Superintendent shares new idea: Separate $2 million budget shortfall from district buildings discussions

Dr. Dave Moyer participated in his first public meeting as superintendent of schools this past Monday, January 8, and immediately introduced thoughts on how to handle two major issues facing the community – what to do with district buildings currently up for sale or lease and how to make up for a $2 million revenue shortfall come 2027-28. 

Separate the discussion of buildings from the $2M shortfall, Moyer said. The shortfall can be covered by examining the budget (specifically programs and staffing), while the sale/lease of the buildings should be handled as a longer-term issue requiring better community outreach and more resident input.

This week’s meeting was the third gathering of the Financial Planning Board Committee; in attendance were Moyer and Assistant Superintendent for Finance Bob Howard, as well as committee members and BOE trustees Larry Licopoli and Carol Taylor. Trustee David Badanes joined the meeting about an hour into the presentation.

The committee has identified three primary challenges currently facing the district and presented paths forward for each one. A synopsis and discussion of the committee’s progress thus far will take place at tomorrow’s board of education meeting. 

LIPA Settlement and Revenue Shortfall
The 2020 LIPA settlement increased the proportion of property taxes paid by residents, resulting in a 7-year glidepath that increases the tax burden on homeowners. Additionally, the negotiated $2 million yearly funding during the glidepath will be ending in 2027, leaving the district with a revenue shortfall. 

To offset that shortfall, the district plans to examine expenses impacting per pupil spending, a recommendation that was made by the Long-Range Financial Planning Committee (LRFPC) in November 2022. 

“It’s my advice that we begin to decouple this conversation about the $2 million LIPA money and what we do with the buildings,” Superintendent Moyer said. “To build long-term sustainability into our planning for the budget, we have to take a look at a variety of different factors because most of our money is in staff to support student programs.

Moyer believes the district needs a long-term resource allocation plan that’s decided with the help of community engagement. “That’s not going to be resolved by talking about buildings,” he said. The committee should continue its work in discussing the future of the three buildings, he added, but that should be separate from the work that needs to be done with budget management and creating a sustainable plan for the future. The process would benefit, Moyer believes, from greater community engagement.

The superintendent said he has closed budget deficits before in a short period of time, one by $2.2 million and another by $3.4 million. He said it may be a challenge to make decisions related to budget adjustments, but he’s “extremely confident” that, with the help of community input, he’ll be able to close the deficit without significantly impacting the student experience. Some factors that will be examined include course and extra-curricular activities enrollment, contractual expenses, district staffing and an analysis of outsourced services. 

Moyer suggested that the board explore the use of a consultant for facilitating community engagement, which would require putting out an RFP (request for proposal), as well as board approval. He said that in the past, he’s driven engagement with a facilitating team that “helped shape the process” and allowed for various means of communication such as phone surveys, mailers, and in-person meetings. Community feedback related to the district’s facilities, budget and instructional programs would then be put into a final report that’s presented to the board. 

The community needs to pinpoint priorities so that resources can be allocated to fund them, Moyer said: “If we do it backwards and we just try to make cuts solely to balance a budget, then we would not necessarily be considering which programmatic experiences are most impactful for our kids, which are the things that they most need now to be prepared in the future, as opposed to programs that were set up 20 years ago, to serve their needs then.” The superintendent wants to create a comprehensive plan instead of focusing solely on making up for budget shortfalls, he said, and thinks that this can be done in a two-year timeframe with a proper community engagement process.  

Capital Projects
Over $91 million in capital work has been identified by the district’s architect; much of it consists of work deemed as critical infrastructure projects. The district’s current funding levels are insignificant and do not cover the costs of these projects. 

In its report, there were two recommendations put forth by the LRFPC to fund capital work: increase yearly budgetary appropriations toward capital projects by at least $1 million per year (going from $3 million to at least $4 million annually) and issue a bond for the projects, utilizing the current debt service that’s falling off (or paid for) in 2026-27 to pay for the new debt. 

Additionally, revenue from state building aid and the selling or leasing of underutilized buildings (Bellerose and Dickinson elementary schools and the William J. Brosnan building) could be used to fund necessary capital projects, the LRFPC stated in 2022. 

District Properties
The three district buildings that are not currently being used for students and have been included in the gathering of proposals for their potential sale or lease include Bellerose, Dickinson and Brosnan. Of the three properties, only Bellerose is completely unused at this time. Dickinson’s current occupancy is at 40%, with the district community service program and transportation offices housed there, and Brosnan is at 100% occupancy, with the Island Kids lease, district administrative offices, the alternative high school (PORT Academy) and other community uses filling up the space. 

“I don’t believe there was ever an intent on selling all three buildings. It was to gain values on the buildings to see what they’re worth,” Howard said at the meeting on Monday. “You can’t sell a building that you’re 100% using – where would those folks go?”

In previous committee meetings, Howard presented information on the cost of maintaining the three properties (assuming they were mothballed) at approximately $99,000-142,000 per building annually. It would cost the average taxpayer about $19 per year to keep the buildings in district possession, which would cover groundskeeping, utility bills, light maintenance and custodial and security costs. The capital avoidance for each building, if they were mothballed, is approximately $101,000-$133,500 annually, money that would have otherwise been spent on roof replacements. 

One of seven essential question put forth by the committee included a discussion about alternative revenue sources that can be generated from the three buildings. Some possibilities included in the committee presentation were bringing programs such as BOCES into the district, using vacant buildings for in-house field trips (which could also be used by other districts), creating a staff training and development center, relocating the district’s transportation facility, and expanding the community service program. 

Howard said that moving the transportation department onto district property from its current leased location on Brightside Avenue would be a $100,000 expenditure shift, for example. Additionally, if the district builds a transportation facility, a company like Huntington Coach may pay the district to use it. Howard also suggested using the back of Bellerose for the district’s transportation department, while still being able to lease the building for additional revenue. He noted, however, that these ideas need to be fleshed out and presented to the community to gauge interest. 

Leasing buildings is another potential revenue source that keeps the assets in the district’s possession. Howard presented the net lease value (after paying utilities and upkeep) for each building, indicating the following low/high figures for the entirety of each building: Bellerose at $584,000 to $657,000; Dickinson at $550,800 to $660,690; and Brosnan at $1,178,000 to $1,413,600. 

When presenting sale vs. lease scenarios, Howard showed that, if comparing the highest sale offer to the highest net lease value for Dickinson as an example, total proceeds to the district would be just over $9 million for a sale and close to $16 million for a lease after a 20-year period. Accounting for the expected lag time in leasing a property at the highest lease value, Howard compared the figures to when leasing took five years before onset: district proceeds from a sale would be the same at $9,216,000, while leasing would bring in $11,629,587 after a 20-year period (five of those years make up the waiting period). “There is still a better example for the lease, but the key is we have to get a lease signed and that’s the big question mark. But this shows that you can wait five years,” Howard explained. 

Howard also explained that when leasing a district-owned property, it must be demonstrated to the state that the price is within the fair market value. “A public building is tax exempt, so if we were to rent out the facility and we do not achieve fair market value, we can get a claim of gifting public funds against the district and it can also be viewed as unfair competition,” he said.

The district currently has one lease offer from the Whole Child Academy (WCA) for Dickinson, with an updated proposal ranging from $102,000 to $108,000 for year one and increasing to $192,000 to $204,000 by year five. The proposal includes the use of Dickinson’s main building, gym and one satellite building during year one, which would be 63% of the building, with additional satellite buildings added to the lease space giving WCA 95% of the building by year five. 

The lease proposal also states that the district would be responsible for maintenance, grounds and snow removal costs, Howard said. With operating and maintenance for Dickinson costing $126,107 per year, the net lease revenue for year one with the WCA proposal as is would be negative $18,107, Howard explained. By year five, the net lease value would be $77,893, which is well below the minimum threshold to avoid a “gift of public funds” claim, he said. At approximately $1.50 a square foot, a simple comparison provided by Howard would be renting a 2,000-square-foot home for $3,000 per year. “The net lease offer is approximately 500K below market value for the building,” he said.  

Going forward, and to suit what seems like a preference for a lease, the committee agreed that changing the district’s contract with Newmark Realty should be up for discussion by the entire board. The suggestion presented by Howard at the committee meeting involves removing the sale option for all three buildings and keeping the lease option, with a lease commission of 7% for years 1 through 3 and 3% thereafter until year ten. The adjusted contract proposed would also exclude lease agreements for the school districts, BOCES or any public entities because those parties are generally dealing with the district directly and would not require the use of an outside realtor.

Hired in November 2022, Newmark Realty has been providing brokerage services for the district since 2023. According to the contract with Newmark, the agreement between the district and brokerage firm began on January 1, 2023 and will expire on June 30, 2024 but “may be terminated by either party upon thirty (30) days written notice to the other party.” For now, Newmark is continuing to carry out the parameters of its contract, including showing properties, district officials told the Journal last month. All offers to lease or buy the buildings were shared with the public in October 2023, and no new offers have been received by either the district or Newmark since then, officials said.

There is no penalty/fee for terminating or changing the contract, Howard confirmed at Monday’s meeting. 

Howard believes that Newmark can still bring value to the district by creating contacts with potential tenants that the district has no contact with. “They are bringing value, they are expediting the process, and bringing more choices and chances for our community to have revenue out of those buildings,” he said. 

The Newmark contract will be discussed further by the entire board at the January 11 BOE meeting. Trustee Badanes questioned whether or not it was wise to eliminate a sale option completely at this time. To that concern, Moyer said keeping the lease option for now will generate income on the properties while the district decides what to do in the long-range and that a sale can still be explored down the road.

Regarding a change to the Newmark contract to remove the sale option, Moyer said, “We want to send a message to the community that we fully listened to [them] and vetted what our plan is, moving forward with the buildings, and that they have had a voice. Keeping that sale option in the contract right now may send a message to the community that we are actually not sincere in wanting to engage and listen to their preferences.”

Trustee Badanes did express at the meeting that he believed many community members’ voices had yet to be heard, and insinuated that the entire community was not represented by a “no sale” stance. Moyer said, because he didn’t know with certainty if the entire community had voiced its opinions about the future of the three properties, that the community engagement process he’d like to see going forward would help determine how all residents of the district feel about the issue.

“The mistake we did make was talking about engaging with the realtor before we did any of this stuff,” Trustee Licopoli said. He reiterated that the board never had any intent to sell all three schools: “That was not part of any kind of conversation and I think we’re taking the steps now to methodically correct that going forward.” If the community prefers leasing the buildings, Licopoli added, the district shouldn’t rush into a long-term lease contract without thinking through all options, including using the buildings for educational programs. 

The board intends to enter into a committee-of-the-whole to discuss the progress of the Financial Planning Board Committee and the status of the committee work to date at tomorrow’s BOE meeting. A discussion regarding the district contract with Newmark will also take place, with the BOE expected to put forth a resolution to alter the contract at the next meeting. 

The Thursday, January 11 Board of education meeting will take place in the Brosnan building cafeteria at 7pm and is available via Zoom; the notice can be found here. The January 8 financial committee meeting video can be viewed here. The presentation from the meeting is linked here.