and I think sharing that information
because in prior years
we've also been at some of these meetings and look at these numbers
now, some of that due to COVID, but made the commitment
or the statement that we're going to try not to increase taxes.
And so I think that's a different way
to talk about it versus as we're at this part of the year
that we are talking about, this is really seriously something
that is going to need to be contemplated and considered at the end of this year,
you know, up to 3.4%.
But but hopefully something larger than than zero
is what we're going to have to implement.
Okay. You have any questions?
What's the deadline for submitting a tax increase for 2023?
The budget approval? Yeah.
Yeah.
Just seeking the exception that we have to approve ahead of time
for the action index.
So that's usually December.
January.
Yeah.
Mr. Friends, do you want to.
We only have about 4 minutes.
Do you want to comment on the fun fund balance on the top of that screen there?
I just ask you to put this on there as a reminder
and I appreciate the refresher, our fun balance and you can talk more.
This is kind of like what we consider our savings account.
And part of it is unassigned.
Part of it is assigned.
There's only so much we're allowed to keep kind of in the bank
per the state code.
But do you want to speak to these numbers?
Sure. Okay.
We we currently have a F and excuse me, I don't know the number of the policy,
but we have a fund balance policy here at the district
that follows school code in which says that we can't keep any more
than 8% of our expenditures in unassigned fund balance.
However, we can commit fund balance
to other things that may be unknown or have changes.
One of those most notably medical insurance.
After the one of the ways we were able to keep our current programs
and operations fairly consistent in this uncertain time
is because we have a fund balance, because we had a savings account
that we could dip into when we needed to.
And it is estimated that this past year
and we still going through the audit.
So this number won't change drastically,
but it may change a little bit is we had to use $1.2 million
of our fund balance to balance the 2021 budget.
We would like to get that amount back
up to the 8% once again to ensure consistency,
but also hopefully for that learning experience that when we do
go through a time of need, we can have the least amount of interruption
or effect possible on the programs because we can continue to support those.
So the question was,
can we start to look at or how do we look at refunding or
putting that $1.2 million back in there
to get this up to back up to the $5.9 million figure?
I think some of that is going to happen a little bit naturally.
As I look at our current years,
this is our current year budget.
Now, once again, $885,000 on a $67 million budget
is is really small when it when you're comparing those two numbers together.
But we did pass a budget that had
a bit of a surplus this year.
We are looking obviously to pass the budget.
And before this thing, if I go to zero here,
this number
is around $1,000,000
in terms of once again because the Esser funds that are in there.
So looking at these two, the overage
or the excess funds left over from those two years,
if everything works out, that would hopefully replenish the
the amount of fund balance used for for this last year.
Now, once again, that's assuming all things work perfectly.
So I think this is another item that should be an ongoing
discussion in terms keeping an eye on.
But that would be the first place that I look at for the solution is
is what we've currently planned and put together may naturally
kind of take care of that and put it back together.
However, once again, Jessica, we're
just through
September in a year that's looking
just like kind of last year from terms of what we're going to expend.
It's it's there's there's still some unknowns that we're
we're going to continue to work through so we get to the end.
Thank you.
Yeah, I just wanted to put it on there as a reminder
so we don't forget that we do need to replenish that someday.
And just really so it's out there
and on the agenda and in the public domain
is any questions on that?
We have one more item that we never seem to get to.
It is 6:00, and we all do have to go to another meeting.
So we'll have to put that on the next agenda.
Is there anything else for the good of the order from anybody here?
All right.
Well, I look forward.