January 11, 2001
|TO:||Chief School Administrators
School Business Administrators
|FROM:||Tom McMahon, Assistant Commissioner
|SUBJECT:||2001-02 Budget Impacts of the Facilities Law|
The following summary is intended to provide guidance in the development of your 2001-02 budgets with respect to the impact on district budgets of the Educational Facilities Construction and Financing Act (EFCFA) enacted in July 2000.
The department has included the applicable information in the 2001-02 Budget Guidelines and in the programming of the 2001-02 budget software.
Funding under EFCFA
Projects eligible for funding under EFCFA include: new construction and additions to accommodate unhoused students; rehabilitation to keep the building functional for its original purpose or new purposes without increasing the square footage of the original building; and acquisition of land or existing buildings to accommodate unhoused students.
Districts have the option of receiving a grant from the Economic Development Authority (EDA) for the state support, instead of debt service aid, of the final eligible costs of an eligible project. EDA will provide the grant and disbursement of the funds through an agreement between the district and EDA.
Districts that have submitted applications for retroactive funding for which debt has been issued, and have received approval of the retroactive funding, will have their 2001-02 debt service aid calculated based on EFCFA formulas.
Budgeting for Local Support of a Project Eligible for EFCFA Funding
Local support includes:
(1) The local share to be paid to EDA for an EDA constructed project;
(2) The local share of a non-EDA constructed project for which the district chooses to receive a state grant for the State support; and
(3) The local portion of debt service payments for a non-EDA constructed project for which the district chooses to receive state debt service aid for the State support.
All districts are required to secure the required local support of an eligible project prior to initiation of construction.
Districts that fund the entire local support through a means other than school bonds must secure this funding through:
(1) Approval of the necessary line items at the annual school election;
(2) Approval of expenditures of local funds at a Special Election; or
(3) Withdrawals from capital reserve in accordance with the procedures described below.
Districts that issue school bonds to fund all or part of the local support must include in the referendum question or board resolution (for districts with a board of school estimate):
(1) The amount required to be raised by bonds;
(2) The final eligible costs of the project as approved by the Commissioner;
(3) The amount of the costs of the project which are in addition to the final eligible costs (if applicable);
(4) The portion of local support to be raised through other funding sources (e.g. capital reserve, surplus), listing these sources and amounts separately; and
(5) An explanatory statement of the costs in addition to the final eligible costs.
For authority constructed projects or districts electing to receive a grant from EDA for the state share, the referendum question or board resolution should request approval of the local share.
For non-authority constructed projects for which a district chooses not to receive an EDA grant for the state share, the referendum question or board resolution must include the total costs of the project and disclose the state debt service aid percentage. In addition, a district should include in the board resolution or question an explanatory statement of the costs in addition to the final eligible costs.
Districts must provide the approved local share to the authority for authority constructed projects in accordance with the rules of the authority to be developed.
Budgeting For Projects to Receive EDA Grants for State Share
Districts electing to receive an EDA grant for its state share should account for these funds along with its corresponding local share in its capital projects fund.
Districts that choose to raise the local share portion in their 2001-02 capital outlay budget should budget only the estimated local share of the school facilities projects they anticipate to receive DOE approval and to be completed in 2001-02.
Districts should transfer the local share budgeted in capital outlay to the capital projects fund upon execution of the EDA grant agreement.
EFCFA allowed districts that did not have a capital reserve account to establish such account by board resolution no later than October 15, 2000.
Funds in the capital reserve account may be used only to implement projects in a districts approved LRFP.
Funds in the account in any budget year may not exceed the amount of local support required to fund the projects in the approved LRFP. This amount will be adjusted annually in a districts QAAR.
Upon submission of a districts LRFP to the department, a district may make deposits into capital reserve to meet the local needs of its LRFP at any time by board resolution as follows:
(1) Transfer of undesignated, unreserved general fund balance; or
(2) Transfer of excess, undesignated, unreserved general fund balance that is anticipated to be deposited during the current year (2000-01) in the advertised recapitulation of balances of the subsequent years budget (2001-02) that is certified for taxes. No transfer can be made if a district applies for a Commissioner SGLA in the subsequent years budget (N.J.A.C. 6:19-2.5(b)).
A district may appropriate funds in its 2001-02 budget to supplement the capital reserve account to meet the local needs of its LRFP submitted to the department. A line has been added to the net budget cap worksheet to exclude the capital reserve appropriation from cap.
Upon approval of a districts LRFP, if the amount in the capital reserve exceeds the amount of local support required to implement the projects in the approved LRFP, the district must withdraw the excess and reserve and designate it in the subsequent years budget.
Audited excess undesignated, unreserved general fund balance may not be deposited into a capital reserve account and must be reserved and designated in the subsequent years budget (N.J.A.C. 6:19-2.5(c)).
Upon approval of a districts LRFP, a district may withdraw funds from capital reserve at any time by board resolution for the following purposes:
(1) To capital outlay to fund the local support of final eligible costs of an approved school facilities project;
(2) After receiving voter or board of school estimate approval, to capital outlay to fund the excess costs of school facilities projects and other projects not eligible for EFCFA funding:
(a) Voter approval may be obtained through the original budget certified for taxes, which must include a separate statement of purpose. A new revenue line has been added for withdrawals from capital reserve for ineligible costs.
(b) Voter approval may also be obtained through a special appropriation process (e.g. special election for a Type II district).
(c) The separate statement of purpose in the annual budget or special election question must include the projects total cost, final eligible costs, and amount requested for withdrawal for excess costs and delineate what the excess costs will fund.
(3) To the debt service fund to offset principal and interest payments for bonded projects that are included in the districts approved LRFP.
A district may apply to the Commissioner for approval to withdraw funds from its capital reserve account prior to approval of its LRFP for emergency purposes.
Funds in capital reserve accounts in existence prior to July 18, 2000 are subject to EFCFA and Commissioner regulations, but must be utilized for the original purpose deposited and accounted for separately. Appropriation of these funds must be made in the annual budget.
Maintenance of School Facilities
For projects that receive funding under EFCFA, districts must demonstrate, starting in the third year following completion of the project, an annual maintenance investment in the school facility of two-tenths of 1% of its replacement cost.
For all existing facilities, districts seeking EFCFA funding 10 years from the enactment of EFCFA (July, 2010) must demonstrate over the prior ten years a maintenance investment in such facility for which the district is seeking funding of at least 2 % of its replacement cost.
Upon completion of a school facilities project constructed by the district, the district must submit a maintenance plan which includes its plan to achieve the above; the maintenance plan must also include a provision for a maintenance reserve fund.
A new column has been added in the Recapitulation of Balances in the 2001-02 budget for the new maintenance reserve fund.
County School Business Administrators