Nearly halfway into its $102.5 million high school expansion, the Shakopee School Board learned last week that $2 million in capital funds it had committed to the project were erroneously used to help shore up the district’s budget earlier this year.
The upshot? The construction project’s contingency fund is short $2 million. The bond proceeds approved by voters are still there, but the extra $2 million the board had injected into the project is not.
It was another blow to a school district still regrouping after the resignation of former Superintendent Rod Thompson, amid a police investigation into his possible personal use of a district credit card.
That came after the district spent much of the past school year grappling with a $4.5 million budget deficit, so it won’t be able to tap into its general fund to bridge the gap in the construction budget.
The school board was briefed on the situation during a meeting of its Bond Oversight Committee Wednesday Aug. 9. Basically, the board will have to cut $2 million out of the project doubling the size of the high school.
“Somewhere in there, that message got lost in terms of where that money was,” said the new finance director, Suzanne Johnson. “It was an oversight but I think it’s very good that we are catching it now because there’s a whole lot of time to look at what we’ve got.”
District Teaching and Learning Director Nancy Thul said it’s OK to use capital funds for salaries but “There was such a drive last spring to just move things wherever they could rather than have hard conversations about where it should really be and what we need to do to make that sustainable.”
Chris Ziemer, the project manager with ICS Consulting, said based on approved change orders and other estimates, the project will come up about $1.4 million short of obligations. So the board is looking for places to make cuts.
“All options need to be on the table even if they’re not attractive,” Thul said.
However, it won’t be easy.
“There aren’t a lot of levers to pull because the building footprint is done,” Ziemer said.
The board talked about saving $750,000 by not building a loading dock for the central kitchen. Decisions about where to make cuts will be made in a formal school board meeting.
Asked whether the mix-up would put the district in the red by the end of the fiscal year, Johnson said the finance department is analyzing the numbers and is not yet in a position to say where the budget will end up.
“If we have to sustain that either way, we might as well take it in the general fund and show that reality,” she said Wednesday. “Let’s let our general fund land where it’s supposed to.”
The board also discussed the former superintendent’s overly optimistic predictions about how many sponsorships the district would get for equipment for new academic labs. Thompson didn’t budget for $615,000 in academic labs and center-based equipment, but instead planned to raise funds to cover those costs.
“To assume it would take care of all of those, in my opinion was never realistic,” Thul said. “By and large, that’s because the philosophy of the former superintendent was he would fund raise for those dollars. … I expressed concerns about this problem awhile ago but the former superintendent was insistent on the budget being shown the way it was.”
Thul said contractors ICS and Wold Architects Engineers are not responsible for the flub; she said district administrators miscommunicated with each other about how the $2 million was to be set aside. Under Thompson, often work was done “in isolation” and others were shut out of the conversation, Thul said.
The new interim superintendent, Gary Anger, got to address the issue with the board during his first day on the job Wednesday Aug. 9. He said the mix-up means “We just might have to wait on a few things.”
“There won’t be any isolated bits of communication any more,” he assured the board. “It’s going to be a team effort to communicate but it’s going to be a clear message all the way through.”
And while he and Johnson said they don’t expect to uncover any more “surprises” like this, needed reductions in other budgets “further increases our inability to cover some of these deficits or shortfalls.” He said budget adjustments will likely be needed at the end of the next fiscal year.
Even if some components have to be delayed, Thul said the project won’t disappoint.
“It’s going to be an amazing building in the fall of ’18 and people are going to love it,” she said. “We’re just maybe not going to be able to do everything we talked about and we are going to be upfront with people about that.”
Thul said most teachers suspected Thompson was over-promising, “so I don’t think it’ll come as a complete shock.”
“It’s going to be a wonderful building,” she said. “Just maybe some of the things that were over-promised shouldn’t be over-promised.”
“That’s my point: I want the over-promising to stop,” school board member Matt McKeand said.
Anger said it would.
“We will not be budgeting on hopes and dreams any more,” he said. “You cannot budget that way. Reality is going to be at the basis of the budget moving forward.”
Some school board members thanked Johnson for being candid about the situation.
“We want to see the warts,” said school board member Shawn Hallett. “We want to see everything.”
“We need to know because clearly we have not known,” board chairman Scott Swanson added.