By setting aside funds over time in a Capital Reserve, the District is able to save taxpayers a significant amount of money by avoiding issuing fees and interest expenses which are incurred when districts go out for large-scale borrowing.

Additionally, the establishment of a Capital Reserve enables the District to plan long-term for its facilities needs and ensures our students are provided with safe, updated, and constantly improved facilities.

When school districts have to borrow money to fund capital projects, they do so with long-term debt, called a “bond.” Half Hollow Hills is looking to pay for necessary capital projects using funds that are already available rather than having to borrow large sums of money.

By using available money, the District will not incur any of the exorbitant expenses related to taking out a bond, including issuing fees and interest expenses. As a result, these available funds – set aside over time in a Capital Reserve – will result in the capital projects saving residents a significant amount of money to accomplish the same end result.

There is no additional expense to taxpayers.

The District already maintains multiple Reserve Funds. These funds are used to pay for very specific expenses, all as set forth in law. So, for example, the Workers' Compensation Reserve Fund can only be used to pay for Workers' Compensation expenses within our operating budget. We routinely seek to replenish the balance in the Workers' Compensation Reserve Fund, for example, by transferring any surplus (extra unspent) funds at the end of each fiscal year into this fund. This is done as a matter of typical business routine after receiving Board approval, but not through a public vote.

However, for Capital Reserve Funds specifically, the law requires school districts to have a public vote on the establishment of and funding level for such reserves… even though the way in which this reserve will be funded is consistent with how other District reserves are funded now and have always been.

The way the District is choosing to fund this Capital Reserve is through surplus (extra unspent) funds at the end of any fiscal year, just like we do now to build the balances in other Reserve Funds we have. It is for that reason there is no additional expense to taxpayers. In fact, since we are setting aside money to pay for future capital projects without necessitating borrowing funds and paying issuing fees and interest expenses, taxpayers will actually save money.

Assuming a modest interest rate to borrow $30 million and pay it back over the course of 15 years, the District taxpayers would incur over $10 million of interest expense.

Stated differently, if we borrowed instead of establishing and funding a capital reserve, the total project cost of $30 million would actually be over $40 million.

The District is looking for voter approval on the establishment of a Building Improvements Reserve Fund which will remain open to fund for a total of 20 years. Over that 20 years, we hope to save a maximum of $30 million into this Capital Reserve to fund various future capital improvements, renovations, purchases and/or alterations of School District facilities and property. While that may sound like a lot of money – and it certainly is – when looking at the size of the District it becomes much clearer why that maximum funding level is needed. The District manages 15 buildings – seven elementary buildings, two middle schools, two high schools, an administration center, a transportation center, a facilities building and a natatorium. As we know with our personal residences, when a large ticket item like a kitchen needs replacement, the cost is often more than what we have available in our budget or savings account. Setting aside money each year to pay for these expensive, but necessary, improvements is a responsible and logical way to accomplish the end goal. For individuals, this could take the form of a separate savings account to set the money aside into. For schools, this account is called a Capital Reserve Fund.

That is why we are requesting voters approve the establishment of a Building Improvements Reserve Fund, funded up to $30 million over the course of the next 20 years so that we know funding will be available when our facilities are in need of important improvements to our buildings, all without a financial impact to our taxpayers.

While this is certainly one strategy to address the many capital projects our buildings will need, this plan would cause each project to cost much more than necessary because the District would incur borrowing fees and interest expenses if it went out for a large-scale borrowing. Instead, we are looking to start saving now, and in future years, for various capital projects so that when the time comes that the capital projects need to occur the funding is ready and available to use. By setting aside into a capital reserve any extra funds that went unspent in our operating budget we can save for necessary projects in a methodical way that has no financial impact on taxpayers.

Because the District is looking to maintain its long-standing commitment to being responsible fiscal stewards of public funds, we are not looking to accumulate long-term, expensive debt to fund all projects at once.

Further, all of the anticipated projects are simply not needed immediately. By establishing specific capital reserves for particular purposes, we will be able to proactively anticipate facility needs over the course of many years and fund them without any additional burden on taxpayers.

Money can only be added to this new capital reserve from unspent (surplus) budget amounts and unanticipated (extra) revenues at the end of a fiscal year. For example, if the District budgeted a 10% increase in healthcare expenses during the budget development process yet the actual increase ends up being something less than that, then the amount that wasn’t spent on healthcare remains unspent in that fiscal year. These unspent dollars combined with all other unspent dollars throughout the budget are called surplus at the end of June each year. As a matter of routine, a portion of this surplus is “deposited” into any one of our savings accounts – called reserves – for use in the following year’s budget. By allowing the District to establish a Building Improvements Reserve Fund, it simply provides the District with another "savings account" to set aside some of the end-of-year surplus into to plan for future needs throughout the District.  It doesn't mean there is more surplus to set aside, it just means there is an additional place to put the surplus when that time comes.

By funding the Capital Reserve in this way, there is no financial impact on our taxpayers. And, if approved, the language of the proposition limits the District to ONLY fund this reserve in this way with no ability to change that plan.

This particular Capital Reserve Fund will be used to finance the cost of District-wide improvements, renovations, construction, reconstruction, purchases and/or alterations to bathrooms, ceilings, lighting, interior flooring, windows, HVAC and building mechanical systems, parking lots and sidewalks, including original furnishings, equipment, machinery, apparatus, accessories, planning costs, site improvements, and incidental improvements and expenses in connection therewith.

The rules that surround Capital Reserve Funds ensure taxpayers will be informed in advance of all projects that the District will utilize this money for, as the funds require a vote to be set up and subsequent votes to use the funds. Therefore, you will know every step along the way.

Typically, voters will see two propositions (or items) to vote on.

1.    The first proposition is to vote for, or against, the next year’s school budget.

2.    The second proposition is to select Board of Education Trustees.

This May 21^st, voters will see a third proposition – to establish a Building Improvements Reserve Fund. Voting “YES” for the proposition will simply allow this reserve to be “opened” (kind of like opening a new savings account, but not putting any money in…that comes later). Voting “NO” for the proposition does not allow the District to establish this new reserve. Within the proposition language, voters will note that the District is requesting to keep the reserve open for 20 years and fund it up to a total of $30 million over those years.

Remember, approving this new reserve:

• does NOT mean it gets automatically funded, and
• has NO financial impact on taxpayers.

Approving this new reserve simply gives the District the ability to set aside any unspent budget amounts and unanticipated extra revenues each year into this reserve, just like it currently does with its other reserves.

The actual language voters will see on the ballot is shown below:

The establishment of a Capital Reserve Fund requires a public vote. Instead of incurring the costs to hold a separate public vote for this proposition, districts most often choose to include this proposition as part of the annual May Budget Vote and Board of Education Trustee Election.

This year’s vote, occurring state-wide on Tuesday, May 21, 2024, will therefore also include a request for residents to vote on allowing the establishment of the Building Improvements Reserve Fund.

Over the past decade or so we have been fortunate to fund capital projects right out of our annual operating budget. As many of the anticipated capital projects would require budgets far larger than can be supported in the capital projects line of the annual budget, we are looking at additional ways to stay ahead of our large-scale facility needs while maintaining our focus on fiscal responsibility. Saving for various capital projects over time using surplus funds that already exist allows us to responsibly plan ahead.

Capital Reserve Funds are a legally permissible way for school districts across New York State to plan and save for large-scale projects. In fact, most school districts across Long Island already utilize this savings vehicle as part of their long-term planning and have for decades.

Yes, the District has other reserves, but none that can be used for these building improvement capital projects.

The Half Hollow Hills School District does have other reserves, but not any that are legally allowed to be used to fund building improvements capital projects. To establish a Capital Reserve, school districts are required to bring a proposition before voters to have them agree on establishing one or multiple reserves. Further, unique to Capital Reserves, not only is voter approval required to establish the fund, but it is also required to spend money from the fund.

Many districts have established multiple capital reserves over the course of several years. Since each capital reserve could have multiple purposes, or one singular purpose, districts can responsibly manage public resources while planning for the many varied needs across its facilities.

The Half Hollow Hills School District already has one "singular purpose" reserve; voters overwhelmingly approved the establishment and funding of a Roof Replacement Capital Reserve.  This May we are seeking to establish our second capital reserve – a Building Improvements Reserve Fund – at the May 2024 vote. Why choose improvements to buildings as our second Capital Reserve Fund? Well, we know that with a district of our size (we have 15 buildings) and the expectation by our residents that we maintain our facilities to a certain standard, we need to continually be thinking long-term with respect to how to fund some of the large projects which we know will need our attention in years to come.

That is why we are requesting voters approve the establishment of a Building Improvements Reserve Fund, funded up to $30 million over the course of the next 20 years so that we know funding will be available when our buildings are in need of repairs and improvements… all without a financial impact to our taxpayers.