Vermont Legislature SmartTranscripts:

[Emilie Kornheiser (Chair)]: Ways and Means Committee. Today is Tuesday, March 31. It is 01:15. We are beginning our week of ed finance. We're We're going be putting together all of the pieces from the whiteboard for this week and into next week, expecting to get the underlying bill from education probably on Thursday and have that scheduled. We will likely skip the floor at various times. So if anyone has any need to not do that, please do let me know at the end of the day today. And that's that. We might meet on Monday, we might not. But please hold the time for Monday morning, nine to twelve So we are gonna start our day today talking about school construction. We have a long list of testimonies, so I'm gonna ask folks to hold questions for each witness until that witness finishes their testimony. And the last two pieces on the agenda, we can push a little bit if we need be. So with that, John, can you tell us about how school construction works under existing law?

[John Gray (Office of Legislative Counsel)]: Sure can. So John Gray, opposite of legislative counsel, said that I would not screen share. And I will not do that in part because there are so many witnesses. But if the committee is interested, I'm happy to share afterward a PowerPoint I do have. It's kind of like a historical overview if folks are interested in that, but I don't think we have time for it today during testimony. So as you know, a moratorium was imposed on the current state of preschool construction program back in 2007. That's Act 52 from that year. Those laws related to state aid for school construction are still on the books. They're still entitled 16. We have a new program in Act 73 that will be largely going effective 07/01/2026. So what has been happening since the moratorium was imposed? Well, some things have continued to receive state aid. So certain emergency projects, for instance, do receive state aid under the program. But for the most part, the previous state aid program is not going out to any school districts. And so the simple way to explain this is that your school district votes a bond and those ongoing payments that they have for school construction are part of the district's education spending, which means that they increase the district's per pupil spending. And so your local district will have an elevated onset rate reflecting that school district spending that you're doing on school construction. Additionally, those costs are shared statewide. So the yield is lowered to increase raising of revenues across the state. And so currently your school construction costs are captured in the general state funding of public education that we do. There's no categorical aid that goes out other than potentially if you're receiving emergency aid up to small cap under the program. But it is treated like any other education spending under the current system at this point. I should say there is a slight difference in the way that it's created for purposes of excess spending. As you know that excess spending subjects for people spending above a particular threshold, that's 118% under current law to double taxation. And you may recall that there's a carve out for voter approved bond payments pre 07/01/2024. So under existing law, that kind of education spending, school construction costs is not accounted for excess spending and subjected to double taxation. But it still does result in an increase in the districts per pupil spend raising its local subsidy.

[Emilie Kornheiser (Chair)]: And for districts that are having bond payments that were voted in after 2024, is sort of a pay as you go versus a bonded debt? Are those two types of spending treated differently under current law?

[John Gray (Office of Legislative Counsel)]: I don't believe that those are treated If you don't do something to address the post 07/01/2024, then the effect on per pupil spend will be different for the different districts. But the actual mechanism for funding is the same, which is that it's raised statewide through the property tax. The non homestead rate increases as well to raise Ed's spending. So, your homestead and your non homestead also go up, but mainly it impacts how much variation occurs in the homestead rate.

[Rep. Carol Ode]: Representative Ode. Thank you. You said emergency projects get held. Can you tell me what's the definition of an emergent project and what's the help like that?

[John Gray (Office of Legislative Counsel)]: So the provision under an existing law, even through the moratorium, is under title 16, section 3,448. And it says that the secretary may grant aid through the standard aid process for a project that the secretary deems to be an emergency. So that is a discretionary call. And it's up to a maximum total project cost of 100,000. I should say that the aid itself is not gonna be the total project cost. Right? It's a particular portion of that. Like a standard project is 30% of approved costs. So you could think of a maximum there as being 30 ks. But it's a discretionary call. It's a relatively low monetary figure. And I think looking to the rules would be the best place for understanding.

[Rep. James Masland]: That's another question. You bet. Separate that down.

[Rep. Carol Ode]: Can you give an example, when you post 2024 like Colchester, what does it look like on their homestead rate if we don't

[David Shearer (Deputy State Treasurer)]: you don't do any?

[John Gray (Office of Legislative Counsel)]: So I wouldn't be able to give you numbers in terms of the impact, but the basic way to explain it is that we're calling out that post 07/01/2024, because we're saying this is something where it's going to count toward excess spending. And so what that means for your hypothetical Colchester district is that it's approved bond payments and we're stipulating, I assume, that it takes them above the excess spending threshold, which means that their per pupil spend is in excess of 118% of historic FY '25 statewide average per pupil spending inflated to current date. So we're stipulating that in this hypothetical, culture is above that threshold. And so the way that its homestead rate is going to be determined, one, the yield is gonna be lowered to raise additional revenues. So every district is gonna pay more as a consequence of that lowering. But the particular way in which Colchester would be most directly impacted is the variation in its homestead rate. It's gonna have an increase in its per pupil spending. And I'm gonna put aside the excess spending for now and just say, let's say you went from 15 k to 18 k as a consequence, so 18 per people. That larger figure is now divided by a smaller yield, which produces a larger homestead rate. The additional impact of the excess spending threshold is that the portion of your per pupil spend that is above that threshold is double counted. What that means is that the way your homestead rate is determined is per people spend plus the amounts above the threshold. That's the double counting that happened, then divided by the yield. So Colchester is having a number of things happen in this hypothetical. One, its per pupil spend goes up, which we know will increase their homestead rate. Two, the yield is being lowered to increase statewide rates writ large. That also increases their homesick rate. And three, they're double taxed on that piece above the excess spending threshold. Those are the three ways you can think of their rate is increasing. Sorry, I don't have numbers to just show you, but that's the simple way to explain it is that the three mechanisms that are increasing that post 07/01/2024 hypothetical districts' homestead rate are increase in per pupil spend, excess spending, decrease in yield. Those are the three mathematical mechanisms that do it.

[Rep. Carol Ode]: Appreciate that.

[Emilie Kornheiser (Chair)]: Sure. Really. Nice.

[Jamie Bauer (Housing Division, Dept. of Housing & Community Development)]: Thanks, John.

[John Gray (Office of Legislative Counsel)]: Sure. And if folks want that PowerPoint, I can provide, but I don't wanna distract during many witnesses you will have.

[Rep. Bridget Burkhardt (Clerk)]: Thank you. Can you send it, then people can look at it? And

[Emilie Kornheiser (Chair)]: then we'll post that. And then the very beginning beginner language that we're working on from here is also posted under John's name.

[Rep. Bridget Burkhardt (Clerk)]: Michael? Here. He's on Zoom. Oh

[Emilie Kornheiser (Chair)]: gosh, right there.

[Michael Gaughan (Executive Director, Vermont Bond Bank)]: Hi there.

[Emilie Kornheiser (Chair)]: Hey, welcome. Thanks for joining us.

[Michael Gaughan (Executive Director, Vermont Bond Bank)]: I supposed to start off? Michael Gaughan, Executive Director of the Vermont Bond Bank.

[Jamie Bauer (Housing Division, Dept. of Housing & Community Development)]: Hello.

[Michael Gaughan (Executive Director, Vermont Bond Bank)]: Hello. Not 100% sure what we'll be addressing, but happy to answer questions here.

[Emilie Kornheiser (Chair)]: Thank you, Michael. We are sort of diving back into our school construction work and want to understand what your role at the bond bank would be if we restarted a school construction program.

[Rep. James Masland]: Okay, great. Great.

[Michael Gaughan (Executive Director, Vermont Bond Bank)]: Yeah, so maybe I'll should I just jump

[Emilie Kornheiser (Chair)]: in? Right on in. Yeah.

[Jamie Bauer (Housing Division, Dept. of Housing & Community Development)]: Okay, great.

[Michael Gaughan (Executive Director, Vermont Bond Bank)]: Yeah, so if we restart a school construction program, at least with the task force report from a few years ago, pending major decisions on all of your parts, if we were to move forward with like a reimbursement type arrangement for debt service costs, the bond bank envisions our role being similar to RIbek, the the Rhode Island public authority instrumentality that handles reimbursements to schools in Rhode Island. So what that would mean is that we sort of see ourselves as a convenient way to effectuate a role as kind of like a fiscal agent for the reimbursement. So, you know, the some entity or otherwise would decide that the project qualifies. Would be the project then would in that district would receive, you know, X amount X percentage reimbursement of debt service costs. The bond bank for the most part either directly holds the loans for school district construction or is very familiar with the process by which bond payments occur and would know the right questions to ask, And so therefore it would be a convenient way to monitor that debt service payments have occurred, validate that, and then do the flow of funds of money that needs to go to that school district. This also preserves our ability effectuate the state intercept, which is the primary form of credit enhancement for school districts both in Vermont and in over 30 states. And so I think practically what that would mean is that the of pot of money that's used for reimbursing debt service costs, we could hold in like a fiduciary account, verify that debt service on related projects has been paid, and then in short order reimburse that school district for those costs. So I think that's the primary role, and of course, as always, and we've had more expansive conversations over the past few weeks and months, We're very interested in ways that we can control costs on this very large undertaking, so always available to lend our perspective and thoughts on how to control costs.

[Emilie Kornheiser (Chair)]: Are there any particular ways you'd flag that we should, for us to do this as effectively as possible, given the scale we're going to need to be working at?

[Michael Gaughan (Executive Director, Vermont Bond Bank)]: For construction aid specifically? Well, we've talked a little bit about the potential for aggregating projects together so that you don't have project on project competition and driving up costs as a result in finding efficiencies and procuring construction so that, you know, there's a number of ways to do that. So that's one thing I think makes a lot of sense. But as it also just relates to flow of funds, I think having the bond bank in this role as kind of a fiscal agent makes some sense because you don't have, you know, well there's going to be less districts going forward in all likelihood, but you don't have 20 plus districts communicating with AOE and verifying that they've paid their debt service and then getting having to call that paperwork. Oh, yeah. Sorry.

[Rep. Charles Kimbell (Ranking Member)]: Hang on for a second.

[Rep. James Masland]: Sorry. It's okay. Technical difficulties.

[John Gray (Office of Legislative Counsel)]: So much for pre prepping.

[Emilie Kornheiser (Chair)]: If you disconnect your microphone while you're in the Zoom.

[Sean Gilpin (Director, Housing Division, DHCD)]: Yeah, it's all listening.

[Emilie Kornheiser (Chair)]: Okay, great. Back to you, Michael. Can you start with fiscal agent if you have any idea? I'd never remember my sentence once it comes out of my mouth, so I

[Scott Baker (Director of Debt Management, State Treasurer’s Office)]: don't know if you can do that.

[Michael Gaughan (Executive Director, Vermont Bond Bank)]: Yeah, no, I just think it would be very efficient for the school districts while also maintaining the integrity of the state intercept. So as opposed to AOE having to verify, you know, 20 plus school districts debt service payments semi annually, we can do that by just literally looking at our invoicing reconciliations and would be able to very efficiently reimburse those school districts for 90% of the school districts to use the bond bank as method of financing. And I just think that would just have a lot of efficiencies, And that's how Rhode Island does it as well. And so they came to a similar conclusion.

[Emilie Kornheiser (Chair)]: Is there any way you would want to differentiate new construction from rehab or expansion?

[Michael Gaughan (Executive Director, Vermont Bond Bank)]: From our perspective as fiscal agent or financing entity?

[Emilie Kornheiser (Chair)]: I would say from your perspective as a person who's been part of these conversations for the last years.

[Michael Gaughan (Executive Director, Vermont Bond Bank)]: Yeah, no, I think the new construction obviously lends itself to more standardized approaches and, you know, potentially some consolidated procurement opportunities, whereas, you know, renovations and or remediations are so site specific, I think it'd be difficult to do those at scale.

[Emilie Kornheiser (Chair)]: Okay, thanks. Yes, Brooks and Burkhardt.

[Rep. Bridget Burkhardt (Clerk)]: Michael, when you were here last time, you mentioned that in your travels, as you were looking at other states' school construction programs, none of the other states that you came across had as restrictive a foundation formula as the one that we're considering. Could you just say another word about that? Can you

[Emilie Kornheiser (Chair)]: talk a little bit about what

[Rep. Bridget Burkhardt (Clerk)]: you learned about other states' foundation formulas and how they interact with school construction?

[Michael Gaughan (Executive Director, Vermont Bond Bank)]: Yeah, and granted I'm doing my best to become expert on this subject. My real area of expertise is on forms of state credit enhancement for school districts and debt issuance, but as we've been having these conversations, I've certainly tried to get smart on other ways in which construction aid interacts with foundation formulas, and I'm not aware of other states that have as hard a cap. Typically there's some method of local share via property tax increases to sort of accommodate excess spending, if you will, to use our Vermont terms. Now in some states property tax increases are limited by sort of taxpayer bill of rights considerations where it's limited to inflation or 2.5% or something like that. So that does provide a cap in some ways, but typically there's a workaround with a general referendum process to get over that cap. Generally there's sort of a relief valve of property tax increases in many of the states I've looked at to date.

[Rep. Carol Ode]: Thank you. Yeah, Representative Ode, well, since that, what would you say we have to think about if our cap is possibly one that others don't have, what do you think we should be Yeah,

[Michael Gaughan (Executive Director, Vermont Bond Bank)]: I think you have all been having those discussions and that's one reason you're talking about levels of state support that are higher than, you know, what is in current law, which I think if I recall was like 20 to 40%, you've been talking about state support well in excess of that. And I think that's the way you might be able to overcome that. And then, of course, risk transfer of some of the unknown aspects of school construction, which is project delivery construction costs escalations. So those are also ways to control the cost and budgetary implications for schools, which gets more to the centralized procurement conversation we've been having.

[Rep. Carol Ode]: If it's possible for you, and if it's not, give me an example with numbers where you'd say greater than the 20 to 40% state support at that level. Can you just say, okay, here's how it would look before the foundational formula, here's how it would look with our current foundation formula. Here's how it would look with greater than 20% to 40%. Do know I mean? I need something to compare.

[Michael Gaughan (Executive Director, Vermont Bond Bank)]: Could you give me a little bit more clarity? I'm not sure I totally understand.

[Rep. Carol Ode]: Well, I hear you saying how what we're doing is more restrictive than other states, what we're looking at for our foundation for our job. What do you think would be less restrictive and still fair and still we were gonna put this together? Do have this right now?

[Michael Gaughan (Executive Director, Vermont Bond Bank)]: Oh yeah, I'm not sure exactly. I mean, I think the relevant factors in that decision are that the foundation formula, you know, I think JFO had indicated there's like $120,000,000 or so of costs that aren't accounted for in the foundation formula, including transportation and capital. And then state by state comparisons rating agency data indicate that kind of a steady state of debt service for school districts of the size that we're talking about in a future state in Vermont is around 5.5% of budget. So I think those give you some ways in which you can back into what the appropriate level of state support would be. The million billion dollar question of course is what is the size of our capital need?

[Emilie Kornheiser (Chair)]: Thank you, Michael.

[Michael Gaughan (Executive Director, Vermont Bond Bank)]: Thank you.

[Rep. Carol Ode]: I can't personally back into that. Know.

[Emilie Kornheiser (Chair)]: So today is all about, there's a lot of different puzzle pieces. There's definitely pieces of the puzzle that are missing from the stack of testimony, including the question of how much money do we actually need to do this well. We're not going to answer that question today, but at least we're going to put all the pieces, as many pieces of the puzzle as we have on the table.

[Rep. Carol Ode]: I'd like see some examples that I'll say. Yes.

[Emilie Kornheiser (Chair)]: Well, we have an example coming up in the forum. Nope, not quite yet. Next, we're going to hear from the state treasurer's office, if they're ready. Okay, cool. If you could join us, whichever one he wants to. I absolutely do not mind if you I would love if you both testified. That would be thrilling. And after them, we'll have an example from Colchester. Ode? Floor is yours. Welcome.

[Jamie Bauer (Housing Division, Dept. of Housing & Community Development)]: Thank

[David Shearer (Deputy State Treasurer)]: you. Good afternoon to the record. David Shearer, Deputy Treasurer, and Scott Baker, Director of Debt Management. And do you wanna just take a minute to explain a little bit about what you do as now I'll dive into a couple points.

[Scott Baker (Director of Debt Management, State Treasurer’s Office)]: Yeah. So I basically handle the the state bond issue. So anything that goes in the capital bill, we issue general obligation bonds, we do get nets. Yeah, so we borrow money, issue bonds, that's what we do.

[David Shearer (Deputy State Treasurer)]: Great. Thank you.

[Rep. Charles Kimbell (Ranking Member)]: So just as part of that, because we just heard from the bond bank, how does what you do differ from what the bond bank does? If you could just explain further.

[Scott Baker (Director of Debt Management, State Treasurer’s Office)]: Yeah. So what we do, and anything that goes into the capital bill, capital projects that the state is funding, we issue the general obligation bonds for. The bond bank loans to municipalities and school districts, so they go through the bond bank. Collectively, go, bond bank will issue one bond and loan it out to those individual school districts or tenants.

[Rep. Charles Kimbell (Ranking Member)]: So those are general obligation bonds, theirs are not?

[Scott Baker (Director of Debt Management, State Treasurer’s Office)]: Correct. Everything we have right now are general obligation bonds. We have in the past issued transportation infrastructure bonds. We did three series from 2010 to 2013, and there's a tax assessment on gas and diesel fuel, there was a portion, those revenues went to paid debt service on those bonds. So those were special revenue bonds, Everything else we do are general obligation bonds, which means payable from any of the state funds that we have.

[Emilie Kornheiser (Chair)]: How much debt capacity We actually coincidentally have the capital bill in the committee later this afternoon. But how much debt capacity does the state have right now that we're not using?

[Scott Baker (Director of Debt Management, State Treasurer’s Office)]: So right now we have about $547,000,000 bonds outstanding. We have another 192,000,000 of bonds that are authorized but unissued. So any projects that have been appropriated within the capital bill, when we go out to bond, we work with finance and management, we survey all of the departments and recipients of the funds, find out when they expect to spend the money, and we will go out and bond for either money that has already been spent or that they expect to spend in the next six or twelve months or whatever, and we will bond for that amount. For projects that have appropriations but aren't going to spend for a while, we will not bond for those. That money's been appropriated to projects but not bonded for, so that's called authorized by unissued debt. So if everything was going out right now, we'd have 192,000,000 more of outstanding debt.

[Emilie Kornheiser (Chair)]: And then how much? What debt capacity do we have that is not authorized nor issued, but is possible or advisable from the Bond Oversight Committee that I can't remember the acronym for? So

[Scott Baker (Director of Debt Management, State Treasurer’s Office)]: the CDAC Committee, the Capital Debt Affordability Advisory Committee meets annually and comes up with debt metrics. They assess and come up with an amount that can be prudently issued and recommends to the governor and the legislature how much we can do. And what they do is benchmark to AAA rated states. So Vermont is one notch below that AA plus with two rating agencies, AA-one with movies. Again, that's the second highest rating, so our bonds are well received, we get good interest rates, low borrowing costs. CEDAC will go through the analyze the debt metrics, come up with some numbers, they set some guidelines and issue an amount for biennial issuance. This year, well, for the 2026, 2027 amount, they came up with $100,000,000 or about $50,000,000 per year, and that was constrained by a few factors. One, because we have so much authorized but unissued, we have federal money, which we're still trying to spend. There are projects that can't get done just because there aren't enough people to build the projects or supply shortages or whatnot. So they came up with the $50,000,000 They also did an analysis analyzing $86,000,000 per year, and that was based on the administration's ten year capital plan, how much they expect to spend over the next ten years. That amount stayed within the debt metric guidelines, so we could do that amount. Again, they stayed at 50,000,000 just because it was testimony that we just couldn't spend that amount in the next couple of years. Had our financial advisor run some scenarios. Did my question jump ahead of your plan for

[David Shearer (Deputy State Treasurer)]: the next No, this

[Rep. James Masland]: is fine. Okay, cool. Okay, good job. Thanks.

[Scott Baker (Director of Debt Management, State Treasurer’s Office)]: Great. And we could realistically probably do an extra 50,000,000 on top of what

[Rep. Charles Kimbell (Ranking Member)]: SEDAC

[Scott Baker (Director of Debt Management, State Treasurer’s Office)]: recommends per year. Per year, right? And anything above that, we rely on the rating agencies. They're formulas, but there's some judgment on their part too, so you can't just, it's hard to know exactly what would happen, but we don't want to issue too much debt, with lower ratings, our borrowing costs go up. We also have agencies that use the moral obligation of the state like BHFA and BSAAC and the bond bank. Their rates are directly tied to our ratings as well, so that would raise borrowing costs for them as well.

[Emilie Kornheiser (Chair)]: And a special revenue bond, would that be a separate set of capacity that you'd have

[Scott Baker (Director of Debt Management, State Treasurer’s Office)]: to have separate conversations about? So the tips, the transportation bonds that we did issue, the rating agencies do look at that as net tax supported debt, so that would go under the same umbrella issue. Even if there

[Emilie Kornheiser (Chair)]: was a new revenue source attached to it, which I'm not putting on the table. I'm just asking hypothetical questions every one of them. Just trying to understand.

[Scott Baker (Director of Debt Management, State Treasurer’s Office)]: Yeah, we were hoping that it wouldn't Though it's net tax credit? It is a special revenue, and the ratings on that is probably a notch below the GEO bond rating as well, because it's not guaranteed. Based on whatever we collected in those cash taxes.

[Emilie Kornheiser (Chair)]: Thank you. That's helpful. What else did you want to tell us?

[David Shearer (Deputy State Treasurer)]: I had a few just high level points about thinking broadly about policy, not anything in great detail or length, but I know that the committee has been talking about as often the case in the past and future. So looking at legacy debt, I think the treasurer's basic stance on that is that if the legislature is willing to take on that burden and the outstanding construction debt service are numbers that I believe the committee has, next year it would be something like 61,000,000 and goes down there. That's certainly something the legislature could choose to do if they're willing and able to support that. It strongly supports queuing as closely as possible to the Rhode Island model, which has been mentioned already by Michael Gone, and I believe we have somebody here to be able to talk about it in much more detail. But that would be a method which would increase the likelihood that that outstanding debt service would not be counted as net tax supported debt, which is what would be counted as against our rating. And Scott, step in whenever I say something.

[Scott Baker (Director of Debt Management, State Treasurer’s Office)]: No, you're right.

[David Shearer (Deputy State Treasurer)]: Using that model would make it less likely that that would impact our overall bond rating. There's no guarantee on that. That the even stronger support using that as a model for those reimbursements, but understanding the legislature has to be ready to make those payments wouldn't be as supportive of issuing debt to support that debt. Would be

[Emilie Kornheiser (Chair)]: A little bit of a shell game.

[Rep. Charles Kimbell (Ranking Member)]: Yeah. Another question comes, what is the source of the 20 to 40% to service that debt? Is it still the education fund, which is property taxes?

[Rep. Mark Higley]: The way, for the

[David Shearer (Deputy State Treasurer)]: legacy debt? I mean, that is the big question. We have an answer to that. Just wanna make sure I didn't miss something. The legislature would have to be prepared to take on it in some way. Looking forward, again, I know the treasurer is supportive of thinking about this through the lens of the Rhode Island model for supporting future school construction. His view is that we do need that it would be probably unique and very challenging, unique and maybe not unique, but close to unique to take on 100% of future school construction. And he does believe that there would need to be some local support for school construction. There would have to be some payments coming from the local districts in order to support that. Understanding the foundation model restricts the amount available and the ways in which that, it makes it a little challenging. That would have to come under assessment as to whether or not that is doable or is there other revenues that districts could be empowered to levy? Those would be questions that I think the legislature would have to take under advisement, but his view is that you would need to have some it would make more sense for there to be some local input, local revenues that would have to go into support future school construction, in part also to make sure that the money the state spends is really going a reasonable distance in terms of supporting a number of different projects. Obviously, there's a large, as this committee has discussed, there's a large number of deferred maintenance and capital needs, but starting is important. Not everything is going to happen all at once. And I think that is a useful way to think about it, which is that if you do a bit at a time and then moving forward, that makes it more doable to tackle the problem. It's not all going to be, not all the money likely be able to be on the table at once to solve the entire deferred maintenance challenge.

[Emilie Kornheiser (Chair)]: Representative Holcombe. Just tell us, and you may have already said this, but what was the cost of the bond downgrades in 'eighteen and 'nineteen?

[David Shearer (Deputy State Treasurer)]: The cost of

[Emilie Kornheiser (Chair)]: What was the impact of those downgrades in 2018 and 'nineteen on our borrowing costs?

[Scott Baker (Director of Debt Management, State Treasurer’s Office)]: Typically a downgrade, it might cost 25 basis points or whatever. Although we're a notch below AAA, the last two bond issues that we've had, we actually traded better than some of the AAA states that went out around the same time. Part of it, we don't have a lot of issuances, so there's a high demand for it. It's still a high credit state. It's difficult to tell from issue to issue, but the last two issues that we've hit pretty much traded like a AAA.

[Rep. James Masland]: Doesn't mean it always will, but yeah. We're trying to use the word back in, but you parted back into an answer to what I have having to do with capacity, which is, as we know, there's a whole lot of unmet needs out there in many schools that have been waiting and waiting and waiting. What sort of process would there be if a whole bunch of schools came online at once and said, we need that, I mean, that's basically a local decision making and you found in your inbox request for huge amounts of money, far beyond what you would say would match our capacity, what sort of process might we end up with?

[David Shearer (Deputy State Treasurer)]: That's a great question.

[Rep. James Masland]: I

[David Shearer (Deputy State Treasurer)]: think that have to be something we would establish in statute or rule. I don't have a complete answer for you now. I think you'd have to have a variety of different metrics, including how close a project is to being able to start, whether there's local support, either by vote or some other measure. And so I think there'd be a variety of different metrics you'd have to assess that by. But I don't have a full answer. It's a great question.

[Rep. James Masland]: Mean, that's very, very adequate, better than adequate. It's a very good answer. And I'm also amazed when you guys come in and sit down and veg and let council people come in and sit down, invariably they say that's a great question. And I'm sure some of the time they may roll their eyes and say, mean, you guys are remarkable at what you do, and I appreciate it, and you answered as well as you could for what's available, is what I see. So I appreciate that. Thank

[David Shearer (Deputy State Treasurer)]: I promise there's no internal eye roll. No, no, there's a problem. We

[Rep. James Masland]: put people through a lot of patience, I think, just trying to do our jobs, but thank you. Thank you.

[Emilie Kornheiser (Chair)]: You can roll your eyes. No, we're not making that a theme, folks. And it may be too early, but have you seen any change in interest in bonding in the last, in response to some of the national events and international events?

[David Shearer (Deputy State Treasurer)]: Interest on the part of?

[Emilie Kornheiser (Chair)]: Are you seeing people are moving ahead of bonds? Are you seeing growing caution? What are you starting to see in terms of people looking to do big projects?

[Scott Baker (Director of Debt Management, State Treasurer’s Office)]: Yeah, I think it depends on the need, the timing. The bond bank just did an issue, and actually I think they were pricing right before all the tensions in when we started, so I know they paid a few basis points higher than when they were projecting, but they've gone up since then, so I'm guessing we're kind of waiting a little bit right now.

[Jamie Bauer (Housing Division, Dept. of Housing & Community Development)]: Representative Higley.

[Rep. Mark Higley]: Thank you. Could you go over one more time? I think I heard you say that you have the ability every year for $50,000,000 to $80,000,000 but then you also said you could possibly double that in the 50,000,000 range, is that correct?

[Rep. James Masland]: Yeah, so

[Scott Baker (Director of Debt Management, State Treasurer’s Office)]: the two year recommendation was 100,000,000 or 50,000,000 per year, and when CDAC ran the scenarios, they also they go through projections, and there are several projections they run and see where the debt metrics go and what could be issued. They did run scenarios at 86,000,000, and again, that was based on ten year projections from the administration, the capital needs. So they did look at those scenarios. Subsequently, when we were talking about school construction and running some scenarios, the financial advisor ran some scenarios and projected that we could issue about $50,000,000 per year on top of our current book, not on top of the 86, but on top of the 50.

[Rep. Mark Higley]: Yeah, okay.

[David Shearer (Deputy State Treasurer)]: In a total of 100 a year.

[Rep. Charles Kimbell (Ranking Member)]: So Scott, were you working in the treasurer's office when we used to have state aid for school construction?

[Scott Baker (Director of Debt Management, State Treasurer’s Office)]: I started right after that.

[Rep. Charles Kimbell (Ranking Member)]: Okay, all right. So I just want to make sure I remember correctly that in the before times, when there was still state aid for school construction, there might be 20% of whatever school project is issued in the bonds that are issued by the state. But that would be provided to those school districts without the expectation they would have to repay it because the interest is being repaid by the general fund at that time. Am I remembering it correctly?

[Scott Baker (Director of Debt Management, State Treasurer’s Office)]: I that I those went through the capital bill. So it was 20% subsidy, and I think it was about $10,000,000 a year that that equates to.

[Rep. Charles Kimbell (Ranking Member)]: Okay, but the interest still was being paid by the general fund and

[Rep. James Masland]: not by the school districts. Right. Okay. Yeah. Wait a second. I thought you said.

[Rep. Charles Kimbell (Ranking Member)]: No, mean, yeah, so it was paid by the general fund, the interest on those.

[Rep. Carol Ode]: General fund paid the interest and what was the note?

[Scott Baker (Director of Debt Management, State Treasurer’s Office)]: So anything in the capital bill, we issue general obligation bonds. So that basically the general fund Thank

[Emilie Kornheiser (Chair)]: you both, really appreciate your time on this and all the other conversations related to this. One thing I'd love for us all to be thinking about is how do we make sure that we are citing schools where they're needed, not just where there's willingness to take on debt? And so I think that's a really hard question, given all the fiscal pieces. I don't want anyone to sort of answer it today. I just want to make sure that's built into whatever we're doing going forward. So thank you both.

[David Shearer (Deputy State Treasurer)]: Thank you. Thank you.

[Emilie Kornheiser (Chair)]: Speaking of willingness to take on debt, hey, Colchester. Hi. So glad you could join us today.

[Amy Minor (Superintendent, Colchester School District)]: Yeah, thanks for having us.

[Emilie Kornheiser (Chair)]: And I'm really particularly glad that you're here because I have always thought of you and I imagine you think of yourselves as a quite fiscally conservative district actually. We do, we do. So tell us all about it, please.

[Amy Minor (Superintendent, Colchester School District)]: Awesome, so I am going to share my screen if I can. We have a really short presentation. I thought it would be helpful for you all to know just a little bit of history of the bond and why we went this road.

[Emilie Kornheiser (Chair)]: Thank you for permission now. Thank you.

[Amy Minor (Superintendent, Colchester School District)]: Great. Can you see my, first slide?

[Emilie Kornheiser (Chair)]: We can.

[Amy Minor (Superintendent, Colchester School District)]: Okay. Great. So we prepped in 2023 a facilities bond for the Colchester School District. We called it Our Towns, Our Schools, Our Future. And our rationale around the bond, like many schools in Vermont, our schools were aging. And so our two oldest schools were built in the 50s. Both of those buildings were having significant ventilation, heat, and one of them was having a significant septic issue. Mount Bay School was built in '62, the middle school is built in '68, and the high school is built in '74. And so from our perspective, the three buildings that needed the most renovations are the two elementary schools, Union Memorial and Porter's Point School built in the fifties, and Colchester Middle School, which was built in 1968. You can see that Union Porters and Mallett Space School did have some renovations done to those buildings, and that's because those buildings expanded as the population of students grew in the town of Colchester. The middle school really has had no renovations since it opened. So this wasn't a quick decision to go to bond. This works predates 2013. And in 2013, the board really talked with themselves and with administration around a long term facilities plan because they were starting to see that deferred maintenance was taking a toll and some of the things that needed to be replaced or renovated were at costs that would be outside of the normal operational budget. The superintendent before me, which was Larry Waters in 2015, launched a early education committee. Our preschool program, we really wanted to get that off the ground, but there was not space in any of the school buildings to do that. So this committee thought about, okay, Porter's and Union is aging. Our preschool program is located in Mallett's Bay School, which is a grades three, four, five building. Can we talk about a facilities renovation that will find a true home for our preschool program? So that committee was launched and between 2015, 2016, 2017, the timing just didn't feel right from an economic standpoint to put a bond on the ballot. I became superintendent in 2016, and it was one of the goals of the school board was to create a long term facilities plan because we just continued, like many other districts, to see a significant amount of deferred maintenance. And so the need was there based on the state of our facilities. The board did a lot of work. We did community engagement and our bond was set to go on the ballot November 2020. And so we all remember what happened in 2020 and our bond didn't go on the ballot and we had to take a pause. And you know, for many reasons post COVID ability to construction crews, we waited until the 2023 when it sounded like if we were to eventually find some dollars to do significant renovation, construction costs had come down by then, crew availability was a little bit easier. So in the 2023, we hired the Center for Effective School Operations known as CESO to help us with our community engagement plan. And when we hired them late fall, early winter, we weren't sure if we were gonna put the bond on a March ballot or a November ballot. And so we got some feedback from them around what worked in other states and some feedback from the community. And ultimately the decision was made that it would be on the November 2024 ballot. In retrospect now, maybe the March 24 ballot would have helped us out a lot more, but through that engagement process, that's what we decided. And the community was really behind us with what they were seeing. They saw the need with the infrastructure, with the limited space that we had in some of our school buildings, and just the state of the middle school. I would say our middle school is really needing some significant renovations. So when we talked to the community about our renovation project, safety and security was one of the number one reasons. We heard from many outside sources and assessments that we had when they audited our buildings around our infrastructure in those buildings had outlived their useful life. And that's when we're talking about roofs and windows and plumbing, electrical, and the HVAC system. None of our, the buildings that we're looking to really tend to with this bond have a strong heating and cooling system. None of them have air conditioners, so we're putting AC units and windows. And then we were short some significant learning spaces. Our elementary schools do not have gyms, it's the cafeteria. And so there was lots of reasons for need. I could talk hours about why, and I have lots of pictures, but I won't share those today unless you want me to come back and do that because I know we wanna talk about how we're funding But I wanted to give you the overview and the history of how we got here because it wasn't a quick process. And the process came out of our students need strong facilities and our facilities are failing.

[Emilie Kornheiser (Chair)]: So In the lead up to all of that, have you all been able to put sufficient money aside for ongoing maintenance or did you have a lot of deferred maintenance?

[Amy Minor (Superintendent, Colchester School District)]: We had a lot of deferred maintenance. George will talk about this, but if you look back like the past twenty years, Colchester has been well below the statewide average in per pupil spending. And when you compare our pupil spending dollar amount with the other schools in Chittenden County, it was typical for us to be the lowest or the second lowest spending school. Just a couple times in recent years where we're the third lowest spending school within our region. And because of that, you know, we weren't putting a lot of money in kind of the maintenance line because historically passing school budgets in Colchester was challenging. You know, we had many years where there were three budget votes. And so it was something that our board really made sure we took really strong care of our buildings, but it was hitting the point where we were starting to see systems fail, and there just wasn't enough dollars in the operational budget in order to do things like HVAC, redoing the plumbing system of a building, redoing the electrical system of a building. Those types of systems is what we're talking about really needing to be replaced.

[Emilie Kornheiser (Chair)]: Yes. We did go through

[Amy Minor (Superintendent, Colchester School District)]: the formal process with the agency of education to have our project approved before it was placed on the ballot. And so we worked with Bob Donahue. It was a significant amount of work, traffic studies, septic study, the audits from VISBET around the state of our building facilities, which really all pointed to our facilities needed greater work than what we could provide through the operational budget. And so we got that approval on 10/14/2024, and then we put our facilities bond on the ballot on November 5, and it was approved by our voters. And so we were really excited about that, but I think that date is really important and knowing that we had been working on this for years because we are just four months outside of that 07/01/2024 date and schools like Winooski, Fairfax and Burlington, they are within that date. So it's something that we're asked frequently frequently about. Same year, we were close, but not quite close enough. So our bond is a thirty year bond. The total dollar amount in our bond is a $115,000,000. That our projects will they we've started, and so we broke ground on the Porter's Point School construction this fall, so 2025. We are hoping that all of our projects will be complete by 2030. And the three schools that are getting the largest funds from the bond are Porter's Point School, which is currently a k to two school, Union Memorial School, which is currently a K-two school. Those two buildings are getting a new addition, and we are kind of tearing off half of the building to turn that into a parking lot and a safe bus route, cause that's one of the challenges of both of those buildings. It's a safety concern that we have. And part of what is being added to those buildings is preschool, because preschool is currently not located at Porters And Union. And so those students and those families have to transition twice. They transition into Mallets Bay School, a grades three, four, five school for preschool, and then they transition to Porters and Union. So those two schools are significant. Colchester Middle School is the other school that it's getting a significant portion of the bonds, and that's our school that has not had any renovations, and that school is grades six, seven, and eight. Sorry, I think someone had a question.

[Emilie Kornheiser (Chair)]: You should keep it going.

[Amy Minor (Superintendent, Colchester School District)]: Okay. When we promoted the bond with the community, we talked about doing the HVAC at Mallets Bay School and a couple of projects at Colchester High School so that all five schools in the district would benefit from some portion of the bond. We don't have dates or specifics on those yet because we need to move through those first three projects first to see where we are. What's important about the Mallets Bay School project is HVAC is definitely needed there. Preschool takes up one of the wings of Mallets Bay School, which has typically been one of the grades. Because we were invested in having preschool in the district, we needed to find space. So we made classrooms larger at Mallets Bay School. At Mallets Bay School currently my class size there ranges from 23 to 26. And will, Maltspace School will take that wing back. It's much needed space right now. We have offices on the stage. We've converted some closets into small workspaces for students with special educators, and so space is a big need there as well. But that's kind of the overview of what's being done in the project. I'm gonna turn it over to George, who's gonna talk about the repayment schedule and some other financials.

[George Trieb (Business/Operations Manager, Colchester School District)]: Yeah, sure. So I won't get too far down into the weeds here because it actually started with a really excellent explanation of how it would work for Colchester without the numbers, how the per pupil spending would work, how it would increase the homestead tax rate, how it would apply to the excess spending threshold. And all you were lacking during that conversation was the numbers. So you can see here with this table, Amy mentioned that for the twenty years I've been here, we've always been a low spending district on a per pupil basis in Chittenden County. And you can see how per pupil spending would go from about 14,403 in fiscal twenty six to 19,108 in fiscal twenty nine, which is the high point of our bond debt repayment. And so essentially as we include the principal and interest payments as we ramp up these projects, we go from being one of the lowest spending districts in Chittenden County to becoming more of a high spending district in Chittenden County. The bond debt payments right now in fiscal twenty six is about 1,000,006. It reaches its peak in fiscal twenty nine of about 9,300,000.0. And you can see how the, spending per pupil would change somewhat, if the bond debt was excluded for Colchester. That's the third line down where the the actual spending per pupil would be reduced to $13.09 61 and in fiscal twenty nine, it would be reduced down to $16,005.14. The bond debt right now represents about 2 and a half percent of our overall spending plan. And when we reach the peak, it's going to represent just over 11%.

[Emilie Kornheiser (Chair)]: And what I hear you saying is that you're not planning on reducing spending in order to make up for the increase in debt. It's just it will increase your overall spending.

[George Trieb (Business/Operations Manager, Colchester School District)]: No, that's not what I said at all. Actually, We will, of course, look every year as we did this year with our budget that passed at making some adjustments and reductions where they make sense. This year, the budget the board put forward had over $1,000,000 in reductions. So of course, we'll look at that, but I'm not even going to pretend that we'll be able to, in fiscal 'twenty eight, reduce enough in our overall operating budget to cover even half of fiscal twenty eight's bond debt of $6400000.07400000.0, excuse me. So while we're always looking to do some adjustments, these numbers grow over the next three years and we won't be able to fully offset that. That's not possible.

[Amy Minor (Superintendent, Colchester School District)]: You know, our board has always been committed to looking each year for efficiencies. And so it's not uncommon for us to make some reductions and do a review of programming in every budget cycle. You know, I think when you're looking at those numbers and you're trying to figure out, okay, so how much then do you need to cut to cover that bond payment? If you just think about that from a teacher perspective, you could roughly estimate between eight to 10 teachers is a million dollars. And so to cover that 7,000,000 in FY '28, if you just did that with teachers, knowing that our class size is really close or in some grade levels slightly over the EQS, it would mean a reduction, a significant reduction of programs or very, very large class sizes well above 25 per class.

[Emilie Kornheiser (Chair)]: And I'm not asking because I think it's a good idea. I'm more trying to understand if you did so much communication in your district in the lead up to this bond. And I'm wondering if you feel like it's your community's expectation that per pupil spending will be higher for the next thirty years, or if they're gonna be expecting you to somehow miraculously keep it where it was, even though they voted yes on a bond. And I know that's a big question, you don't have to answer it now, but I think it's sort of at the crux of some of what we're gonna be wrestling with.

[Amy Minor (Superintendent, Colchester School District)]: Yeah, and I, you know, thank you for asking that question. And I just think the perspective is, you know, important when you're looking at the numbers to know like what that potential impact would be as we make some really difficult decisions over the next, you know, three to five fiscal years. Alright, so George is going to talk about just the overall budget impact.

[George Trieb (Business/Operations Manager, Colchester School District)]: Yeah, so I've covered the first bullet, which basically is saying that we've been a low spending district on a per pupil basis, below the statewide average, one of the lowest in Chittenden County. That's certainly going to change. And going back to the the exclusion exclusion of the bond debt. Our biggest concern is bumping up against the excess spending threshold, which was was a discussion we had with the board and with the community to partially answer the question you just had about knowing that the addition of bond debt if we don't have the ability to exclude it will start to push us closer to the excess spending threshold where there could be some additional taxes, penalty taxes as a result.

[Amy Minor (Superintendent, Colchester School District)]: Here is a picture of what the Porter's Point School renovation looks like currently. You know, we've toured Burlington High School and we've toured Winooski and seeing what we're about to do at Porter's Point School, it really, think, is gonna result in a transformation of what students are currently experiencing in a building that was built in the fifties. And I do think it's gonna bring us some economic efficiencies because it will be a much more efficient building than what we have right now in place. That is my entire presentation, so I will stop screen sharing here and happy to answer any questions that you might have.

[Rep. Charles Kimbell (Ranking Member)]: A couple of questions, Mr. Charles Kimbell. I'm wondering, first, in terms of the process you went through with Bob Donahue and the Agency of Education for getting the preliminary approval, wondering you think the benefit of doing that was at this point and how that might apply to what you're thinking about in terms of your spending versus qualified expenses, that type of stuff.

[Amy Minor (Superintendent, Colchester School District)]: I think one of the reasons we did talk about, should we do that or should we not do that? It was an extensive process, but I do think it was worth it to get kind of an outside eye reflection around the scope of what we are building. And if school construction aid ever came back, we wanted to do that because we would hope that we would be kind of grandfathered in to that program. Several years ago, I remember knowing that there was a moratorium on school construction, there was a kind of feeling that, so it's on local voters and local school boards to take care of your school buildings. And so our board did exactly that with no moratorium and seeing that there are aging facilities, it truly is the community's responsibility to do what they need to do to take care of those. And I think we've been good stewards of our buildings, getting them to this point. You know, the high school is built in '74 and I think that's got a long, it's gonna be a long time before we need to do anything significant there because we've taken such good care of it. But I think that is our hope, right? That we would be grandfathered into a school construction process with the state if there were to be funding because we went through that pre approval process. That's our hope.

[Rep. Charles Kimbell (Ranking Member)]: And of the 115,000,000 how much of that was deemed to be qualified? So there are eligible construction expenses, so was it all $115,000,000 of it, or was it a percentage of that?

[Amy Minor (Superintendent, Colchester School District)]: $90,000,000

[Rep. Charles Kimbell (Ranking Member)]: $90,000,000 Okay. And my only last question is how many students are in your school district?

[Amy Minor (Superintendent, Colchester School District)]: Great question. We have been 2,100 students since 2009, and so our enrollment is stable and strong. We do, our demographer is predicting that our enrollment will continue to rise because we've had so much development in Colchester and another large development is planned.

[David Shearer (Deputy State Treasurer)]: Thank you.

[Emilie Kornheiser (Chair)]: You're welcome.

[Rep. Bridget Burkhardt (Clerk)]: When you said that 90,000,000 was qualified, the rules that they And maybe this is a question more for the Amy. The rules that were used to say that that was qualified, were those the old rules from the previous program, or are these new rules that have already been put in place?

[Amy Minor (Superintendent, Colchester School District)]: I think that would be a great question for the AOE. My understanding it was the existing rules that Bob was using, and so I'm not sure if they were old or if they've been revised.

[Rep. Bridget Burkhardt (Clerk)]: Okay. And this is a detailed question, if I may. How is the interest rate structured on your bond? Is it a floating or is it fixed? And do you happen to know what that number is?

[George Trieb (Business/Operations Manager, Colchester School District)]: It's fixed, and it's about 4.4.

[Emilie Kornheiser (Chair)]: Okay.

[George Trieb (Business/Operations Manager, Colchester School District)]: And and just to clarify, we only have, we've only drawn down a portion of our 115,000,000.

[David Shearer (Deputy State Treasurer)]: Yep.

[George Trieb (Business/Operations Manager, Colchester School District)]: So we've drawn down $30,000,000 and we'll continue to space that out based on how the project schedule goes.

[Rep. Mark Higley]: Amy, ballpark, do you know

[Rep. Carol Ode]: how many of that 2,100 district wide students ish, how many are in each of your

[Amy Minor (Superintendent, Colchester School District)]: schools? Yeah, there's approximately two twenty at Porters and Union without preschool, because preschool's not in there right now. About five fifty at Mallets Bay, about six thirty at Colchester Middle School, and we're about seven forty, I think, the high school, roughly.

[Rep. Carol Ode]: Thank you, and Mallets Bay, so which grades again?

[Amy Minor (Superintendent, Colchester School District)]: Right currently, right now, Mallets Bay School serves ages three, four, five, and grades three, four, five. Once the project is done, Mail at Space School will only be grades three, four, five, and then Porter's and Union will take on the three, four, and five year olds.

[Scott Baker (Director of Debt Management, State Treasurer’s Office)]: Okay, thank you.

[Emilie Kornheiser (Chair)]: Thank you so very much for your time today and for all the work you're doing, really appreciate it. Yes, we have

[Rep. Carol Ode]: a question. So let's just say that new construction aid formula comes into effect in four years, whatever. The point of the question is this, you wanna be grandfathered in, how would you want to be repaid for the money that you've paid so far so that you come out as though you started early, somebody else is gonna start in ten years. Would you want to have it buckled back to when you started so that you get the same benefit even though you started earlier?

[Amy Minor (Superintendent, Colchester School District)]: Great question. I mean, we will take those dollars any way that we can. I

[Emilie Kornheiser (Chair)]: will be as flexible and thorough.

[Rep. Carol Ode]: If that were to be, what amount would you, maybe just the same percentage and then you just look at what you've spent in each of the years, how would you

[Emilie Kornheiser (Chair)]: say that?

[Amy Minor (Superintendent, Colchester School District)]: Yeah, I think I might say something like our hope would be that we would receive revenue for what we were approved through the AOE4, that would be a great hope. How the funds trickle back into the district, I think I'll leave that up to the legislature, but knowing that it'll be thirty years for us to buy down, it would be prudent to pay that down sooner so that we're paying less interest. It would save everybody. You know, how can we do that in a way that saves taxpayers the most dollars possible?

[Emilie Kornheiser (Chair)]: You, Yep,

[Amy Minor (Superintendent, Colchester School District)]: thanks for having us.

[Emilie Kornheiser (Chair)]: Thank you. Thank you. I'm gonna take a brief pause for agenda clarity. We have moved the capital bill to tomorrow morning. We've moved the special education testimony to later in the afternoon. And I skipped Jamie Bauer on the agenda. I'm so sorry. Would you like to join us? And please, come on. And you're both welcome to sit together, just one of you, whatever works better for you. So folks, one of the pieces of this all that we need to figure out is as school buildings stop being used for schools, what happens to those buildings? How do we help communities see that as an asset rather than something else? And so we have invited the land bank crew to talk to us about that.

[Jamie Bauer (Housing Division, Dept. of Housing & Community Development)]: Thank you. If you could show our presentation, my computer was making all these wonky noises.

[Sean Gilpin (Director, Housing Division, DHCD)]: And just to introduce ourselves, my name is Sean Gilpin. I'm a director of the Housing Division at the Department of Housing and Community Development.

[David Shearer (Deputy State Treasurer)]: I'm hereby.

[Jamie Bauer (Housing Division, Dept. of Housing & Community Development)]: I'm Jamie. I am also with the Housing Division. I'm helping steer the land bank work and I'm also assisting with Homes For All as well as other programs and initiatives.

[Sean Gilpin (Director, Housing Division, DHCD)]: Lots of hats. So, I'll turn it over. Jamie's been the spearhead on this one with plenty of experience from past lives and that she's bringing to bear for the state

[Rep. James Masland]: of Vermont.

[Jamie Bauer (Housing Division, Dept. of Housing & Community Development)]: Yes, we'll try to be a little quick because I know it's running late. So if we could go to the next slide. Just for context, how we got here in 2024, the legislature asked us to do a feasibility study on whether or not we could benefit from having a land bank. We turned that in in January 2025. In the last session, we were asked to create a tactical plan and draft legislation that's due on November 1, and we submitted kind of a progress report in January. And what is a land bank? A land bank is a non profit entity, accountable to the public. They make decisions that are based on community benefit, not on profitability necessarily. I'll give you some examples. I hail to you from Cleveland, Ohio. I was in community development for over twenty years, ten years of those with a nonprofit, worked a lot with the Cuyahoga County Land Bank, a really premier land bank in the country. We were able to take 65 vacant and abandoned houses, repurpose them, put them back into the hands of homeowners. We were able to save a church. We were able to save a dry cleaner. We were able to create a park out of a landfill. So they really can take part in helping any type of land in meeting any of the community goals. What a landmaid can do, one of the big things they can do is they can wipe back taxes, they can wipe liens, they can clean up titles. So for the dry cleaner scenario, it would have been vacant for thirty years. They had $30,000 worth of back taxes. It had mechanics liens and grass cutting liens from the city, and it had a cloudy title. So when we had a business who wanted it, the land bank was able to take it, clean all that up. They helped us get a phase one and phase two testing. They helped us with meeting with the EPA, and then they turned around and sold it to that business for $3,000 of the business and invested $800,000 into that building. I should have also said most of what land banks deal with are vacant and abandoned properties. They mostly do not deal with anything that's occupied.

[Sean Gilpin (Director, Housing Division, DHCD)]: Yeah, it's largely dealing with challenge issues, things that nobody else wants to touch, that the private market doesn't want to touch because it's too complicated. And in many cases, as Jane will get to, municipalities might not even have the capacity to

[David Shearer (Deputy State Treasurer)]: And deal

[Jamie Bauer (Housing Division, Dept. of Housing & Community Development)]: even with the case with the dry panel scenario, the business wanted it, but they couldn't get it because their title was messed up, the back taxes. So sometimes a lamping just needs to do it and do that to make something a viable project. What we found when we did the feasibility study was we talked to multiple, multiple for profit and nonprofit developers asking them what their challenges were with trying to bring it back, vacant and abandoned properties back to life. Again, property titles and tax delinquency. Many of our small communities are all volunteer or only one steppers. They don't have capacity to deal with that terrible property that's been hanging out for twenty years. And we were also told that we have a lot of the pieces at different organizations, but putting it all together is like trying to put a puzzle together. So it takes a lot more time and less efficient. Next slide. Thank you. Progress report highlights we've been working with a working group of professionals all across the state and housing and community development and advocacy. One of the things we totally agree with is land bank activities should primarily be locally driven and in keeping with their goals. I think we can just for some time, All right, how they can help small communities, they can hold property while communities go through an assessment process. They can assist with submitting applications for grant dollars. They can be the fiscal agent. They can help with project management. They can help with helping to find or select a contractor, just all the technical things that these little communities just might not have the capacity to do. The next slide. Right, repurposing school buildings. In most across the country, most standard classrooms are around 700 to 900 square feet, which would be a one bedroom apartment or maybe a small two bedroom apartment. In 2022, the Secretary of Education submitted a study to the legislature. They did a survey of all the schools. I think it was three ninety. I think that's all of them. Based on their results, our average size of a school is about 40 fourseven or almost 45,000. A 45,000 square foot school typically has 20 to 25 classrooms. So and the average cost to convert classrooms to apartments is about 200 to $2.50 per unit compared to building a new apartment in Vermont is between 300 or above 500,000.

[Emilie Kornheiser (Chair)]: Can I

[Rep. James Masland]: ask a question to you?

[Rep. Carol Ode]: Yes, on that last slide.

[Rep. Charles Kimbell (Ranking Member)]: The cost- You brought up Barry, man.

[Rep. Carol Ode]: She's talked to a constituent, so there's a new Barry bill. The Ward five school is now an apartment building. We shall do a tour. The cost to convert classrooms to apartments being around 200 to $2.50, does that assume that the nuts and bolts of the building are strong?

[Jamie Bauer (Housing Division, Dept. of Housing & Community Development)]: It can vary. I think that assumes that it's been vacant for some time, but maybe not as long as Ward five School, which was ten years, which we can get into. It can also depend on the location and infrastructure, but in general rehabbing an existing building is less expensive than building a new building. So I don't know if that answered it or not. Yeah. So we are repurposing. Oh, yes, ma'am.

[Emilie Kornheiser (Chair)]: Represent Ode, shouldn't have let I'm gonna lay finish your testimony and organize questions.

[Jamie Bauer (Housing Division, Dept. of Housing & Community Development)]: Okay, so we are doing some of this work. This is a building in Barrie. This is a recent project. It was just finished last year. It's a smaller school. It would have been vacant for over ten years. It was not in good condition. The total investment to create nine affordable apartments was about $10,000,000. The Vermont Rehab Investment Tax Credit is really the Housing Preservation Tax Credit and they gave about 2,000,000 for the project and they got additional funding through VHFA, VHCB, CDBG money, ARPA money, so just a whole funding stack. It's a great project. This one was done in 2022. It's a larger school that was in much better condition and only been vacant for about a year and a half. Was Mary's School of Immaculate is a very well name. They created 19 affordable apartments, a total of investment of about $6,500,000 In this scenario, the tax credit investment was $1,000,000 and they also received funding from all the different varieties of sources that funding is provided. And we also, just yesterday, we had our working group had employees from the main land bank at our meeting. The main land bank is new, it stood up in 2020 They are providing technical assistance to three communities to help them repurpose their school. They're working on doing what they're calling a toolkit. The state of Maine legislature has a bill that they're considering to create annual funding of 5,000,000 to convert schools to housing units. 5,000,000 would convert a 45,000 square foot school at 200 per unit. So approximately one school in Vermont a year would be about $5,000,000 This is just a really beautiful project. It's in Atlanta, Georgia. It had sat vacant for decades. It's now with $8,000,000 investment, live work space for artists and crafters, peanut people. And last but not least, next steps. We are going to be providing the legislature with a tactical planning and enabling legislation in November. Our working group meets on the last Monday at 02:00 every month. Everybody is invited. If you would like a link to come join one of our discussions, please contact me. We would love to have you. So yeah. Thanks. Thank you.

[Sean Gilpin (Director, Housing Division, DHCD)]: Yeah, will. If I may just thank you, Jamie. I do want to applaud Jamie. It's been a very a lot of outreach and a lot of interaction with everybody from the RDCs to a huge litany of different folks, BHCB and the like, been in there. A lot of municipalities, the Vermont League of Cities and Towns has been involved in this conversation. All the examples in Vermont have been done without a land bank. However, we imagine that those type of projects could be much more easily achieved if we had that sort of mechanism.

[John Gray (Office of Legislative Counsel)]: So

[Sean Gilpin (Director, Housing Division, DHCD)]: we look forward to providing some guidance for you all to engage in on the next session. But in the meantime, yeah, there boisterous conversations

[John Gray (Office of Legislative Counsel)]: every end of the month.

[Jamie Bauer (Housing Division, Dept. of Housing & Community Development)]: Chittenden, do you still have a question?

[Rep. Carol Ode]: Yeah, I do. The rehab for existing costs is less than building a new building, that's for going to apartments. Would that also be for rehabbing for a school purpose or be not?

[Jamie Bauer (Housing Division, Dept. of Housing & Community Development)]: I mean, well, I guess in general, it is less expensive to rehab than to build. I can find out.

[Emilie Kornheiser (Chair)]: I wanna take testimony from folks about repurposing for schools. Thank

[Rep. Carol Ode]: you, I love that. Can you help me

[Emilie Kornheiser (Chair)]: understand what a land bank would do that one of the housing trusts doesn't? Yes, absolutely. I imagine you've gotten that question before.

[Jamie Bauer (Housing Division, Dept. of Housing & Community Development)]: Oh, yes. For example, there's just a few different powers with the right legislation. One is cleaning up back taxes. They wipe them away. So you forgive them? Forgive them. Okay.

[Rep. Carol Ode]: Where does in most of the Where

[Jamie Bauer (Housing Division, Dept. of Housing & Community Development)]: does the lost revenue So let me just for the record, most of these buildings have been vacant for years and years and years. You're not going to collect those taxes. They're just sitting there fallow. So by cleaning up those taxes, you're creating an opportunity actually to be able to collect taxes on that building.

[Emilie Kornheiser (Chair)]: But does the land bank pay the town

[Jamie Bauer (Housing Division, Dept. of Housing & Community Development)]: for the taxes? That is something that they could Well, they will pay the town for the taxes.

[Emilie Kornheiser (Chair)]: Would they pay the state for the taxes? You can answer that some other time. Yeah. Okay.

[Jamie Bauer (Housing Division, Dept. of Housing & Community Development)]: But they can also clean up hot, cloudy titles. If you have a specific especially true with vacant commercial buildings, you'll have somebody die, five people inherit it, two don't know, one doesn't care. So to try to bring it back to use, you really need to be able to do that. Land banks can hold property, contaminated property with limited liability like Brella has the powers to do. We're not sure if we want to recommend this, many land banks issue bonds. They can act as fiscal agents for municipalities. So just a variety of different things. Some of some of there is some crossover with what RPCs and RDCs do. I would want I would view the land bank as being able to help with the capacity that they can't already do, but there's a lot of projects that aren't getting done because you have the capacity to do it, right?

[Sean Gilpin (Director, Housing Division, DHCD)]: And I would say one, it's largely a legal entity and a legal mechanism to try to free up some of these legal issues. One of the other major things that a land bank is able to do is act as a third party so that you don't, and we intentionally pulled this slide out because it got a little into the weeds, but to avoid what the Feds call choice limiting factors. So if somebody wants to get a HUD grant to go in and test some housing construction, they can't necessarily already purchase the building because HUD considers that as limiting their choices. Similarly, frankly, for FEMA buyouts, there's opportunity for this to stand in as an intermediary for those sort of things to buy a little time and make sure that a developer can come in and do their work.

[Jamie Bauer (Housing Division, Dept. of Housing & Community Development)]: Right, we really think that the flood relief and the small communities could be the biggest beneficiaries. I know in Barrie we've got 45 properties that want buyouts. It creates a terrible situation of pitting a city against its residents and the residents against its city. A land mate can purchase those properties that might not be able to reuse some portion of it, but it's not, we can never even look at it ever again. So it would take the right engineering, maybe some portion of them could be redeveloped. It just doesn't take it off the table like the FEMA buyout does, which would be beneficial for both the community and the residents who are both in unfortunate situations currently. Thank you. Representative Matson?

[Rep. James Masland]: Yeah, you mentioned umbrella. Yes. I I don't know if I call it a proposal or I mean, what you're what you're putting together. Yep. It'll have Brella language in it.

[Jamie Bauer (Housing Division, Dept. of Housing & Community Development)]: It potentially. That that is something

[Rep. James Masland]: Brownfields. We are

[Jamie Bauer (Housing Division, Dept. of Housing & Community Development)]: Yeah. Brella is brownfields. And there's special powers that Brella has and most land banks have where they can hold Let me just step back. Most of the time, if you buy a contaminated property, you are in the chain of title and you have responsibility for that cleanup. For organizations that have this circle of power, they can hold contaminated properties without having that liability with the understanding that that will be passed on to the buyer. The land bank or the entity is going to help them getting to phase one and phase two and help them get it into a place where it could be cleaned up and then they sell it to the end user.

[Rep. James Masland]: And it's turned over clean.

[Jamie Bauer (Housing Division, Dept. of Housing & Community Development)]: It's turned over clean or it's turned over with a remediation plan. It could be one of the two.

[Rep. James Masland]: Thank you very much.

[Jamie Bauer (Housing Division, Dept. of Housing & Community Development)]: We're not it's not 100% sure whether the land bank will have those powers too. That's a conversation we're having with the Brownfields folks.

[Emilie Kornheiser (Chair)]: Thank you both so much for your time and all your work on this. You're welcome.

[David Shearer (Deputy State Treasurer)]: We're not

[Sean Gilpin (Director, Housing Division, DHCD)]: asking for anything right now, just interest for a future conversation.

[Jamie Bauer (Housing Division, Dept. of Housing & Community Development)]: Stop on over for our meetings. We'd love to have you.

[Emilie Kornheiser (Chair)]: Thank you.

[Rep. James Masland]: Very helpful.

[Jamie Bauer (Housing Division, Dept. of Housing & Community Development)]: And next up, we have James Fen from the Mountain Dew Supervisory. Hello.

[Rep. James Masland]: How are you?

[James Fenn (Director of Finance, Mountain View School District/Windsor Central)]: So let me tell you a little bit about our project that I don't have a nice nice PowerPoint like they had, earlier, but we started our project actually in 2014.

[Emilie Kornheiser (Chair)]: I'm so sorry to interrupt, but can you tell us, who you are for the record first, even though I just said your name?

[James Fenn (Director of Finance, Mountain View School District/Windsor Central)]: I'm James Fen. I'm the director of finance for Mountain View School District, formerly known as Windsor Central School District.

[Emilie Kornheiser (Chair)]: Thank you.

[James Fenn (Director of Finance, Mountain View School District/Windsor Central)]: We started our project actually in 2014. So, you know, twelve years ago, with our high school board, at that point, we had six different districts on a high school board doing an evaluation of the building to determine what they needed to do with it. We merged into a unified district in 2018 and have continued that process. I've been with the district five years. In the last five years, we've spent over $7,000,000 on building maintenance on all of our buildings, the majority of it on our elementary schools, bringing them up to a standard where they need to be. And we really have this 1958 building that the Department of Ed in their assessment that you funded a few years ago determined that its FCI, the facility's condition index, was over 90%. In other words, 90% consumed, and it really needed to be replaced. Like. The other school district that was done earlier, we met with Bob Donahue. He did give us preliminary approval on our project in 2024. We got it 02/16/2024. And just to let you know, the 2000 whatever construction planning guide was updated and revised on 01/29/2024, and so that's a standard that he used on our building. A lot of the work in that is still from the old handbook, but generally, our building met those, conditions. We two years ago, we had a $96,000,000 project. He awarded us 86% of our building as qualified and the other 14% not qualified. We brought it to our voters in March '24, and, the vote failed by 300 votes. We've revisited the building in order to not have to go through the pre qualifications again. We brought the same building forward, and the building has jumped to 113,000,000 from 99,000,000. We value and engineered about a million dollars out of it and brought it to our voters again this year, and it passed by 1,600 votes to just over a thousand votes. So our community is behind this building. We have a building that this summer, we have to replace the sewer line in because the cast iron sewer line that was put in in September 1958 has deteriorated to the point that we don't have a pipe anymore. We have sewage running through gravel and concrete, so we have to drill it and and jackhammer the concrete, put a new pipe in, and put a new floor in. And the nineteen fifty eight steam boiler that we've kept running for sixty eight years, has outlived its useful life by a 100% and has failed, and that needs to be replaced for next year. So those are our two projects we're doing on this building this summer just to keep it open. Our new building is going up is scheduled to go on the same campus that our old building is, so it can be built on the football field, doesn't interrupt education going on in our building, and then when the new building is occupied, we will remove the old the old building and put a new football field where the old building is. You you've talked a little bit about per pupil cost. We're already above the threshold. The two projects that we're doing this year are $550,000. That's $86 per pupil on our per pupil cost. And if it's not exempted from penalty, it's a $172 that our taxpayers have to raise for the $86. Our new bill at its highest will have an annual debt service cost of $8,344,000, very similar to the one we saw earlier. That will increase our per pupil cost by $5,613. If we have a penalty, it'll increase our tax impact by over $11,000 per pupil. Excuse me. $1,100, yeah, $11,000 per pupil. When you think about our communities, and we have seven communities that are members of our district, Also, keep in mind that out of every dollar raised between the homestead and non homestead taxes in our communities, 62¢ doesn't stay locally. It goes to Montpelier, and only 38¢ of every dollar raised is used in our districts. So we although we are a land wealthy or real estate wealthy district, A lot of the money raised is used to support education education elsewhere in the state.

[Jamie Bauer (Housing Division, Dept. of Housing & Community Development)]: Mister, a few possible questions.

[James Fenn (Director of Finance, Mountain View School District/Windsor Central)]: Please.

[Emilie Kornheiser (Chair)]: Thank you. I just wanted to make sure I understood that you were saying that before the bond vote passed, you were above the excess spending threshold in your district. Yeah. Okay. And I have a vague memory from reading the articles and maybe a less vague memory from talking to representative Kimbell about this fairly regularly, that there's a contingency in the bond vote related to legislative action. Can you tell us about that and how your voters understood that? Sounds very complicated.

[James Fenn (Director of Finance, Mountain View School District/Windsor Central)]: Oh, it's it's complicated. There's a contingency, and the contingency is if the legislation does not separate the construction or the bond debt from the per pupil penalty calculation as it currently is, then our project can't go forward. So if you go back to two years ago where the bond debt was separated from the penalty calculation, we're great. If you keep it the way it is right now, our project won't go forward. There's also a a second condition that we raise a percentage of the project cost in local or state funding. We're above the $5,000,000 threshold, local gifts already towards this project. If we get the base 20% building aid that's written into act 73, putting that with our local funds, we are at the threshold so we can go forward on that part of the condition.

[Emilie Kornheiser (Chair)]: Thank you. And then, I know that you, your district is really quite close to two other districts that also have high schools that might be in need of some new construction and or bonding. And I'm curious about the conversations about well, frankly, you seem like a prime spot for a regional high school somewhere amongst the mix of those three districts. And I wondered about what conversations looked like with that in advance of your local bonding.

[James Fenn (Director of Finance, Mountain View School District/Windsor Central)]: We we being mostly our board chair has spoken with board chairs of several of the area districts to

[Rep. Mark Higley]: greater or lesser

[James Fenn (Director of Finance, Mountain View School District/Windsor Central)]: levels of agreement. We have several communities that would love to be part of us. They can't be part of us right now because of the restrictions of the Articles Agreement. And so as long as the Articles Agreement as they currently exist in the law remain in law, they can't leave their districts and join us. The communities I'm thinking of would put us take us from about a thousand student district up to almost a 1,700 student district. So that would put us much closer to a 2,000 student threshold, which I think is a good threshold. We spent a lot of time talking with Hartford. Hartford does not have the building capacity to absorb us. They have PCBs. They have lots of work they're doing just to keep their buildings open.

[Emilie Kornheiser (Chair)]: I think I'm asking less about, inviting other people to come to your sandbox or going to other people's sandbox and more about everyone building a new sandbox together.

[James Fenn (Director of Finance, Mountain View School District/Windsor Central)]: I found a piece of land for that, and, nobody wanted to talk about it.

[Emilie Kornheiser (Chair)]: Okay. You have a sense of why

[James Fenn (Director of Finance, Mountain View School District/Windsor Central)]: piece of land for it, and nobody wanted to talk about

[Emilie Kornheiser (Chair)]: That must have been very frustrating. Can you do you have any sense of why that happened? I would tell you you're not on the record,

[Erin McGuire (Essex Westford SD; past president, VCSEA)]: but you are.

[James Fenn (Director of Finance, Mountain View School District/Windsor Central)]: Yellow jackets and the wasps don't want to to join together.

[David Shearer (Deputy State Treasurer)]: If

[James Fenn (Director of Finance, Mountain View School District/Windsor Central)]: you just think about the teams and these communities, there's there's the

[Jamie Bauer (Housing Division, Dept. of Housing & Community Development)]: The mascot for what's known as

[Rep. Carol Ode]: the wasps. I don't know if everyone has.

[James Fenn (Director of Finance, Mountain View School District/Windsor Central)]: If if if that makes any sense.

[Emilie Kornheiser (Chair)]: And it's hard for the yellow jackets?

[David Shearer (Deputy State Treasurer)]: No. They're the hurricanes.

[Emilie Kornheiser (Chair)]: Oh, okay. Well, that would be hard. All that spinning. And

[James Fenn (Director of Finance, Mountain View School District/Windsor Central)]: and and and there's just these hundred years of rivalry that. And and you know, because we merged under act 46, you know how much work that was for the few of us that, voluntarily did under that. It's it's tough politics to do that without somebody telling us we have to.

[Rep. Charles Kimbell (Ranking Member)]: Jim, it's Charlie. Nice to see you. When you were talking about the reengineering work, value engineering, I'm sorry, the process that you've gone through, Bob Donahue speaks highly of the school district and what you did. Could you just tell us about what the process was when you came up with a design and then subjecting it to other scrutiny?

[James Fenn (Director of Finance, Mountain View School District/Windsor Central)]: Sure. Our our initial design several years ago came in at a $110,000,000, and we built we designed the building with everything everybody wanted. And then we said, okay, we can't afford that. We've gotta get it under a $100,000,000. And so the penthouse for the youth the rooftop devices went away. We went to flat roofs, saved us a million dollars. We've gone a 100% geothermal. We went 50% geothermal, cut 2 and a half million dollars out of it. We, had three kilowatts of solar panels. We've cut those out of the project, and we'll do a power purchase agreement for solar power instead of owning the the solar panels. That's the type of work we did. We downsize some classrooms. We actually took a a block of eight classrooms and cut it into four classrooms. So we've done you know, narrowed the hallways by two feet. Little things like that, but everything we could do to start cutting some money out of the project. And we we cut $10,000,000 out of the initial one. When we came back this time, we redid the facade, redid the front of the building, changed reduced some glass, reduced other things to take another million dollars out of the project.

[David Shearer (Deputy State Treasurer)]: Yeah. Thank you. Yeah.

[Emilie Kornheiser (Chair)]: Thank you very much for your time today and all the time you've spent in your own community figuring this out. Really appreciate it.

[James Fenn (Director of Finance, Mountain View School District/Windsor Central)]: No problem.

[Rep. Charles Kimbell (Ranking Member)]: Thank you, Jim.

[James Fenn (Director of Finance, Mountain View School District/Windsor Central)]: Thank you.

[Rep. James Masland]: Thank you.

[Emilie Kornheiser (Chair)]: Folks, we are now going to turn to the great work of other states, starting with Mr. Sean Matlock from Prince George's County Public Schools, who did

[Jamie Bauer (Housing Division, Dept. of Housing & Community Development)]: a really cool big project. And I'm hoping he'll tell us

[Rep. Carol Ode]: about it. Welcome. Thank you.

[Sean Matlock (Prince George’s County Public Schools)]: Thank you for having me. I'm very happy to be here. My name is Sean Matlock, and I'm the director of the Office of Alternative Infrastructure Planning and Development for Prince George's County Public Schools. I was their former capital director. I served in that role for roughly about seven years. And put Prince George's now I'm I'm from a little town in South Jersey. And the school building that I went to, my mother went to. It was built in 1942. I went from elementary school all the way through middle school and high school in that same building as did my mother. And that building is still in operation. So I very much appreciate that a district, a small school district can very much keep building alive and with good maintenance, care, and understanding if

[Rep. Mark Higley]: they

[Sean Matlock (Prince George’s County Public Schools)]: want to keep a school building going. I come from that conservative background. However, Prince George's County is a very different place. Prince George's County, to put it in some context, the nineteenth, rough between eighteenth and the nineteenth largest school district in the country. In comparison to Vermont, we have about 40,000 more students than state does, but we have around two thirds of the number of school buildings that you have. So you have roughly around 300 school buildings. We have somewhere around two ten school buildings, not including buildings that have been used for administrative purposes and other various purposes. So, we're a fairly large school district. Like your state, we had a moratorium on our county construction that lasted over twenty years. So, we had a lot of buildings that did not get replaced for quite some time. And as a result, some of our older buildings that were already old got older. And we have the second oldest inventory in the state of Maryland, despite having the second largest number of schools in the state of Maryland. And so, as a result, we had a lot of old school buildings. And in addition to that, we had a lot of overcrowding in the northern part of our county. So, we had to do something about it. We had done several studies on modernizing our infrastructure and we ended up, I got a, in my 2017 educational facilities master plan, we determined that we needed almost $8,500,000,000 over twenty years to modernize roughly half of our inventory. And there was no way we were going to get that kind of money. It just wasn't going to happen. And so we had to come up with some unique ways to fund some of our more critical needs. And so we identified, we went out and did some research and ended up putting together a work group with our county council. And we ended up doing what's called a P3. Now, so we divided our infrastructure or our school construction plans into three phases. One is traditional construction for our larger projects that were very, very expensive. Then we had some schools that had really good bones but needed updating, so they dropped into our renovation bucket. And then we had the schools that needed to be replaced, couldn't be renovated, and were of a certain size. And they fell into our bucket that we ended up doing or potential schools that could be built through a public private partnership or P3. Now, the P3s are roughly what describe them. They're basically a range of contractual ranges between public agencies. A private entity delivers the public infrastructure facility and the services. There variety of financing models that differentiate by allocation of rights, risks, responsibilities between the public and the private entity. Some contracts can be less than fifteen years. It can be designed, builds or CMARs or guaranteed maximum price contracts. There's the middle range, which where we fall into, which is between fifteen and fifty years, which are design build finance, operate maintain or design build finance maintain. Basically, the private sector goes out and gets the money. They do the design. They finance that construction. And then they maintain the building. And the district or public entity pays them back over time at the conclusion of that construction for the construction and for the maintenance. And that usually lasts. It's a payback, sort of like a mortgage, is the best way to describe it. And then there's a privatization, which is something nobody really is interested doing. Even under the DBFOM and DBFM models, the school district owns the buildings. So they are not at risk. There are also other versions of that called like a lease leaseback and things like that. So the reason to use a P3 is basically to accelerate the capital plans by leveraging private sector financing, achieve operational efficiencies and life cycle costs, remove risks of future maintenance deferral, utilize private sector innovation to better manage the risk and incentivize performance and provide long term budget predictability, which is one thing that was that's proven to be a benefit to our county. So what we ended up doing is we built our first build was six schools that were middle schools and one K through eight. And what this did was it allowed us to increase capacity and remove our sixth graders from elementary schools, which relieved the overcrowding in our elementary schools. And we built bigger middle schools, which made the middle schools able to absorb more students and spread them out. And we ended up consolidating buildings. And that consolidation reduced our overall maintenance burden by basically reducing the number of roofs that we would have to maintain. And by eliminating these older roofs, the basic cost of those maintenance was reduced dramatically. In addition to that, in these contracts, we built a refresh. So, at the end of twenty years, all the systems have to be updated by the developer. And that cost is already built into the price. So, when the buildings come back into our portfolio at the end of thirty years, they're not in bad shape. They'll be in good inside another thirty year of useful life zone. And so that's what we're designing for. So we built these schools. All six were built and delivered. They were designed, built, and delivered in three years. And they're currently been in operation now for roughly three years. And the way we paid for it is that we already had a revenue stream for our capital program. And we diverted a piece of that revenue stream, roughly about $15,000,000 to cover the capital spend annually. And then our county agreed to provide a little additional money into our operating budget to cover the maintenance or the services charge of the spend. And between the two, we have roughly, we started off with a $27,000,000 annual payment for the schools over thirty years. It does rise in price due to escalation costs on the services side. But that's generally how that transaction worked. That was such a successful program that the state, who did not participate in the original transaction, decided that they were willing to help us finance a second one. And so our county utilizing a portion of its, what do they call it, communications tax. And the state using funds from our Maryland Stadium Authority created a fund. And they funded eight more schools. These schools were all going to have six elementary schools and two K-eight. One actually ended up being a three-eight. Right now, that project is ongoing in the construction phase. We'll be delivering two schools this summer, four schools next summer, and then the following summer, the last two schools. And that project was a bit more pricey because of escalation costs and also the size and location of these buildings. And also because we put a project labor agreement on top of that. But the thing that we got on this one was because of the financing arrangements, we were able to not have any escalation. So, the charge is flat throughout the entire thirty year period. And that's generally what we're doing. And we've eliminated a lot of overcrowding. We've been able to go green on our second phase. So, seven of the eight schools will be net zero ready with geothermal and solar panels. They are bigger. And so, we've been able to consolidate. Although we're only building eight schools, we're consolidating over 14 schools into those eight schools. The communities are happier about the consolidation. Instead of going into one old building, they're being consolidated into a brand new facility with all the updated amenities. It's been a very successful program so far.

[Emilie Kornheiser (Chair)]: Thank you. A few questions around I'm going ask a couple of questions. There are a few questions around the table. This is so exciting. Thank you. And I do hope you can come back or at least meet with a couple of people offline so they can learn more. You talked about sorting your buildings into sort of three buckets. Who sorted them? And what happened to the people who lived near them after you sorted them into buckets?

[Sean Matlock (Prince George’s County Public Schools)]: So, again, we focused on overcrowding first and we sorted them by size, basically, and by character. One of the things that we were trying to achieve and which we did achieve was a degree of scale of maintenance or scale of purchasing. So we built very similar schools. Most of these schools are built around a prototype design so that we get repeatability in the purchasing of HVAC systems and other systems that we needed. I have to point out that the first six were built, were bid and developed during the COVID crisis. And as a result, there was a supply chain issue. But because our purchases were so large, we were able to get priority in delivery of these items. And so it was very good for us to do that. The way we sorted them was initially we had already developed a priority of schools that were going to be constructed. So, we had 31 schools that were already on the list for construction replacement or renovation. Within that group, what we determined was in order to get the biggest bang for our buck, it would be very hard to do high schools because high schools are very big and very expensive and it would eat up too much of the capital. So, we excluded them from the list of consideration. Then what we did is we focused on the need. So, the need was to eliminate overcrowding. And so, the schools where we could eliminate that issue best were the ones that got priority for P3s. There were two other schools that were being built at the same time. So, a lot of the schools in that priority got constructed. The ones that got renovations were ones that didn't require an expansion. And they are getting renovations. Those renovations are moving forward on different timeline. And the new construction, again, is moving slower because we are using traditional funding. So, that is moving slower. Although we did our high school, Suitland High School, which is basically a showpiece for us, as recently as will be finished next spring or this coming spring. And it's a very big high school. The two other middle schools that were done at the same time were also big schools, but they were also done on similar models. So, the pricing turned out to be very almost the same in cost from a capital spend, but they were done with using traditional funding because of where they were and how far along their projects were. And then as I've stated, the elementary schools are pretty much excluded from the first phase, but they've been included in the second phase. So the second phase is we're picking up a lot of our elementary schools that needed replacement.

[Emilie Kornheiser (Chair)]: Thank you. And then, you said you paid for it, one part one section of it with a communications tax. Was that new revenue that was created in order to fund this, or were you diverting existing revenue?

[Sean Matlock (Prince George’s County Public Schools)]: So we were diverting existing revenue. So the way the first time around, we had the so our so to give you a a your your the way I've been listening to you your discussions, and the way you do your capital is slightly different. So let me give you a little

[Emilie Kornheiser (Chair)]: It's different from every other state, unfortunately.

[Sean Matlock (Prince George’s County Public Schools)]: Well, it's slightly different. So the way we work is the state has roughly about $250,000,000 annually that they parse out to the various districts. And they basically rate your projects based on some sort of criteria. And then what you do is then you get a certain amount of that budget annually for your project. And then they contribute roughly 7% of direct construction costs. And then the other 30% of direct construction costs plus design and FF and E and all those other things come from the local community. So, that's generally how they do that. And so, because of that rate of funding, it's much slower. It's harder. You have to take your funding over multiple years in order to build a school or two. So, that's the why it's slower and harder to do. And then, if you want to accelerate, you could, but it would require more local funding to do it. Our local budget is probably very considered very large compared to what you all have. We have roughly about our local budget and our state budget combined. It roughly works up between 120,000,000 and $160,000,000 annually. So, what we did was we parsed off roughly about 10% of that $15,000,000 which would have gone probably to a large renovation project. And then instead of using it for that, we used it as a revenue stream. So that revenue stream always existed on our capital side. On the operating side, we have operation for maintenance. So they increased our maintenance budget in order to cover some additional costs related to the P3. So, both budgets on the first one existed. We basically carved them out. Now, on the second one, there was a communications tax that was already going to the school system. And what we agreed was that we would give that revenue back to the county and they would take a portion of that and they would use that revenue to fund their contribution to the P3. So it was already a revenue stream. It was already going to the school district. We just allowed them to take it back as a revenue stream. And then they diverted a portion of it to us. MSA, which is the Maryland Stadium Authority, that's the only new revenue that really popped into this. And that was off of a state funding bill that they were utilizing and we were carved out for a P3. And they used the Maryland Stadium Authority revenue as a contribution to their portion of that. And that's the only real new revenue.

[Jamie Bauer (Housing Division, Dept. of Housing & Community Development)]: Thank you. And then

[Emilie Kornheiser (Chair)]: There were a bunch of hands,

[Jamie Bauer (Housing Division, Dept. of Housing & Community Development)]: but I've lost them.

[Rep. James Masland]: You, sir. Very interesting, very informative. Back when you were describing the public private partnership model. But later or something like that, when you talked about the first schools, you did that way. You use you said you used the phrase when they were returned to your inventory. Was there a change change of ownership or ownership model? No. No. What did you mean by securing your inventory? I didn't follow that.

[Sean Matlock (Prince George’s County Public Schools)]: Okay. So the buildings are under a DBFM, which is a design, build, finance, maintain. So during thirty years while we're paying for the buildings, the developer maintains those buildings. So, they're responsible for all capital maintenance. So, at the end of twenty years, they are refreshing all of our systems. So, new HVAC system, new windows, new floors, new everything in order to make sure that the useful life of the building when it returns to our maintenance control is not they're not falling apart. They're not at the end of their life. We still have useful life in all those systems. So that was the reason when I say control, I mean our maintenance department's control, not necessarily ownership. We own the buildings outright.

[Rep. James Masland]: That makes sense. And thank you for the clarification.

[Rep. Charles Kimbell (Ranking Member)]: So again, thank you. The idea of building that many buildings at once, and I think you said that you had, I wouldn't say cookie cutter, but pre approved designs that are then altered to the specifics of the site, right?

[David Shearer (Deputy State Treasurer)]: Exactly.

[Rep. Charles Kimbell (Ranking Member)]: Yeah, so how long did it take you to put together that portfolio of designs? Is that quick? How did you decide what it was? Yeah, can you help us understand that?

[Sean Matlock (Prince George’s County Public Schools)]: Sure, So a procurement of a P3 is slightly different than regular procurement. So they bring their own designers to the table. So during the procurement process, they were giving us preliminary designs. They had to get to about 35% in order to bid. So from that, for them, it's an expensive process. But they got to about 35% of design. So we generally knew what we were getting before we even got the pricing for the buildings. And we engaged with them during that process. That was our first version. And it what we determined was in our second version, we did slightly differently. They didn't because the first one they bid on price. And we had a price and we basically knew how much it was going to be before we made a selection of a developer. The second time, we didn't do that. The second time, we actually worked with them to develop the budget sort of like a GMP development team. And we worked alongside them. So, selected on their preliminary qualifications and ability to finance and on their preliminary idea of a design. But then we got together and sat on the same side of the table and worked through those designs before we executed the contract. So there's this period called the exclusive negotiation period where in both sections where we sat with the developer and worked through those intricacies. And those are all, and we try to provide, and this is one thing you have to do with P3, is you have to provide a lot more information than you would on a regular bid. So programming information, all those general specifications we provided in advance so that they could build around those specifications and those programming needs. So, to give you an example, a school that has an autism program is going to be different than a school that has a traditional special education program. And so those requirements need to be provided in advance if you know what you're going to build, and which is what we try to do.

[Rep. Charles Kimbell (Ranking Member)]: So enrollment projections, everything. Mean, you got it

[David Shearer (Deputy State Treasurer)]: really nailed down. Yes. The

[Emilie Kornheiser (Chair)]: buildings that you took offline as school buildings, what did you see as the district's responsibility towards the next stage of that building slate?

[Sean Matlock (Prince George’s County Public Schools)]: So to be quite blunt, most of the schools that we built were built on the site where they were. So we had some space to do some swings. One school that was rebuilt still exists in our portfolio as a school, And we use it as swing space for other new construction. We're using it for the second phase of construction. Some of the schools were completely replaced. And some of them didn't exist before.

[James Fenn (Director of Finance, Mountain View School District/Windsor Central)]: And were all

[Sean Matlock (Prince George’s County Public Schools)]: then, on our second phase, any school So, our second phase, one of the issues we had was with aging portfolios, we had schools that were condemned. Basically, they were unusable as schools. And so what we've been doing is tearing them down and demolishing them. We're looking to do other things with them. So, Parkland, sharing it with our Parks and Planning Department. We are looking at housing development for potential use. We're looking at clean energy development, and we're looking at alternative community uses for those sites. We don't really want to give up the sites if we don't if we can avoid doing so. For one simple reason, we are in an area where we're the largest landholder, but most of the land around us is being developed. So as a site either is unburdened with the school and no longer has a school on it, when then what we might want to do is say, okay, we're going to keep it for future in case there's growth in the area. We want to hold on to the land. So, we'll find a temporary use that can work under a ground lease. And then we generate some revenue off that property in a non permanent use. And then when we need it, usually probably in ten to thirty years thirty to twenty years or forty years, then we'll be able to get that property back and reuse it for what we need to use it for.

[Jamie Bauer (Housing Division, Dept. of Housing & Community Development)]: Thank you. And

[Emilie Kornheiser (Chair)]: two more questions. The way you're describing this, it sounds like a very tidy, top down process to some degree. How did community engagement work?

[Sean Matlock (Prince George’s County Public Schools)]: So in some ways it was, in some ways it wasn't. So what we do for every project is we have what's called a project planning committee, right? So that's made up of both the faculty, local politicians, local homeowners associations and other groups that are involved in the design of the facility, not so much from a, well, how big will it be or what program will go into it, but some of the aesthetics around the building and the site and the use of the site, how it fits within the walk zone, how it fits traffic issues, things like that that we need to consider when we're putting together a building. There is, in order to get mandatory referral, which is a requirement for us under the development under the project planning requirements in our county, we have to hold a number of local meetings with the community at large. So, we both communicate with the school community, but we also have several meetings with the community at large to discuss what we're planning to do and how we're planning to do it. Now let me just say this, not everyone is always happy. We did have we did build one school.

[Emilie Kornheiser (Chair)]: You don't need to tell us that.

[Sean Matlock (Prince George’s County Public Schools)]: We did build one school where the community did not want the school. Unfortunately, though, we had to build it there. It was just no choice. We also had a community that's been asking for school for the last forty years, and we finally were able to deliver them the school that they've been waiting for for forty years. So it's a mix and match.

[Jamie Bauer (Housing Division, Dept. of Housing & Community Development)]: Thanks. And then my

[Emilie Kornheiser (Chair)]: last question is, are you using union labor on all this building?

[Sean Matlock (Prince George’s County Public Schools)]: Yes. So on the first project, roughly about 30% of the contracts went to union shops, mostly your big union shops, like your, you know, electric, HVAC, that sort of thing. On the second p three, we have a project Lagerburg agreement and almost all the work is going to union shops. So and and we we worked out a a basically, the developer was required to work out an arrangement with the with the with The U with the combined union representation, and they basically now provide some of the oversight on contracts from that standpoint. So two different P3s, two different delivery models, two different selection models, very different projects. But same general idea.

[Rep. Carol Ode]: Representative Ode Burkhardt, Masland. I was interested in what you said about even bond payments over the years because we just saw an example from another town where it it's here and then it goes up and then so what what do you do? What what do you do, though?

[Sean Matlock (Prince George’s County Public Schools)]: So so we didn't do the financing on it, but we did help structure it. Had one of our best advisors as a company called XXM, and they helped us put together the financial model for it. And basically, when the market was really much like the model that we put out and because it was a government backed project, the return on the project looked pretty solid, we actually oversubscribed by 500%. So we asked for 700,000,000 in capital bond funding for the overall project. And we got $3,500,000,000 in orders. And as a result, we were able to then go back and negotiate down the financing charges and able and then as a result, we ended up coming up with a flat financing number. And so there is no escalation on the charge. It will be the same amount of money, same contribution from the state and the county every year and for the next thirty two years.

[Emilie Kornheiser (Chair)]: But if

[Rep. Carol Ode]: you had asked for the 500 and then had go down to 300, well, what would you do if you really thought you wanted a 100 and then that's all you wanted and you wanted to be even? Do you stuck with financing people?

[Sean Matlock (Prince George’s County Public Schools)]: Well, that's a hypothetical. I'm not really sure how to answer, But I can say that we've been very successful on both tranches. And P3s are very well liked in the marketplace because the returns are pretty stable. That's why they like them. And in fact, the second one, we are even opening it up to the public. So what's happening is 10% of the equity portion is being made available to residents within our County so that they can participate as investors in the overall project. Anything that they don't buy, then the developer will retain, but we're making it available to them so that they can participate because the return is significantly higher than general a regular investment would be. So that's kind of it's a very good investment for the banks apparently. The way they've structured the financing is very, very favorable to us.

[Emilie Kornheiser (Chair)]: Thanks. Mr.

[Rep. Bridget Burkhardt (Clerk)]: Malik, you mentioned that there is a contribution from the communities. So there's a portion of the projects that are not state and county funded. How do the local communities go about raising that additional revenue to provide their portion?

[Sean Matlock (Prince George’s County Public Schools)]: So, it's all state and county funded on our side. What we're allowing them to do is join the developer group basically as investors. And so, any local person in the county will be able to contribute up to $200 per share and up to the 10%. And so it's for them. What happens is the school system, less than 20% of the people have kids in the school system. So that means how do you make this something that's attractive for the rest of the people in the community? How do they benefit? Well, yeah, they do benefit from a better infrastructure and money saved on better schools and things like that. But one way to make it a more direct benefit to them was to give them the opportunity to invest. And I think the return is like 9% annually. So it's a very nice return And it's a stable return. And if you want to invest, you can. If you don't, then the developers will keep whatever you don't buy. But we're giving them up to 10% to the community in order to invest in this project.

[Rep. Charles Kimbell (Ranking Member)]: There is something else to. That?

[Rep. James Masland]: Yeah, easy question, sir. Again, thank you again. In your county, is your enrollment in declining declining or increasing?

[Sean Matlock (Prince George’s County Public Schools)]: So, that's a tricky question and I'll answer it this way. What we are a county that used to have a lot of refugee and asylum seekers and stuff because of where we're located, right? So, we've seen as a result of the decrease in immigration, we've seen a decrease in our overall enrollment. So we've gone down about 2,000 students, I think this year from where we were last year. So we're seeing some decline in enrollment in that regard. But our buildings are getting bigger because we're putting pre K like some of the other schools. We're putting Pre K classrooms into our schools and the state is moving towards universal Pre K. So we are using more capacity, though our K-twelve enrollment is going down slightly.

[Rep. James Masland]: Thank you very much.

[Emilie Kornheiser (Chair)]: Thank you. Thank you so much for your time today. Really appreciate it. I think we all took a lot of notes around the table and appreciate your patience if a couple of us are back in touch.

[Sean Matlock (Prince George’s County Public Schools)]: Oh, hey, we're here to help other school districts and other places to build schools for schools. The reason why Schools For Our Kids, because I'm involved in this not primarily because I really think that our kids deserve to be able to go to school in healthy, really good learning environments. And learning environments can't just be a warehouse because there's so much that goes into a good school. And we're just trying to build better schools. And if I can help in any way, know, I'm a phone call away.

[Emilie Kornheiser (Chair)]: Thank you so much. Thank you.

[Rep. James Masland]: Thank you. And

[Emilie Kornheiser (Chair)]: next up, we have Mario Carino from Rhode Island. Another. Thank you

[Rep. James Masland]: for this day.

[Emilie Kornheiser (Chair)]: Sure. Thanks to everyone who helped back up the testimony for it. Hello. Thank you for joining us. Thank you for your patience in waiting for us to get to you. I'm sorry we put you last. And we've all heard a lot about the Rhode Island model over the last few years, and just really glad to have you here.

[Mario Carreno (Rhode Island Department of Education, School Construction)]: Thank you, Madam Chair. Very similar to your state, we were in a moratorium between 2011 and 2015. We conducted a needs assessment, I think, very similar to what you have done, which identified at the time it was over $3,000,000,000 of needs that were deferred throughout our state. The average age of our buildings was over 60 years old. And the legislature and the governor at the time made it a priority to help solve this. One of the things that is apparent is that there's also a cost to doing nothing, and I think that should also be determined here. In the example that James gave earlier, that that new project that he referenced, which was $99,000,000 a few years ago, has now escalated up to one thirteen. They're gonna cut out scope to get it back to 99. You just are gonna get less bang for your buck by waiting. That applies to everything. Costs over the last, I think, five years are up 30%. So there's a cost of just waiting and delaying. These buildings don't regenerate. They don't get better. You have to act to make a significant change. We have a reimbursement based process in Rhode Island that ranges from 35% as the minimum to up to 96%. It's a wealth index. This funding formula for schools is separate and apart from our foundation aid. Rhode Island General Law 16735 makes it very clear that the purpose of what's known as school housing aid is designed to ensure adequate school housing for children, but also, and I think it's important, is to guarantee that it doesn't impact the operations of the school district. The prospect of having to fix a boiler or a leaky roof in the in exchange for laying off 10 teachers doesn't seem like a wise trade that anyone should be consider making it. Even some of the examples earlier today seem problematic, and that's not a choice that that should be made, which is for that reason Rhode Island law separates the two, so you don't make that choice. Local districts will issue bonds and the state then reimburses them over a twenty to thirty year period. This is done for a variety of reasons. Number one, it's to ensure that the project actually completes until the time of completion. The risk is 100% on the local municipality. The state does not pay a dime until the work completes. Once it completes and it's confirmed that it conforms with our school construction regulations, then we'll begin to make our debt service payments again over a one to thirty year period. We also reimburse capital reserve funded projects. So those are projects that are smaller in scale that districts have available resources to fund. Those are reimbursed in one to three years. As recently as 02/1822, the state issued a statewide school construction bond, and access was given to every LEA in the state. That was to help spur projects as well as reduce the size of local debt by issuing that bond. We have a proposed bond this November, a $50,000,000 bond specifically for CTE programs and those investments. That's another funding source we've had. The third one that's been in effect for ten years now is known as the school building authority capital fund. It allows the state and the Rhode Island Department of Education to target specific types of programs. It could be CTE related. We've had a facility equity initiative. It's been known as. We have done a food truck program, which we've given 16 food trucks to high schools across the state to help kids learn how to start a business. We have done funding for the arts, for wellness furniture, for technology and equipment. So it just gives us a wide range of latitude to address our buildings. With that, I'll turn it over to any questions, and I'm happy to share other details, as detailed or as not detailed as you'd like.

[Rep. Charles Kimbell (Ranking Member)]: Sure. Could you 35% to 96% assistance in repaying the bond taken out by the school? You said it's the calculations by a wealth index. Are you talking grand list? Or is it tell us how you figure out the index.

[Mario Carreno (Rhode Island Department of Education, School Construction)]: Yep. So it's the easiest way to put it is we look at the average daily membership for a community as compared to its aggregate property values, and then we divide that over the state's average daily membership and everyone's property values. I mean, we actually have a sheet. I'll send it to But essentially, it's that. It's your enrollment and your property values compared to that of the state that that figures out your base reimbursement rate. We also, between 2018 and 2024, the state had specific incentives to help encourage behavior from districts. I know earlier on, there was a discussion about potential regionalization. Without incentivizing or offering some sort of care, you'll find it it defies logic that local communities don't wanna work together. Your state is the same as ours. You will be hard pressed to find a local school committee or a town council who wants to give up their high school or give up their school system that's been a part of their town for hundreds of years in Rhode Island specifically. So we have incentives for and have them for newer and fewer, where if you have two buildings with that are half full and you replace them with one, you receive additional aid. If you were underutilized or overutilized and address that, if you did educational enhancements or health and safety, and districts were able to get up to 20 points. That was a huge boost in approval since 2018. Rhode Island has approved $5,500,000,000 of work for districts throughout the state. I believe at the moment, we're tracking 50 new or like new schools in Rhode Island, which doesn't sound a lot, but we have, I think, a very similar number of schools to you. We have three zero six. The 50 new schools is the equivalent of California doing 1,300 schools. So at scale, it's a really large number that's done, but that's really driven by both the incentives, which were temporary in nature, which I think it's critical because you want decision makers to move forward. Again, the cost of waiting is something that you probably can't afford. And then it was also spurred by state by state bonds to help offset the cost of design and some of the things early on to get projects up and running.

[Rep. Charles Kimbell (Ranking Member)]: I have two quick follow ups. The part that isn't covered by the state aid for Chittenden, is that raised by local property taxes? Is it raised by some other source of revenue on the school district basis?

[Mario Carreno (Rhode Island Department of Education, School Construction)]: Yeah, so the way we have it here in Rhode Island is a district who is interested in applying, they first have to come through an approval process through the Department of Education, in that we look through the needs of the building, we look at enrollment projections, we look at local approvals. We look at a wide range of I mean, the applications are thousands of pages, and then we will decide what level of approval we'll grant them for the projects that they are proposing. In almost all cases, the needs that are identified locally far exceed local bonding capacity or even state willingness to address them. So we ask communities to prioritize. We further review and prioritize and then move forward with an approval. There are instances in that we might approve, and I'll give you an example for a community. Warwick is the name is the city. They're looking at doing two high schools. We had approved 313,000,000, but they wanted to do 350,000,000. There were there was there was some scope of work that they felt that they needed, that the community was willing to pay for, that the state wouldn't reimburse. They went forward. They got approval from voters for all $350,000,000. What'll happen is they have their debt service. We'll prorate what part of their debt is eligible, and then we'll run our reimbursement rates for them. Again, one of the reasons they were able to do both of their projects is because they're going to pick up 20 percentage points additional aid from the state on top of their base rate of 35. Percent. So they're going to get 55% reimbursement, which it makes it financially feasible for them. And that way they're able to do both projects at once, which again, there's a cost to do it now, but the cost to do it now will always be less than doing it in ten or twenty years.

[Rep. Charles Kimbell (Ranking Member)]: For Woodward, in that case, are they paying for that percentage that's not coming from the state from property taxes and work?

[Sean Matlock (Prince George’s County Public Schools)]: That's correct.

[Mario Carreno (Rhode Island Department of Education, School Construction)]: Yep, that's

[Rep. James Masland]: correct. Okay,

[Rep. Charles Kimbell (Ranking Member)]: and then the second question, if you have some communities that have a huge state aid, maybe it's like 80%, do you have examples of where that school districts has decided even with that aid that they're not going to move forward with the school construction project?

[Mario Carreno (Rhode Island Department of Education, School Construction)]: So the flaw, if you will, of a reimbursement based program is that the communities who don't have any money are the ones who are at 90%. So in this case, the example of the one who has 96%, the the state actually had to issue a bond for them. They exhausted every avenue. There was no mechanism where they could issue a $100,000,000 bond even if the state was paying for 96,000,000 of it. That's because the way it works in Rhode Island, and I think that was touched on at the very beginning of the meeting, we have an entity known at the as the Rhode Island Health and Educational Building Corporation, RIbek. The municipality is responsible for making a payment, which then is reimbursed, in some cases, as little as a day. They just can't come up with that payment, even though they know they're getting back 96 in in a day. So they we had special legislation for them. Providence, who I'm happy to share a report that we released on Friday, they get 80% reimbursement, which was temporarily boosted to 90. For decades, even though they had the means to do work, they chose not to. I think that district's also been under state control since 2020, but you can see some of the influence that's there. They are now looking at a billion dollar plan, rightsizing their buildings. And by 2030, they will be, I think, the one of the only urban districts in the country who can say that 100% of students will have access to new or like new schools. Change is possible, but it does take some encouragement. To answer your question, even though you have a higher reimbursement rate doesn't mean you will actually do work.

[Emilie Kornheiser (Chair)]: And so in that, I want to just drill a little bit further into that scenario. So you said that the state issued that bond. Did the state say, we're giving you this building whether you want it or not. Here's your bond?

[Mario Carreno (Rhode Island Department of Education, School Construction)]: No. No. We did This is, and again, this is a collection of stakeholders and interest groups. So you have a buy in from the mayor of the city of the school committee. I mean, their, their existing high school is 100 years old in Central Falls. And it's, you know, some old buildings are fine if you maintain them. Theirs is not the case. And you can't hold kids accountable when the roof is leaking on them and the windows. So the need was there. There was a desire to do the work. There was a push and buy in from the legislatures, from the treasurer, from the governor. Like, it takes everyone to come together to solve that one.

[Emilie Kornheiser (Chair)]: Thank you. Present a picklet. You.

[Rep. Mark Higley]: Mario, I think I heard you mention that there was a scoring of the projects. Do you have something you could send us as to what that looks like? Maybe explain it a little bit, but I'm sure it'll be rather complicated and complex.

[Mario Carreno (Rhode Island Department of Education, School Construction)]: So it is and it isn't. So in that, when this boom started back in 2000, and originally in '16 when they lifted the moratorium and then after with the incentives, the legislature set a prioritization system. And I'll send I'll share with you our scoring. In the event that the number of projects exceeded available funding. We never had to use that. So we did run the exercise. We had a scoring rubric. We would rank every project that would come in, and we we would present it to our console, and they would approve it. That never had to be used. Again, the the the depending on your angle, the benefit of a reimbursement based system, at least for the state, is that you get the economic impact now because you're issuing the bond, you're putting people to work, you're doing the project, but you don't repay for it probably four years after it's approved and then over a twenty year period thereafter. In that, we were able to approve projects and never pushed up on the limit of having to actually use the prioritization list. Two years later, the assembly actually removed that criteria, and anyone who came through our process and showed that there was a need gets approved. It's an entitlement program in the state of Rhode Island. So I can send it to you. It's a historic document. But we fortunately, we didn't have to use it. Again, it's hard to determine, you know, from one community to another what like who's like, who's more valuable? It's a hard question to even have to answer.

[Rep. James Masland]: Representative. Thank you very much. I think you just answered my question with your scoring mechanism. But I was wondering, and I asked the previous week, I witnessed if there are basically competing school districts for resource. Would your scoring process help you sort that out or do you have another process process available?

[Mario Carreno (Rhode Island Department of Education, School Construction)]: So again, in 2016, there was like that. The thought of it was that if funds became limited, then yes, it would enter into, like, this competition realm. Whether that's right or wrong, that's been removed. It's a straight up entitlement program. If you can document need, you can do you know, we have a a square foot cost that's approved annually. We have a square feet per student that we approve. Like, we have an elaborate document that ensures that every project that's being completed has a useful life of fifty years, that if you satisfy this criteria, you have local buy in from both municipality and the district. The voters are going to approve it. You also are required to get general assembly approval on every single bond issuance before it gets to voters that if you satisfy that criteria, the state will agree to fund your project.

[Rep. James Masland]: Very helpful, thank you very much.

[David Shearer (Deputy State Treasurer)]: Two other

[Rep. Charles Kimbell (Ranking Member)]: questions. What is the source of the funds that you're using to provide that subsidy on bonds? That's the one question. And the second is you still have a separate foundation formula for the regular education of the students that's operating at the same time, correct?

[Mario Carreno (Rhode Island Department of Education, School Construction)]: That's correct. So I'll do your second one first. The formulas actually start the same, the housing formula and the basic education aid formula in terms of attendance and wealth divided by those. The funding formula then becomes more complex and they look at wages, they look at the ability to raise taxes, they look at the number of families from K to six who live in poverty. Like there's other criteria that are not part of the school housing aid formula, but both have formulas in statute and they're separate and apart. So if you go, you go to our website, you'll see every city in town has their laid all listed out, including any categorical funds that exist for them. And then separately, you'll find school housing aid on a different document. It's a different from them because the thought is one shouldn't compete with the other. And that's been a constant in Rhode Island since 1960 when School Housing Aid was created. In terms of your first question, these are general revenues. So the the process that we have is we we get our approvals. Every summer, we survey every district on projects that, number one, have completed and projects that they anticipate completing the prior year or the subsequent year. We will look at their debt service schedules. We'll figure out how much is needed, and then we give that information to the budget office. So they they always have the information in advance so they're able to budget appropriately for these. I will say at least since 2016 with this process, the school construction aid category has grown slower than our overall budget. So it hasn't been an issue now. With 5,500,000,000.0 approved, that may not always be the case. But at least for the first ten years, we have been able to approve and complete hundreds of projects across the state and are funding at a rate slower than the increase of our overall budget.

[Rep. Charles Kimbell (Ranking Member)]: Okay. Thank you. What is the actual annual layout for that subsidy? Do you know off the top of your head?

[Mario Carreno (Rhode Island Department of Education, School Construction)]: Yep. So this current fiscal year, we are 119,000,000.

[David Shearer (Deputy State Treasurer)]: Okay.

[Mario Carreno (Rhode Island Department of Education, School Construction)]: That includes projects. It's a medley of projects. Right? We we've had housing aids since 2000 and sorry, since 1960. Though no projects from that era are still on our books, but we have projects that were approved in '95 that we're still paying for the last couple of years. Projects come off every year, new ones jump aboard, and it it just changes. But we also have the information to share with our budget office and the general assembly so they can adequately budget for that.

[David Shearer (Deputy State Treasurer)]: Thank you.

[Rep. Carol Ode]: Can I ask

[Rep. Bridget Burkhardt (Clerk)]: Mario what the administration, like what the administrative team looks like? So where is the administrative team for construction housed? How many people are there? I'm just trying to envision what that looks like because we don't have

[Mario Carreno (Rhode Island Department of Education, School Construction)]: Sure. So we have a very small staff. For the majority of this time period, they were either three or four of us who were here at RIDE. We have two architects, myself. And then we've had like it's rotated, but we've had three or four people. We recently received a federal grant. So we've expanded to seven, though though three of them are temporary. But we have four now. We we review the stage one applications as it's known where it's like you document the needs. The stage two is the solution to the needs. We do a lot of outreach with our districts. I think something that's really important understand is that there's it's almost like a curve of influence that the farther the project gets along, the less influence the state has. So we are at the very forefront of this in that when districts are even beginning the process, we'll meet with them, with their building committees, we will make suggestions, we share our statewide assessments with them on opportunities that may exist. We will try and see if any districts around them are even interested in working together, though you won't find many where that's the case. Once the project is approved by our council, we also will do design reviews to make sure that the projects are approved in accordance with our regulations. Because of the volume of projects, we have consultants who help us with those reviews. Historically, we would do them in house, but when you get into the billions, we can't do that with just three people. We also have a variety of funding sources. I mentioned earlier with the capital funds, state bonds, and reimbursement. So we have a person who's dedicated to making those payments. We also work with the with Rybeck who has, I think, three people there, and they help process the payments to the cities and towns. So dedicated staff would be as little as four. But then also we we benefit from, you know, Rybeck as individuals. We have legal here at Ride who a portion of the time is for us. We have the finance office at Ride who, you know, a small portion is for us, but it's essentially very lean entity and team that we have here at Ride.

[Rep. Bridget Burkhardt (Clerk)]: Thanks. One follow-up question. When districts are going to create their projects or do their projects, are they all then it sounds like it's such a small team they are then responsible for going out and doing their bidding process to find a consultant to help them develop a project. They're responsible for all of that master planning that happens before the project even gets to you. Or do you have any role in technical assistance in helping them find consultants or find architects or builders that are going to help them in their process?

[Mario Carreno (Rhode Island Department of Education, School Construction)]: No. Great question. So we have created several what's known in Rhode Island a master price agreement list where the state will procure services for project managers, for architects, for prime contractors. We'll review them and have them on a list. So at a minimum, they're able to go to those lists and access them. Typically, the contracts are under $250,000, they're able to just grab someone from that list, though that varies municipality to municipality, whether that threshold applies to them. But we do offer guidance with those lists. We will also meet with districts and give them feedback from from our own staff here. But they are ultimately responsible for picking their vendor. They are responsible and beholden to their building committee, which is a variety of stakeholders, both municipal school district as well as the public. And that's really where a lot of these decisions lie. And then we'll we will frequently attend those meetings. I mean, the benefit of a small state, we can get anywhere in Rhode Island in an hour. I mean, we we do meetings all the time with districts, and it seems to work, fairly well.

[Rep. Bridget Burkhardt (Clerk)]: This is just a tiny question, which I probably could look up while I had. How many districts do you have?

[Mario Carreno (Rhode Island Department of Education, School Construction)]: This is, so districts is 36. However, we also have charter schools, which we have, I think, an equal amount. So even though we have, we are a state with declining enrollment, which is probably very similar to to y'all, we have more LEAs, which is the term we use, which includes both district and charter schools than we did twenty years ago. So we have, I think, 65 LEAs, which brings up other benefits and challenges. Have, right, 65 superintendents in counties. I think the the gentleman before me has a county that's probably bigger than Rhode Island. Right? We have we frequently so I also oversee transportation, and we will frequently compare our system to Montgomery County in Maryland, where they have 25,000 more students than Rhode Island, but we spend $40,000,000 more than them on transportation. We like, there's there's a tremendous amount of inefficiency with a with a bunch of tiny districts all with declining enrollments. And we have we have more districts than we did twenty years ago. Thank

[Rep. Carol Ode]: you so much. Really helpful. Thank you so much for your

[Emilie Kornheiser (Chair)]: time today. I really appreciate it.

[Sean Matlock (Prince George’s County Public Schools)]: No problem.

[Emilie Kornheiser (Chair)]: And for your time, for all the other times you've testified over the last few years as we Thank figure this you.

[Mario Carreno (Rhode Island Department of Education, School Construction)]: Good luck.

[Emilie Kornheiser (Chair)]: Thanks. So before we move to a new topic, I'm just gonna ask folks to please make sure you're keeping good notes of what idea sounded good that we can put in the pot. Charlie and Bridget are going to hold this pot.

[Rep. James Masland]: Think the question for Charlie, could ask now later And the witnesses, if I could ask him to testify that separating the bond payment from something else that you would know something about? Let me see if I call it back up here. I'll think of it.

[John Gray (Office of Legislative Counsel)]: Okay, all right.

[Emilie Kornheiser (Chair)]: So we're going to move to special education. As folks might remember, we looked at language on this last

[Erin McGuire (Essex Westford SD; past president, VCSEA)]: week.

[Emilie Kornheiser (Chair)]: It was about maintenance of effort. And we have Erin from the Special Education Association here, the Vermont Council of Special Education Administrators, in fact, to testify about that language. Erin, thank you for your patience as our agenda got moved around.

[Erin McGuire (Essex Westford SD; past president, VCSEA)]: No problem. Happy to be here. Thank you for inviting me. So can you hear me okay?

[Emilie Kornheiser (Chair)]: Yeah, you were like a black box for a minute, but now you're

[Rep. Carol Ode]: here. Hi.

[Erin McGuire (Essex Westford SD; past president, VCSEA)]: Okay, great. Great. And my audio is coming through fine. Yep, everything's perfect. Wonderful. Should I just jump in or are there?

[Emilie Kornheiser (Chair)]: The floor is yours. Okay, wonderful.

[Erin McGuire (Essex Westford SD; past president, VCSEA)]: Thank you. I'm Erin McGuire. I serve as the director of equity and inclusion and co director of student support services and instruction for the Essex Westford School District. I am the past president, in the Vermont Council of Special Education Administrators, and I am also the past president for the Council of Administrators of Special Education, which is the national organization for special ed directors. I've been a special education director for about twenty five years, and I'm grateful to have an opportunity to talk with you all again related to the need for some conversation about maintenance of effort in the funding language in Vermont's funding related both to our needs in FY27, and I'll tie that to '28 and '29, as well as its association with the Future Foundation formula that has been in conversation related to Act 73. So I'm hopeful to talk about both of those topics. But before I jump into talking about how MOE applies, maintenance of effort applies in those two contexts, I'd like to just remind the committee related to the obligation that we have under federal law in IDEA, the Individuals with Disabilities Act, to ensure that we are maintaining our investment in special education in order to gain access to our federal funds. Federal funds in special education in Vermont play an important role. We are able to pay for many of our services in Vermont using federal funds. And if we do not spend at least as much as we did the year prior in local and state funding combined in special education, both at the local and the state level, we will not be able to fully access our federal funds. It is a requirement of federal fund access. You might know the language supplanting as the language in the federal law that sometimes requires particular actions to take place in order to spend federal funds. The maintenance of effort standard in IDEA is the supplanting rule to make sure that we are investing locally prior to having access to federal dollars. There is a requirement to spend at least as much as you did the year prior, with some exceptions. If you have students who move out of district who are expensive, for example, that cause you to spend less, then you may reduce your maintenance of effort calculation to that lower number. So it doesn't mean that you can't sometimes have the amount that you spend the year before between state and local dollars actually drop in the calculation, you can through exemptions. But making systemic changes to the way that you deliver services is not an exemption for MOE. It is important that we do not put special education and general education in competition for the same dollars. And as we move forward with design for education funding in Vermont, we want to make sure that we don't do that. And so the suggestions here today are twofold to ensure that we don't create that challenge. The first one is related to your yield bill and the need to, and the language that is in there to ensure that we are adding an inflator to maintenance of effort to continue. The census model from Act 173 into next year to make sure there's funding for special education aligned with Act 173. You may remember that Act 173 made a change to the way we fund special education. It shifted it from a reimbursement model prior to act one seventy three into a census model for Act one seventy three post and Victorian. Yes I'm going to

[Emilie Kornheiser (Chair)]: interrupt you for a second. I'm sorry. So that language which we put in the yield bill, and we voted the yield bill out of the house last someday last week. And it was referred to the senate, and usually, the yield bill goes directly to senate finance. Mhmm. It was referred to senate education, and it might I we think it's because of that language. And so if you have the bandwidth to go check-in with senate education, that would be super great.

[Erin McGuire (Essex Westford SD; past president, VCSEA)]: Happy to do that.

[Emilie Kornheiser (Chair)]: It's a the fact that the inflator just sort of wasn't there is very confusing.

[Erin McGuire (Essex Westford SD; past president, VCSEA)]: Grateful that you all added the inflator back in from Act one seventy three. So thank you. And I definitely can check-in with Senate education and we'll make a note to do so and follow through on that, to help them understand why that's so essential. I did just want to note, though, that the yield bill is a one year solution to that, and we have FY '28 and FY '29 that will continue to be unstable on this issue without a permanent fix. So I did just want to point that out. I'm grateful for the one year solution because I think it's a

[Emilie Kornheiser (Chair)]: permanent fix. It was a permanent statutory fix. It was just living inside the yield bill as its little vehicle.

[Erin McGuire (Essex Westford SD; past president, VCSEA)]: Oh, great. Great. I understood the yield bill to be a single year.

[Emilie Kornheiser (Chair)]: Oh, the the section that's the the section that it sets the yield is a single year, but the section of statute that we amended for the insulator was a forever little bit of statute.

[Erin McGuire (Essex Westford SD; past president, VCSEA)]: Fantastic. So that's great to know. You for that and that sounds great. That aligns with the testimony that we wanted to provide today on that topic. So let's move now into what we really want to talk about. Sorry for that little bird walk.

[Jamie Bauer (Housing Division, Dept. of Housing & Community Development)]: No, no, no. And that's why

[Emilie Kornheiser (Chair)]: I interrupted you. So thank

[Rep. Carol Ode]: you for

[Jamie Bauer (Housing Division, Dept. of Housing & Community Development)]: letting me

[Emilie Kornheiser (Chair)]: do that.

[Erin McGuire (Essex Westford SD; past president, VCSEA)]: Thank you for interrupting. That was important. So, what I want to talk about next is the need to ensure that in statute we establish an expectation when the foundation formula goes into effect that we will fund special education above and beyond the foundation formula, which is my understanding is the intent in everyone I've talked to that we are looking to fund special education separate from the foundation formula, that the foundation formula will be the allocation for general education. And what I'm looking to do is establish an expectation that the amount of money that will be established in partnership with the foundation formula will meet that same standard of maintenance of effort plus an inflator model. And, and that that would be that would need to be true whether you put in a waiting structure, which is currently in Act 73, whether you put in, keep the census grant model, in order to fund special education above and beyond the foundation formula. What we want to do is make sure that we are not putting school districts into a competitive state related to foundation formula funds in order to meet maintenance of effort. I think that would be harmful to students. It would be harmful to districts trying to manage how to handle that. And I really don't think that we want to put students and families with disabilities and those of us working to serve those students in a place where we're having to move into foundation formula funds in order to fund special education. Move So that is really the ask from VCSEA is to establish an expectation that we would go ahead and say whatever model we put into place, the the standard of expectation is that the model will fund at least two MOE plus the inflator that you actually put in the yield bill and sounds like is in perpetuity from this point forward. So that is really the ask in order to make sure that we are appropriately funding special education with any funding change that we make. The last thing I'll say, and then I'm interested in a dialogue questions that you might have for me, is that we want to make sure that whatever we put structure into place, or we put that census model into place, that the people who are doing the studying of that, which is the Agency of Education who will have a report for you, has a clear understanding of that expectation from you, because I'm very worried that the study will suggest a model that doesn't do this, quite frankly. So I understand that, you know, it's possible that they might consider this issue in the study, but I think it needs to be required that whatever model is recommended to the legislature into funding special education within Act 73 is clearly ensuring maintenance of effort level of funding plus an inflator to school districts above and beyond the foundation formula. So that is why the language was proposed to you all. I am not I'm certainly not ledge counsel and I am not an expert in writing legislation. So we did our best to describe what that might look like and open to a conversation about how we might ensure that we are moving forward with the design as you talk about the foundation formula that does not unintentionally put special education in general education and competition.

[Rep. Carol Ode]: So the language that we have posted that came from you, but

[Emilie Kornheiser (Chair)]: was Yep. Revised very slightly by staff, that works for you? Yes. Okay.

[Erin McGuire (Essex Westford SD; past president, VCSEA)]: I mean, I well, I I have not seen should I have seen language?

[Emilie Kornheiser (Chair)]: Sent it to you. It was in the email I sent you. It's on our website. And it's also email. Okay.

[Erin McGuire (Essex Westford SD; past president, VCSEA)]: I asked Mary Lundin for it. She had indicated she hadn't seen it. And she is not here unfortunately because we had to move the timing, but I definitely can take a look at it. And you're saying it is in the email that you sent related to this testimony?

[Emilie Kornheiser (Chair)]: So, whenever Rebecca Holcombe sent you the language, but it's also posted under today's the Commerce Committee website. I can also And Sorcha will send it to you.

[Erin McGuire (Essex Westford SD; past president, VCSEA)]: That would be great just so I can get it right in front of me without needing to, like, search around. That would be amazing. Absolutely. I guess my question to you would be, do you feel like the language matches the testimony that I've provided and what I'm asking for?

[Rep. Carol Ode]: I absolutely do. Yeah. Give you a vote.

[Emilie Kornheiser (Chair)]: No, Erin.

[Rep. Charles Kimbell (Ranking Member)]: I was just thinking, that from what your testimony is and thinking about how we had thought about the construction of a foundation formula for special education, I hear a concern that it by itself and that construct would not satisfy the maintenance of effort or very likely could jeopardize it.

[Jamie Bauer (Housing Division, Dept. of Housing & Community Development)]: Correct.

[Rep. Charles Kimbell (Ranking Member)]: Even if it was carefully constructed.

[Erin McGuire (Essex Westford SD; past president, VCSEA)]: We would need to make ensure that awaiting design would meet the maintenance of effort threshold. And if you did that, it might make the weights cause over funding in some places. So if you established the weights to ensure that the district that needed sort of the highest amount to meet maintenance of effort, and then those weights get applied to everyone, you may be overfunding. And I know we don't want to do that. So I worry about the current waiting design that is inside of Act 73, no matter how carefully you create weights that apply to everyone that might create some real issues for you in one direction or another. Either you're underfunding and creating a maintenance of effort problem for some people or you're potentially if you you could overfund which you don't want to do.

[David Shearer (Deputy State Treasurer)]: Thank you. That's what I thought you were calling.

[Erin McGuire (Essex Westford SD; past president, VCSEA)]: Yeah. And then, I think the idea of a census model kind of falls into that same category if you're trying to base a census model on number of students because the census model from Act 73 only funds about 50% of special education. So while we created a glide path to be able to say, Okay, everybody's going to get to the same census model, the rest of the funding for special education was able to be fluctuated within our typical process of budgeting and funding through our property tax model. So with the calculations around CLA and tax rates and all of that. So worry if you move to a census model, you almost have to establish the floor of the census on maintenance of effort. Otherwise, you're going to run into that same problem. You might be able to create a glide path to a more common census that isn't based on a historic maintenance of effort. But if you don't base the 100% of, if you're going to fund it 100% through a new model, then that model has to fund at the level of MOE for everyone, which is going to create variability by school district based on what they spent the prior year, as opposed to some waiting formula or some census model based on a student count. So that is the dilemma that we have, which is why I think establishing a floor of maintenance of effort, and maybe a glide path to change the arc over time of special education funding might be possible. And you could do that in a census model. You could do it inside of a weighted model, But what you would need in order to get to that place is some kind of like calculation that creates the right the just right amount of funding in partnership with your model to make sure maintenance of effort is met.

[David Shearer (Deputy State Treasurer)]: Got it. Thank you.

[Erin McGuire (Essex Westford SD; past president, VCSEA)]: I'm just looking at this language.

[Emilie Kornheiser (Chair)]: And Erin, you can get back to us. I don't wanna force you to read on a big Zoom screen and that. I wouldn't wanna do that if I were you.

[Erin McGuire (Essex Westford SD; past president, VCSEA)]: It's fine. Yeah. I mean, I will let you know if there's any deep concern about what's written. I as long as our intent is aligned, then I think we're probably where we where we need to be. And then this will then be as long as it passes through, obviously,

[Emilie Kornheiser (Chair)]: then

[Erin McGuire (Essex Westford SD; past president, VCSEA)]: it would be provided back into the folks who are doing this study so that when they come up with a recommendation, it will actually meet the needs of Vermont. My biggest concern is that we're going to spend a bunch of money on a study that unless it does this is not going to be able to meet the needs of Vermont. And then we're going to be back in this conversation about how do we revise what has been suggested to make sure that we're not falling off this cliff. So I I really appreciate you.

[Emilie Kornheiser (Chair)]: Yeah. Thank you. And when if you do have any thoughts, will you make sure you copy Sorcha on them so she can for us? Thank you very much. Absolutely. Thank you, Erin. Thank you so much for your time today. Please send my apologies to Mary. No problem. If she does wanna jump on and testify later this week, she's welcome to.

[Erin McGuire (Essex Westford SD; past president, VCSEA)]: Wonderful. Thank you so much for having me, and have a great rest

[David Shearer (Deputy State Treasurer)]: of

[Rep. James Masland]: your day.

[Rep. Carol Ode]: Thank you.

[Emilie Kornheiser (Chair)]: Bye bye. Bye. And folks, we are done for the day unless I my preference would be to digest all my thoughts from that enormous block of time before we have a conversation. Great. Okay. We're gonna do that. Tomorrow, we're not going to the floor. We're excused from the floor all week. Like I said, after we're done, if that's far for you, let me know, and I'll change the plan. And then so we're going to do a combination of how merger incentives worked under Act 46 in the morning. And then we'll spend the afternoon talking about what merger incentives we might want to carry forward into Act 73.

[Rep. Carol Ode]: And I also have the capital bill.

[Emilie Kornheiser (Chair)]: Oh, and we have to we're starting the day with the capital bill. We're not gonna spend a lot of time on the capital bill. So I hope you're not disappointed about that.

[Rep. Mark Higley]: Yeah. Well, merger incentives, want to carry forward into like 73. Is that because there's no movement in the House in particular on the district?

[Emilie Kornheiser (Chair)]: There is much movement in the House on districts, Representative Higley. However, those districts are right now likely going to leave the House Education Committee as brokered voluntary districts. Right. Yes. And so we wanna make sure that we have a fiscal plan that supports them coming together locally.

[Rep. Mark Higley]: So so again, because there's a

[Jamie Bauer (Housing Division, Dept. of Housing & Community Development)]: okay.