LOCS Assistant Supt. of Business and Finance John Fitzgerald discusses bond and sinking fund projects, upcoming funding plans

By Megan Kelley
Staff Writer
ORION TWP. — It’s been several years of progress for Lake Orion Community Schools after two ballot measures, a sinking fund millage in 2016 and a bond in 2018, were passed by voters.
Over the years, both the sinking fund and bond have contributed significantly to district-wide improvements in technology, building security and general day-to-day operations.
Recently, The Lake Orion Review sat down with John Fitzgerald, assistant superintendent of business and finance for Lake Orion Community Schools, to get an update on bond and sinking fund projects, where the district stands financially on the bonds and the upcoming sinking fund replacement millage on the ballot Feb. 27, 2024.
School Bond
In November 2018, Lake Orion district voters approved a $160 million, 10-year, three series bond. The bond was marketed as having a no tax rate increase and would not levy any more than the 7.49 mills that were already being levied.
The bond has been a source of many projects over the past five years, with a new elementary, building upgrades, new furniture and added technology across the district.
“Accomplishing these projects as a team, and I dare say I speak for the team, everyone has a great sense of satisfaction that the way that this approach has been done so far has positioned the district, from a facility and equipment point of view, to be able to be on the front end of being able to provide facilities and equipment that will position our kids to be in the best position to maximize their instructional capabilities,” said Fitzgerald.
Since 2018, the district has had to jump over several hurdles with changes in both the economy and supply chain making some of the work more difficult.
To deal with some of the problems, LOCS had to get creative with some of its mitigation strategies, such as doing more forward planning so items can be purchased further ahead of projects, and putting more items together in bid packages.
“It makes it more attractive to the responding vendors,” Fitzgerald said. “If it’s a $100,000 job and there are two other jobs that are $500,000 or a million, they’re going to bid on the million dollars first and then maybe make their way back.”
Additionally, purchasing items ahead of time locks in pricing.
“Who knows where the price for HVAC is going to go. So, the sooner we get that bid and lock in the order, get it on our timeline – we’re also locking in prices,” said Fitzgerald. “The only place prices go down is in the economics textbooks when you’re learning them in school. They may not go up anymore but the amount you can get gets smaller.”
Despite these hurdles, the district has done a good job of meeting their goals.
“We track a projected budget relative to what we’ve actually spent (compared) to expected remaining cash flow from the bond proceeds. We’re on target and in pretty good shape right now. When inflation started going through the roof a couple years ago, we are in about as good of shape as I could have hoped at that time,” Fitzgerald said.
The district is on the very tail end of series two and is already gearing up to begin working on series three in 2024.
Series three includes Paint Creek Elementary, Lake Orion High School and the CERC building, but also has space in it for the Administration building and Moose Tree if funds are available, Fitzgerald said.
Fitzgerald isn’t sure how much money will be left after the main three projects for series three are completed, and notes that is why the Administration building and Moose Tree projects were added to the list in the first place.
“In the bond application that the state approves, we have money tied to this (Administration) building, I think it’s $25,000, same with Moose Tree. The reason you do that is one of the restrictions on using bond money is that if it’s not addressed somewhere in the bond application, you can’t just go use it on a building that was never listed as a project,” Fitzgerald said. “As long as the work that we’re going to do using the residual funds is done on the same project at the same approved sites, you can do that.”
When LOCS originally set out to present a bond proposal to voters, the district came up with a list of things they would want to do in the district which came out to a price tag of around $330 million, Fitzgerald said.
“We worked through that, balanced it with what makes a smart approach to impacting our tax levy relative to asking our community to support it, so that’s where the $160 (million) came from. So, it didn’t impact the tax levy but then we went through the prioritizing process,” said Fitzgerald.
Sinking Fund
The sinking fund was passed by voters in 2016. According to district documents, the expected revenue of the sinking fund millage is expected to land at approximately $5 million in 2024.
With its last levy taking place in 2025, LOCS will ask voters for a 10-year sinking fund replacement millage on the Feb. 27, 2024 ballot to continue the work the district is currently doing. If passed tax rates would stay at the current levels.
The sinking fund, unlike the bond, is for repairs and other building maintenance, said Fitzgerald.
“So, for instance when an HVAC goes down over at CERC, that’s usually a motor in this wing that needs to be replaced. Because it’s repairing an existing system, we can use sinking fund money to do it to keep it up and running,” Fitzgerald said. “At some point, like in any of our buildings, when the systems wear out, when they’re 25 years old and they’re breaking down every other day, that’s when you use the bond dollars to replace them. You can use sinking fund dollars; they pretty much have the same legal things you can buy with them. sinking funds now that are approved have a wider range of what you can purchase relative to when ours was approved in 2016.”
Sinking fund dollars now can be used for things like loose technology and buses and maintenance vehicles, where in the past they could not. However, because the district’s current sinking fund was passed with the previous laws in place, LOCS cannot use current sinking fund dollars for any of those things unless a new sinking fund is approved by voters.
For example, according to Fitzgerald, LOCS currently owns about 65% of its bus fleet. Should the sinking fund be renewed by voters, LOCS would likely look to replace three to five buses a year to target having an average bus age of about seven or eight years, rather than one that is older and needs repairs more often. A similar pattern would likely be put in place when it comes to technology.
“To me, it just makes tons of sense to replace buses and vehicles. Even laptops now – you can buy in bulk and use them to replace on a managed rotation,” Fitzgerald said. “Under our bond structure, you’re spending X millions of dollars and buying 400 or 500 units with sinking fund money, so you can actually plan. On average we incur 75 units lost a year because of damage, loss, stolen or just failure, so let’s just plan on having money in the sinking fund set aside for 100 units a year. Same with buses. Three buses a year, plan on it. Now it becomes an institutionalized maintenance approach so you never get caught behind the 8 ball and have to go buy 600 laptops.”
Essentially, the sinking fund is used to keep the proverbial train on the tracks and allow for repairs or all out replacements to be done that will ultimately save the district money and free up general fund dollars to continue programming and other instructional needs.
“The sinking fund is used for, aside from technology and buses, keeping things going. If a boiler goes down in the middle of the winter and the choice is $75,000 to fix it or $100,000 to replace it, in the old days we’d eat the $75,000 because it’s less than $100,000. Now we’ll buy a new one and that will last and work the way it’s supposed to for another 15-20 years versus band-aiding with the $75,000,” said Fitzgerald.
For two years, the district had just sinking fund dollars to make necessary repairs until the bond was passed. The pairing of the sinking fund and bond have created a way for LOCS to be able to complete a number of projects together.
“When the bond came along, there was some harmonization done and that actually helped with some of the inflation. If we have planned on doing a boiler and a piece of the roof and a piece of the parking lot at Oakview Middle School using the sinking fund, when the project designers and budget planning came along for the bond projects, we kept that in mind. So, it’s all being done at the same time from an efficiency point of view, but the bulk of the funding is coming in from the bonds and there is a slice of the sinking fund,” Fitzgerald said.
Another example of this is the high school roof, which before the bond was likely going to be a repair project for the sinking fund. However, because the bond was passed, the district is able to use bond funds to completely replace the roof rather than just piecemeal it.
“Thank God (it passed) because what we did, within and outside of the bond, it saved programming. The reality was, if we didn’t end up having a bond and we only had the sinking fund, we would have still been able to do things to keep things working but not maximizing what we can be doing for the kids from an instructional environment because you need a bond to really change things or do wholesale big builds. Blanche Sims Elementary is a good example. Sinking fund: we’d never build a new building. We would have been putting money into the old building to keep it limping along. Kids would have gotten a good set of education, but under the new building, just the actual structure itself and the way it’s approached, it’s allowed them to free up some of the instructional approaches that they would never have had that opportunity.” Fitzgerald said.
With the sinking fund replacement millage on the ballot Feb. 27, 2024, the district is hoping to continue to make progress on the roughly $170 million in projects that were left out of the bond in 2018.
“It gives us the ability to do more of the same. We still need the sinking fund. Like I said, it was a big pile of needs and we only addressed half of it with the bond. This sinking fund still helps us push forward in dealing with the other outstanding needs and issues of the building that weren’t addressed,” said Fitzgerald.