School Committee - Finance Subcommittee

EASTHAMPTON SCHOOL COMMITTEE FINANCE SUBCOMMITTEE MEETING Wednesday September 13, 2023 School Department – 50 Payson 3rd floor conference room 5:00 p.m. Meeting Notes Started at 5:05pm: In attendance: Marin Goldstein, Megan Harvey, Nick Bernier, Maureen Binienda, John Pepi, and Mayor Nicole LaChapelle I. Public Speak – N/A II. Presentation on Electric Bus Proposal by John Pepi of Easthampton Energy Committee John Pepi School bus electrification > deal with diesel exhaust and CO2; costs EPA grant is big but not enough to deal with overall cost and too big min order for EPSD Patience and determination > contract services for Bus and EPSD is not ready to own and maintain buses; maybe own and lease back to school contractor Possible? Lease buses, but then we have to staff or hand over to contractor On our own > Easthampton is too small Collaboration? NPSD, HRPSD, and HPSD partnership along with Durham Holyoke > adds larger population and enviro justice support grant award EPA > Lower Pioneer Const. won award of 12 (but they have 200+ buses) This grant will never met all costs, but contractor includes equity funding etc Overall consolidation of bussing will improve contract negotiations etc Some others (Franklin; Belchertown) in this region have chosen this route Maureen Presentation to the subcommittee as point of order; then bring to the whole committee Megan ?s two paths viable > join with other districts OR own and lease back? John issue of purpose > increase competition for transportation bids (uncertain evidence) Electric buses > economics are too high even with EPA grant awards EPA grants > our prioritization is not high based on income/diversity/ etc Marin infrastructure costs John carbon emissions hit target, but not enough investing yet to make this work Megan path forward > collaboration is only choice Nick competition improvement is only possible if we push forward Mayor add points to RFP to weigh awards; smaller buses the place to start Nick Van pool has some electric vehicles for smaller vans in use Lower collaborative for VOC : 7 districts > they choose to get into transportation and charge fee How to proceed? Contract language? Regional transportation proposals and grant awards? Approved to move to the full committee for John to present the topic and to discuss next steps for EPSD III. Review Annual Report a. FY 23 Annual Budget Review > NOT READY, waiting on City audit details IV. Review Quarterly Report of Expenditures vs Budget to-date a. Quarter 4 FY23 Original budget and adjusted budget represents the $200k increase and budget line adjustments Encumbered has mostly all be spent now for summer costs and late invoices This year’s budget was not overspent, funds remain. After all school choice funds/reserves were applied to achieve classification. Some funds were moved back to other locations, eg. ESSER grant from transportation. $200k adjustment provided by the City. $26k return to City V. Other Business: Negative payroll amount > correction of accounts (employee paid too much and needed to return funds) Adjusted final summer pays so nothing was clawed back, agreement in lump sum This was negotiated in partnership with EEA. This caused City claw back for insurance underpayment. Early Nov meeting: Monday 6th @ 5pm – end of year and Q1 FY24 VI. Adjournment: Megan motion adjourn @ 6:28pm Finance Subcommittee Members, 2022/2023: Marin Goldstein, Chair Cynthia Kwiecinski Megan Harvey  School Bus Contracting & Electrification Strategy Proposal for Finance Subcommittee - Easthampton School Committee Mayor’s Energy Advisory Committee (9/8/23) Electric school buses (ESB) are taking off nationally with commitments by New York and California to convert their school bus fleets to zero emission buses over the next 15 years and the EPA awarding $5+ billion in ESB rebates through 2026. At approximately $375,000 per bus the gov’t. and the bus manufacturers are counting on these thousands of bus orders to drive down the unit cost of ESBs so that school districts and their contractors could consider switching to ESBs without the inducement of federal subsidies. However, federal funding must remain steady through coming US election cycles and the industry must continue making progress with shrinking the cost of bus battery technology – which represents approximately 50% of the current price of an ESB. Multiple analyses by industry and public sector advocacy groups have made the case that – even at today’s prices – the total cost of ownership of ESBs and traditional diesel buses are very close. The problem remains - what school district or private bus operator can afford today’s cost of capital for the transition to ESBs without the federal grants and rebates? The EPA Clean School Bus rebate program unleashed a tidal wave of applications in its first two award cycles spanning 2022 and 2023. A third round is on the way before the end of this year, however the EPA award priorities and eligibility criteria are yet to be announced, and, based on the previous rounds, Easthampton’s chance of obtaining an award on its own are virtually nil. The feds so far have prioritized districts that are: fully EJ designated, Tribal jurisdictions or are “42/43” classified rural districts, i.e. Vermont style rural. There are also application volume floors of 15 ESBs for school districts and 25 for private school transportation companies. One key additional factor for flexibility in an ESB acquisition strategy going forward is the ownership and control of the busing program. For Easthampton, as 1 a contracting out district, we are generally at the mercy of the private sector and there is little evidence that there exists a robust, competitive, multi-player school transportation sector in our region which might seek to offer ESBs as a cutting- edge alternative for conscientious school districts. So, while Easthampton might throw its hat in the ring on the federal awards competition, as a small, non rural “42/43” district, with only pockets of population considered EJ neighborhoods and one dependent on the cooperation of its transportation services contractor - this would appear to be a very low probability pathway toward success. Easthampton is currently in year 2 of a 3 year (plus 2) contract with Durham School services for which we are spending more than the EPSD has ever spent. We are financially stable under the current contract providing volatile world oil markets work to our advantage. Yet, there appears to be little cause for optimism about where these costs are headed in the next bid cycle (2027 if we choose to exercise 2 extension options), given: bus driver shortages, the rising cost of borrowing, diesel prices and the perplexing lack of competition in this industry. These cost drivers are mixed in their implications, with some equally constraining for ESB based transport and others working in ESBs favor relative to diesel fueled buses. Considering the high cost of school transportation under the status quo, the price volatility (generally upward) of diesel fuel, the known health impacts for diesel school bus riders, the community and the environment, the likelihood of federal or state prohibitions on fossil fueled vehicle sales within 10-15 years and the paucity of choices for private school transportation contractors, there are two more hopeful paths forward to consider. (1) Joining forces with similarly positioned and physically adjacent school districts to cooperatively solicit transportation bids, thereby raising the stakes for bus transportations companies who would stand to benefit from more business, economies of scale and more profit, and, who, conversely, run the risk of a significantly shrunken market share – according to their ability to fend off or outbid new competition. (2) Entering the business of public-district run school transportation services in order to wrest more control over our future prospects and healthy 2  outcomes – both financial and environmental. The City of Worcester has recently done this, as did the 6 mid-sized cities/towns of the Lower Pioneer Valley Education Collaborative some decades ago. (3) A third path, (a variant on #2) which has been suggested by the Mayor and vetted in concept by Mass. school transportation consultant Richard Labrie, is one in which the City would procure ESBs (with federal grant funds) and lease them back for operation and maintenance to its school transportation contractor, The course of action which the EAC recommends and proposes that the EPSD pursue - falls under path #1 above: EPSD would initiate dialogue with neighboring school districts on the objectives, timing and structure of a potential multi district cooperative school transportation bid. The Northampton and Hampshire Regional School Districts (HRSD) are obvious starting points but possibly also the City of Holyoke. Easthampton and HRSD are at the same stage in their current contract cycles and Northampton is one year behind them. Holyoke is just beginning a new contract. All 4 school districts have contracts with Durham School Services and for the first 3 there has been no other bidder besides Durham in the last 2 bid cycles. On behalf of the EAC and the Mayor I have initiated the following conversations: First, with several other district consortiums that have experience during the last 5-10 years with cooperative bids (Franklin County, Southern Berkshire and Ware/Belchertown/Granby consortiums); Second, with representatives of the Northampton and HRSDs who have expressed interest. Third, with regional planning and services agencies including PVPC, Franklin COG and Hampshire and Lower Pioneer Valley Educational Collaboratives that have been or may be able to support a consortium of cities/towns that wish to pursue a cooperative bidding approach. An initiative of this type would serve a dual purpose and might bear fruit in the medium-term of 3-5 years but also could accomplish some things in the short 3 term, 1-2 years. One purpose is to bolster the market power of the otherwise small, single school districts - for the purpose of securing more competitive, less costly bids. With a cooperative regional school bus bid, there are available mechanisms to facilitate the timing of bid participation at the juncture where some member contracts are due to expire but which also allows others (whose contracts haven’t) to join at the first opportunity. It is also possible to structure the bid to request pricing for both an “all in” regional service and also for each district alone. Additionally, there is the advice of experts in the field (Labrie) as well as some evidence, which says that the introduction of 2 bidding procedures - not generally practiced by local districts - are likely to increase the potential pool of bidders and thus competitive bids. One is to designate – by a vote of the City Council – a base fixed contract period of 5 years. Two, is to advertise the bid solicitation at least 6 months ahead of the bid due date in order to allow school transportation contractors without bus depots situated in necessary proximity to the service area to scout, budget for and acquire rights to a suitable depot location – one that meets the requirements of the schoommits l districts and is also financially attractive for the contractor. The second purpose of such an initiative is to take advantage the EPA Clean School Bus grant program provision which allows school bus contractors to obtain ESB grant funds indirectly via ESB manufacturers/distributors – as long as those ESBs are placed in service for school districts for at least 5 years (?). This means that Easthampton – along with other like-minded districts – could put ESBs on the road servicing its school children without actually owning the buses themselves. Easthampton would have to be a signatory to the grant application as well as the bus contractor. This approach, given current EPS grant eligibility criteria, would necessitate EPSD applying together with several other districts in order to justify Durham’s acquisition via federal award of a minimum of 25 ESBs. The corollary minimum grant request for district owned ESBs is 15 buses. And these must be replacing diesel buses that are at least 2010 vintage or older and which had been in active service in the year leading up to the grant application. 4  Easthampton Public Schools FY 2023 Operating Budget Quarter 4 Report FY 2023 FY 2023 FY 2023 FY 2023 FY 2023 FY 2023 FY 2023 ORIGINAL BALANCE LINE ITEMS BUDGET ADJ. BUDGET YTD ACTUAL ENCUMBERED TOTAL YTD REMAINING % USED Administration $977,510 $977,784.34 $970,082.12 $7,702.22 $977,784.34 $0 100.03% Instructional Services $11,998,685 $11,511,943.28 $10,572,745.04 $939,198.24 $11,511,943.28 $0 95.9% Other Services $351,804 $365,964.41 $344,100.23 $21,864.18 $365,964.41 $0 104.0% Transportation $1,175,761 $1,219,557.53 $1,203,970.57 $15,586.96 $1,219,557.53 $0 103.7% Operations & Maintneance $1,317,339 $1,448,542.21 $1,430,501.96 $18,040.25 $1,448,542.21 $0 110.0% Fixed Charges $64,000 $66,172.75 $66,172.75 $0 $66,172.75 $0 103.4% Tuition to Other Districts $2,004,478.60 $2,499,613.08 $2,433,726 $39,899.29 $2,473,625.31 $25,987.77 123.4% TOTAL OPERATING BUDGET $17,889,577.60 $18,089,577.60 $17,021,298.69 $1,042,291.14 $18,063,589.83 $25,987.77 99.9% Notes: $200,000 additional appropriation approved by City Council on 4/19/23. This report reflects the operating budget after reclassifications were done to close the fiscal year. Barring any unanticipated FY23 bills, $25,987.77 will be returned to the City. Vacant positions and use of School Choice money to offset personnel costs allowed for this. There will be further EOY analysis at our next meeting with the FY23 EOYR is complete and when our ledger is reconciled with the City ledger. Areas to watch: Reclassification Summary: Surplus/Deficits Administration (1000) $ - Instructional (2000) $ (600,000.00) Other Services (3000) $ - Transportation (3300) $ (267,243.04) Operations and Maintenance (4000) $ - Fixed Charges (5000) $ - Tuition to Other Districts (9000) $ 111,623.54 Total $ (755,619.50) Amount Reclassified School Choice** $ 859,679.00 240 Grant $ (75,000.00) ESSER III $ (22,435.96) Ch. 71 Revolving $ 30,000.00 Total $ 792,243.04 Deficit/Surplus $ (755,619.50) Reclassifications $ 792,243.04 Subtotal $ 36,623.54 Expenses not on Holdover List $ (10,635.77) $ 25,987.77 Total Return to City