The ABCs of Idaho education building funding

Constructing education buildings can be challenging enough, but funding them in Idaho can be even more difficult. While there are several methods districts can consider, none of them is particularly easy.

Impact fees

It might seem logical to have a developer contribute to the cost of constructing a new public school building. After all, if the developer is bringing new families to the area and profiting in the process, doesn’t that make sense? And it’s true that in a number of other municipal areas, such as roads, parks and public safety, communities are allowed to charge impact fees to developers to help fund future expansion.

But not schools. At least, not in Idaho, though some other states charge impact fees for schools.

Idaho’s impact fee law was enacted in 1992, according to the Idaho Legislature’s website, and the reason schools were left out of it in the first place is lost to the mists of time. While efforts have been made to add schools to the impact fee law, most recently in 2006 in response to an interim committee on property taxes, school impact fees didn’t make the cut. No significant efforts have been made to add them since.

“In general, the resistance to adding schools to impact fee statue was the thought that schools — on the surface anyway, setting realities of securing the votes aside — can run emergency levies, supplemental levies, plant levies and bonds,” said former Sen. Shawn Keough, R-Sandpoint, who was one of the sponsors of the 2006 bill and who retired in 2018 as Senate co-chair of the Joint Finance-Appropriations Committee. “In short, the thinking was that schools had tools to be used to address growth and didn’t need more.”

There was also the usual objection to adding any new taxing or fee authority, she added.

Bonds

The primary way that public elementary and secondary schools are funded in Idaho is through bonds. As opposed to levies, which fund school operations, bonds can be used only for capital construction, typically last for 10 to 30 years and are guaranteed by the state so they have a low interest rate. Elections for school bonds can be held just four times a year — March, May, August and November. In contrast to many states, school bonds in Idaho, like other governmental bonds, must get a two-thirds majority to pass.

That’s a high bar, and a lot of school districts barely make it or don’t make it at all. Vallivue School District, for instance, passed a $65.3 million bond in March by a single vote.

“Every ‘no’ vote takes two ‘yes’ votes to counteract that,” said Joey Palmer, director of community relations for state and federal programs for Vallivue, which covers the rural areas of Nampa and Caldwell. “If we were playing basketball, the team that wants to build the school would shoot two-pointers and the team against gets to shoot three-pointers.”

It’s also challenging for school districts to get the word out. Districts are not allowed to advocate for bonds, but can provide factual information. They are also limited in how they can spend money on providing information, so expensive multiple mailings are likely out. But getting people to show up for meetings can be a challenge.

Two years ago, with a different vote, the district held a town hall. “We advertised like crazy,” Palmer recalled. “’Come to a town hall! You can ask our superintendent a million questions!’ We advertised that for two weeks. Print advertisements. Reader boards. Social media.”

And the result?

“One person attended,” Palmer said. “We had this huge auditorium, and it was all empty seats, and it was this sweet retired lady, who didn’t even have any children or grandchildren in the district, who thought she’d check it out.”

This year, Vallivue did something different.

Instead of town halls, the district used social media, including Facebook Live, to provide information and solicit questions, Palmer said.

Because the district is growing so much, it is in the enviable position of being able to raise money without increasing tax rates — or, in fact, even while lowering them. The number of new buildings and the increase in property value is enough.

“In 10 years, with all the new homes and businesses, our market value has gone up $1 billion,” Palmer said. “Our tax levy rate is the lowest it’s been in 15 years. People call me a liar, but we’re very transparent with all our finances. It’s a very fortunate position to be in as a district.”

However, that can also make explaining the bond challenging. According to the ballot, the school district was asking for permission to use $100 per $100,000 of assessed value of its existing tax rate toward construction. But a number of people told him that they had voted no because they assumed that meant they’d be charged an additional $100 per year.

“Ballot language isn’t always easy to understand,” Palmer said. “It’s written in legalese.”

Now, the school has $65.3 million for five projects, including a third middle school, renovations for its oldest school, security and technology updates for all the schools and land purchases for future schools.

“The last thing we want to do is build another school and there’s no land left to purchase,” Palmer said.

Plant facilities levies

Because of the high bar bonds require, some districts use plant facilities levies. Unlike bonds, a plant facilities levy is typically applied every year for 10 years and is funded by a bank, so it has a slightly higher interest rate than a bond. However, it requires only a 55 or 60 percent majority vote to pass, depending on the debt level of the taxing district. Some districts — such as Vallivue, which needed two tries in 2017 to pass one by just four votes — use plant facilities levies for maintenance projects, such as new roofs and parking lots.

The West Ada School District, which covers Meridian and is the largest in the state, has had a plant facilities levy since 1972. It is renewed every 10 years, typically for maintenance and improvements, said Eric Exline, chief communications officer.

But depending on how the ballot question is worded, plant facilities levies can be used to construct new buildings as well, Exline said. For example, the district in 2007 included “construction of new facilities” in its ballot wording for a $20 million plant facilities levy. “We used a part of that $20 million, over a three-year period, to build Willow Creek Elementary,” a $16 million project, he said. The district built it in sections so that it could use some of the levy money for maintenance.

Similarly, the district built Renaissance High School, inside the former Jabil plant, over a 10-year period. It supported 800 students while construction was going on.

“We just finished the last phase this last year,” Exline said. “We kept needing to add some more space.”

West Ada’s current plant facilities levy is for $16 million, but didn’t include the “construction” language, so it’s just being used for projects such as adding on to existing schools, and maintenance such as roofs, parking lots and paint.

Plant facilities levies for constructing new schools were particularly useful during the recession, but now that the economy has recovered, the district is back on a two- to three-year cycle of running bonds and turning to the plant facilities levies for maintenance.

“Our community has been pretty supportive of bonds,” Exline said. “Since 1996, only one has failed.”

Charter schools

Charter schools — which are public schools, not private, and are typically geared to a specific subset of the community — have a different challenge. By Idaho law, they aren’t allowed to bring bonds or levies for a vote of the people. Instead, they get a certain amount of funding from the state. That, combined with grants, help from nonprofit organizations, and so on, helps them construct their facilities.

“Until 2013, charter school facilities had to be funded completely out of the general education allocation from the state,” said Marc Carignan, chief financial officer for Bluum, a nonprofit organization that has helped fund and run a number of Idaho charter schools, including Future Public School in Garden City. “This is the struggle that we have. Public charter schools are not taxing entities.”

In 2013, the law was amended to allow an allocation of some additional state department of education funds for charter facilities, which amounts to about $390 per student, Bluum said. Between that, some maintenance funding that all public schools receive and allocation of about $445 per student, charter districts end up receiving about $1,200 per student, he said.

“What that’s forced us to do is to be really thoughtful about how we build school facilities,” Carignan said. For example, Future Public School partnered with the Garden City Boys & Girls Club. Because the club wasn’t used during the day, the school could use its gym and cafeteria. Because the school isn’t used during the day, the club can use the school’s classrooms for its programs. The result is that Future Public School spent $7.6 million for 576 students, or about $13,000 per seat, which is much less than comparable schools in the Treasure Valley spent, he said.

The downside was the expense for land at that location — about $800,000 for about one acre, Carignan said. By comparison, an 11-acre parcel in Caldwell that the company is looking at for a charter school in two years is $339,000.

Another example is Alturas International, in Idaho Falls, which renovated a former district public school for $7.2 million for 538 pupils.

“The cost is about the same per seat, but we didn’t have to make any compromises on the gym,” Carignan said.

Similarly, Gem Prep in Pocatello, another Bluum project, is going to be located in an old Sears store.

“That’s going to be a great deal,” Carignan said.

Because the building was so inexpensive, the total cost including renovations will be less than $12,000 per seat, he said.

The Idaho Legislature considered a number of bills this session to help with charter school funding, such as SB 1180, which adopted a “moral obligation” bond funding mechanism. That meant the state would act as a “backstop” in case a charter school missed a loan payment.

Another bill, HB91, allowed municipalities to not charge charter schools the impact fees for roads and parks that a typical commercial construction project would pay. District public schools are exempt from such fees because it would basically be one government taxing another, but charter schools, even though they’re also primarily funded by the state, had never been exempted from such fees. Some municipalities exempt charter schools from the fees anyway.

Carignan would like to see charter schools be allowed to participate in bond issues. In some other states, school districts either “must” or “may” allow charter schools to participate, he said. That could offer a benefit to both, he said.

“Let’s say a school district is having trouble passing a $100 million bond issue,” Carignan said. If the charter school needs $10 million, the district could put forth a $110 million bond, agreeing to share the proceeds, and the charter school could leverage its base of parents and taxpayers to vote, he said.

“It can be a determining factor in whether the bond will pass,” he said.

There’s also the question of what would happen to the building should the charter school shut down.

“Legally, I suspect the building would be the property of the district,” Carignan said.

Alternatively, another charter school could be recruited to run the new school, he said. To reduce the risk of that happening, the program could be limited to charter schools that had been around and successful for several years, he said.

Higher education

Idaho’s public colleges and universities have the same problem to deal with, though they have a few more options.

For example, colleges have donors who can contribute funding. Just look around Boise State University (BSU) at how many buildings have “Micron” in the name. There’s the Micron Center for Materials Research (part of the Micron School of Materials and Engineering), the Simplot/Micron Academic Success Hub, the Micron Business & Economics Building and the Micron Engineering Center, as well as the Appleton Tennis Center, named after the late Micron CEO.

Similarly, the College of Eastern Idaho received $1.73 million from the William J. and Shirley A. Maeck Family Foundation to undertake the college’s first renovations of the former Eastern Idaho Technical College campus. The J.A. and Kathryn Albertson Foundation donated $2 million in December to the Idaho State University (ISU) College of Technology to help renovate a building on the Pocatello campus to consolidate some of its career technical education programs, and William and Karin Eames donated $2.5 million.

All this can take awhile. For example, the University of Idaho has been working on the Idaho Center for Agriculture Food and the Environment (CAFE) for 15 years, and has just gotten to the point of purchasing land, which it announced in February. The university will pay $2.5 million, and the Idaho Dairymen’s Association is contributing $2 million toward a 540-acre parcel, along with another parcel donated by the seller. But it’s a $45 million project, and the university isn’t saying when it will be completed.

Colleges and universities can also make arrangements to lease back buildings that are constructed by other organizations, such as the BSU Honors College, constructed and managed through a real estate investment trust specializing in student living facilities. BSU will own the property in a little less than 50 years.

The University of Idaho is funding its $46 million Idaho Central Credit Union Arena using a $10 million donation from ICCU — hence the name — and loaning itself $29 million from reserve funds, which it expects to pay back with donations and fees.

And, as with elementary and secondary schools, state colleges and universities can use bonds and plant facilities levies, with the same voting requirements.

Permanent Building Fund

In addition, the state’s Permanent Building Fund can contribute money toward buildings at colleges and universities, though the schools need to compete for that funding and it doesn’t always pay the entire cost. The Permanent Building Fund, which few other states have, was formalized in 1961 as a permanent source of funding for state buildings at $10 per filed tax return, said Raymond Pankopf, director for architecture and engineering services for the University of Idaho.

“That $10 in 1961 has never been increased,” Pankopf said, noting that in present-day dollars it would require $84 to keep up. In addition, the Permanent Building Fund has been supplemented from other sources, such as cigarette tax money, the liquor tax and an annual contribution from the lottery, increasing the total to about $40 to $50 per return – but still not up to $84.

“We have the fund, and it’s nice to have a permanent fund, but resources are very tight and there is no appetite to increase it,” he said.

Other agencies are also dependent on the fund. They include the Idaho State Police, the Department of Corrections and state hospitals, as well as state-owned buildings in the Capitol Mall, Pankopf said.

The money is managed by the Permanent Building Fund Advisory Council, a five-member board appointed by the governor. It includes one state representative, one state senator, one representative from the finance and banking community, one representative from the general contracting community and one at-large member, Pankopf said.

Altogether, the fund typically generates around $35 million per year, which is generally split up into thirds. One-third goes for operations, maintenance and repair of the Capitol Mall. About a third goes into alteration and repairs for other state-owned buildings. The final third goes into major capital, which is where the colleges and universities come in. That third amounts to about $10 million to $13 million per year, Pankopf said.

The breakdown of the funding varies from year to year.

“In the 2018 Legislature, the general thought was, we won’t do new buildings, but take care of what we have,” Pankopf said. Consequently, the majority of the money was put into alteration and repair.

Typically, colleges and universities can’t expect the Permanent Building Fund to pay for an entire building.

“Our experience at the University of Idaho is we will never see a building fully funded from the Permanent Building Fund,” Pankopf said. “We can generally count on partial funding or seed funding.”

For example, in 2017, the Idaho Legislature appropriated $10 million from the state’s Permanent Building Fund to help finance U of I’s CAFE project, with an additional $5 million investment anticipated as the project progresses.

“We often will see major capital funding in a year, and then it may skip a year or two before it’s our turn to see major capital money again,” Pankopf said.

In addition, Permanent Building Fund money is generally available only for general education funding, such as a classroom or a college, and not for auxiliary facilities, such as bookstores, residence halls or athletic facilities, Pankopf said.

Recently, the University of Idaho received $2.4 million for a major renovation to house the WWAMI program, a multi-state medical education program hosted by the University of Washington to serve students from Washington, Wyoming, Alaska, Montana and Idaho. The Idaho students are taught on the U of I campus for the first three semesters before going to Seattle for a semester. The facilities needed to be expanded because the Legislature doubled the number of seats it funded for the program, from 20 to 40, Pankopf explained. In addition, the school had to construct a new anatomy lab because the one it had been using, at Washington State University in Pullman, was moved to Spokane.

The Permanent Building Fund was also budgeted to contribute $10 million toward a health sciences building at the College of Western Idaho (CWI) community college. But if a school can’t raise the additional money required for the building, as with CWI, then it doesn’t get the state money.

CWI has been particularly challenged in this area. The community college, founded in 2007 to serve Ada and Canyon Counties, has been operating primarily in leased buildings since 2009. Since then, it has run bonds and plant facilities levies a number of times to, among other things, construct a health sciences building. Those attempts included $180 million in November 2016 and $39 million in November, an effort that fell 135 votes short of the required 55 percent. At this point, CWI’s board has thrown in the towel on the measure, at least for May.