Dayton Daily News education reporter Scott Elliott writes about schools, kids, teaching and learning.
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Saturday, December 9, 2006
Lucas: Reynolds deal paying off
In 2003, Dayton Public Schools shocked a lot of people when it bought the former Reynolds & Reynolds world headquarters on Ludlow Street in downtown and consolidated three administration centers there as a single, central administrative headquarters for the district.
Efforts by the city and other downtown business leaders to talk the school board out of this move — arguing that another corporate client would be better for the location and that the board could find other suitable locations for its administrative home base — did not dissuade the board. So board members signed a deal to spend $15.5 million to buy the building.
Concerns, anger and above all lots of questions were raised about this move in the last month as the district began struggling with tight finances. A couple weeks ago, I asked Dayton’s school Treasurer Stan Lucas if he would be willing to answer a list of 10 questions about the Ludlow buildings and purchase and he agreed to do so.
Most of these questions came from GOTB readers through comments on different posts about the district’s finances. I added in a few additional questions. Here they are, with Lucas’ responses:
1. The reported cost of the Reynolds purchase was $15.5 million. What was the true final purchase cost and how is DPS’ payout for the purchase structured? Is it true DPS faces a balloon payment in 2007 that could be part of the reason for the levy?
Stan Lucas: The total amount financed for purchase of the facilities was $16,323,995 at an interest rate of 5.38 percent for 25 years. There is no balloon payment required. The purchase of the Ludlow property was made with capital funds. These funds are earmarked specifically for district facilities and are separate from operating funds, which are used for expenses like textbooks, salaries and utilities. The financing included the buildings, furniture fixtures and moving costs as shown below:
Buildings and Furniture: $15,570,000
Moving and Improvements: $500,000
Issuance Cost: $252,995
Total Cost: $16,323,995
2. In 2003, the district estimated the Reynolds deal would save nearly $9 million in four years. How much savings have been realized as of today, almost three and a half years after the sale closed?
Stan Lucas: Our analysis shows the purchase of the Reynolds property will have saved the district’s general fund $5.9 million through fiscal year 2007. While we did not realize a $9 million savings in the short term, we will continue to see savings of $2 million a year, at a minimum, from the consolidation of staff that resulted from the move to this location. Our purchase of the Reynolds property is a capital investment for the future; we are here for the long term.
3. In 2004, you told the DDN that administrative consolidation at the Ludlow buildings was saving the district about $2 million a year, which you said was less than the anticipated $2.25 million annual saving you projected but still enough savings to help stabilize the budget. How did you arrive at those figures? Can you demonstrate today that the Ludlow purchase still is a cost saver for DPS?
Stan Lucas: As discussed in the previous answer, our analysis demonstrates the district will save $5.9 million in the general fund through fiscal year 2007. This figure represents the total dollar amount saved from the consolidation of three facilities into one and the reduction of the central office workforce. We will continue to save a minimum of $2 million a year in salary and benefits from the central office positions that were reduced as part of the consolidation when we moved to the Ludlow facility. In addition to a projected $10 million in savings over the next five years, the district will be building millions of dollars in equity in the years to come.
4. You’ve acknowledged to the DDN that it cost more to prepare the Ludlow buildings for move-in than expected. What was the expected cost of retrofitting the Ludlow buildings for DPS use and what was the true cost? What were the additional upgrades that were undertaken and why?
Stan Lucas: We did encounter some issues when we moved in, the most troubling of which was the need to repair the elevators and bring them up to code for a public building. We also encountered a breakdown in the HVAC (heating, ventilation and air conditioning) system that we had anticipated we would be able to upgrade over a long period of time. In order to protect our investment in the building, we moved forward to make all the repairs up front. We financed the improvements without using general fund money, issuing a 10-year long-term note for $3.5 million at 3.3 percent interest. (The balance of the $3.5 million note was used for other district repair needs.) This note will be paid from the permanent improvement fund, which is separate from our operating funds, or general fund. Total improvements were as follows:
HVAC: $1,700,000
Elevator Upgrades: $400,000
Fire Alarm Upgrade: $250,000
Electrical Upgrades: $130,000
Total: $2,480,000
5. Teachers who comment on DDN’s education blog say the Ludlow II building, which is used for some training programs, seems largely empty most of the time. How many people actually work there and what do they do? Is the idea of closing down or selling Ludlow II feasible as a cost saver?
Stan Lucas: Staff training is a vitally important part of the district’s ongoing efforts to improve student achievement. Teacher training, as well as training for all DPS staff takes place throughout the school year for the district’s employees. Prior to our move, Reynolds and Reynolds used the Ludlow II Building as a training facility. The majority of the building is comprised of classrooms, which has made it a good fit for the district’s use as a training facility for staff. In addition to training sessions, building is used for principals meetings and other district meetings. There also are two district departments housed in the Ludlow II facility. We currently have 24 employees at the Ludlow II building. Staff development has 10 and the HR Department has 14.
6. The Ludlow buildings consolidated three former administrative centers, combining workers from Jackson Center, the former Roosevelt High School and the old administration building on First Street. How many total people now work in the downtown buildings and how many worked at those three centers before the move?
Stan Lucas: We are continuing to right-size our district staff, including our central administration office, to be leaner and more efficient. We are not the same school district in 2006 that we were in 2002, when we began this process. We originally moved 276 administrative and support staff to the Ludlow facilities. We have reduced that count further over the last four years and currently have 226 staff , a decrease of 50 positions. (The consolidation effort was originally targeted to central office administrators and support staff and did not include teachers, psychologist, interpreters, and occupational therapy and speech and hearing therapy staff who are assigned to the administration building for payroll processing purposes.)
7. Part of the district’s real estate strategy that figured into the Reynolds purchase was the sale of unused buildings, especially the former First Street administration building, the former Patterson High School and eventually possibly even Patterson Career Center and Roosevelt High School. The district has since decided to demolish Roosevelt in favor of a new school on that site and to keep Patterson Career Center for a new Montessori. What happened with the sale of the other two buildings — the First Street administration building and Patterson High School? What is the fate of those buildings now?
Stan Lucas: In every case, honest efforts have been made to maximize use of facilities and/or to convey structures to potential buyers. However, the sale of unused buildings was never part of the planned savings, because there is no way to predict the market or the final sales price. Efforts continue to sell the First Street Administration Building. Above all it’s important to keep in mind that simply to stand still with outdated facilities carries millions of dollars in annual upkeep costs. The Board feels strongly that those dollars are better spent in the classroom.
8. Teachers sometimes get E-mails from downtown listing the “specials” at the cafeteria inside Ludlow II. Does this cafeteria pay for itself? Why does DPS need a cafeteria in Ludlow II when there are two coffee/sandwich shops literally next door on both sides of the building (Terra Cotta and Kobricks)?
Stan Lucas: Nutrition Services is a self-sustaining profit center which is not supported by the district general fund and, therefore, must develop ways of generating revenue to support its entire food service operation. Chloe’s Café was established to provide a low-cost competitive alternative for nutritious meals for our employees. Many corporations provide food service options for their employees. Chloe’s is a division within Nutrition Services that generates revenue from three different areas—café, catering and vending. All of these are areas that help to supplement and generate revenue to increase the Nutrition Services’ profit margin. According to the Nutrition Services Department, they plan to expand Chloe’s Café to include downtown patrons. Revenue generated will allow them to provide additional services to the students we serve, such as breakfast at no charge for high school students.
9. What is the plan for the former Wilkie bookstore portion of the Ludlow I building? The rumor is work has stopped on a new board room for public meetings and television studio for taping school district TV programs because of the budget crisis.
Stan Lucas: That report about work stopping on converting the space is accurate. It would be irresponsible to proceed given the present financial circumstances of the district. This space will eventually be used for a community meeting room. Administrative meetings will take place there, including Dayton Board of Education meetings. Dayton Public Schools TV will be able to tape board meetings and other events in the facility. The project has taken a back seat to more pressing school building needs at this time.
10. If you could go back, would you still recommend the Ludlow purchase knowing everything you know today?
Stan Lucas: Yes. We were able to consolidate our staff and move them from three separate locations into one centrally-located facility that was a good fit for our employees and our organization’s needs. The move greatly reduced interdepartmental travel to conduct daily business; provided better coordination of services and, as a result, a higher level of service to our customers; and—most important of all—did result in an increase to the district’s general fund budget. We will be making a capital investment for the long term, while avoiding more than $30 million in repairs and upgrades to three separate facilities.
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