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Why Capital Projects Matter - Even in Challenging Economic Times

Elizabeth Brutsch AIA
Project Architect

Capital projects are an investment in the future of NYS schools, ensuring the longevity of facilities and educational programming. However, achieving community support for capital bond proposals is yet another challenge as districts face increased operating costs, budgetary challenges, and shortfalls due to the COVID-19 pandemic. Looking ahead to the eventual full-time return of in-person learning, districts must continue to improve and maintain facilities to support student success.

What is a Capital Improvement Project?
Schools, like your home, require updating as they age. When there is a repair needed or a renovation or addition desired, the owner must spend money to perform the necessary work. Deferring critical improvements can lead to larger expenses down the road and increases the risk of an expensive emergency project. Ideally, the money spent for a home improvement or repair project comes from savings accumulated over time. Investments in school buildings and grounds can work the same.

Importance of Capital Projects
It can be difficult to justify to taxpayers why investing funds on facility improvements is important in times when a district is looking at managing the annual budget in other ways. However, capital projects have several positive impacts within a district.

On a practical level, NYSED encourages districts to maintain their facilities by offering Building Aid that is available separately from other forms of operating aid. NYSED recognizes that a building which has been maintained over time is less costly to operate than a building that has gone many years between building projects. That is why building aid is not transferrable between a capital project budget line and any other budget lines.

Most importantly, capital projects provide safe and healthy learning environments for children. A building with a new roof and mechanical ventilation units is a healthier building for students, faculty, and administrators. New finishes and improved lighting provide a brighter learning environment and have been proven to improve student performance. Classroom renovations that promote 21st century learning styles encourage students to collaborate and engage in hands-on learning. Flexible learning spaces and breakout rooms go beyond the typical classroom setting to facilitate individual study, one-on-one interactions, or small group learning.  Finally, updated, safe, clean, and secure facilities instill pride within the school community and encourage the public to share in that pride.

Funding Sources
The New York State Education Department (NYSED) encourages school districts to undertake routine capital improvements and recognizes several ways for districts to make capital investments in their facilities. Each method has its own set of pros and cons that must be evaluated by District stakeholders to determine which best suits their needs.

  1. Bond Referendum
    Districts use a Bond Referendum project as the primary vehicle for improving facilities. A Bond Referendum project requires voter approval and can fund a project over time through the use of short-term BANs (Bond Anticipation Notes) or long-term Bonds. The referendum provides voters with a description of the project and the overall cost and impact to the tax levy (essentially, whether taxes will increase or stay the same.) A district will often offer public information sessions and mail project newsletters to residents prior to the vote date. In this method, the project is usually large and encompasses district-wide improvements that could not be completed otherwise. These projects may include the construction of an addition, renovation of existing spaces to respond to current educational trends, or replacement of systems that are at the end of their useful life, out of warranty, or continuously problematic to maintain. The district would work with financial planners to help determine the amount of money that could be borrowed for the project and the time to pay back the loan.

  2. Capital Outlay Project
    A Capital Outlay Project is funded all at once and is limited to $100,000 or less. This money is included in the annual budget, and voters approve the expenditure by approving the annual budget. The funds can only be expended on a single building and the aid will be reimbursed to the District the following fiscal year once the project is closed out with NYSED. While items such as light bulb replacements or minor repairs of larger systems may be performed by maintenance staff within their annual budgets, larger repairs such as a leaking roof area or security upgrades can be completed through this type of annual project. 

  3. Energy Performance Contract
    Another method of capital improvement focuses specifically on energy used by a building and is called an Energy Performance Contract (EPC). In order to receive full NYS Building Aid, voters would approve a referendum to allow the Board of Education to enter into an EPC with a designated company. While a Board of Education can pursue an EPC without voter authorization, receiving voter approval provides an additional 10% NYS Building Aid on the contract. When a district enters an EPC, an audit of the district buildings’ energy use would be performed, recommendations to reduce energy consumption provided, and agreed upon improvements performed by licensed contractors. The energy savings must show the ability to pay for the cost of improvements within an 18-year term without the use of building aid.

  4. Other Funding Sources
    There are several other ways in which a district may invest in their facilities. Districts can develop a Capital Reserve fund and allocate funds to the Reserve during the annual budget process. Districts must obtain voter approval to create a Capital Reserve and receive voter approval to spend the funds. This fund can be used to invest in defined transfer to capital projects or to reduce the local share on larger capital projects. Most recently, Federal funds are being provided to Districts through NYSED to upgrade various school infrastructure items to improve air quality and reduce the risk of virus transmission.

Despite the unique and sometimes unprecedented events faced by our schools, districts continue to educate the next generation and require facilities that are safe, healthy, and conducive to learning to prepare students for future success. Although many capital improvement projects contain items that are not always visible to the public, they are all important items to ensure the integrity of the buildings and grounds that engage, educate, and inspire our children.