School Board Anticipates Tough Road Ahead

The board of trustees at the Fountain Valley School District could be faced with some tough economic decisions over the next two years as the funds they raised through the sale of properties and deposited into reserves begins to run out.

Steve McMahon, assistant superintendent of business operations, provided an overview of financial issues that affect the schools. The “Fund 40 Study Session,” presented during Tuesday night’s board meeting, shows that by 2014 or 2015, the $7.8 million remaining in Fund 40 will be exhausted.

“We’re at the end of our rope unless there is a change in the economy,” McMahon told the board. “By 2014 or ’15, we’re going to have some decisions to make. I don’t know what they are going to be.”

While most school districts in Orange County have resorted to eliminating teachers, which has led to larger classroom sizes, and administrative positions such as vice principals and librarians to balance its budget, Fountain Valley has used the sale of several schools, including McDowell for $25 million and Nieblas for $20 million, to avoid eliminating jobs. Those deals were made prior to 2008 when the state changed the law and said the sale of a facility must go directly back into the facilities.

The sales of Lamb and Wardlow schools have not been completed, but nearly $6 million has been deposited in escrow when a developer could not find a co-investor. The school district still could sell the two properties under a grandfather clause, which would result in possibly $20 million in additional funds for the reserve.

All told, the school district has received $70 from property sales since 2001.

McMahon recommended that the board focus on paying down its debt, estimated at just under $10 million from the Certificate of Participation (COP) borrowed funds.

“Since 2005, the sale of land has been used for non-facility related things,” he said. “That’s why we have been able to put money in the General Fund. If the money is not there, we would have to make $17 million more in cuts.”

The General Fund accounts for about 30 percent, or $7 million, of the total annual expenditures, second only to modernization expenses (45 percent, $26 million). No other expenditure exceeds 6 percent, according to McMahon.

The board of trustees briefly discussed the Fund 40 findings by McMahon before agreeing to put the issue on its agenda for a future meeting.