School Facilities Board report to the Joint Committee on Capital Review

              STATE OF ARIZONA
SCHOOL FACILITIES BOARD
RECE"/ ED
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OFfICE Of THI:. t' 1( l:~ lDENT
Governor of Arizona
Janet Napolitano
December 1, 2008
Honorable Russell Pearce
Chairman
Joint Committee on Capital Review
1716 W. Adams
Phoenix, AZ 85007
Dear Representative Pearce:
Director
John Arnold
A. R. S. Â  15- 2002 subsection A paragraph 10 requires that the School Facilities Board report to the Joint
Committee on Capital Review ( JCCR) by December 1 of each year the amounts necessary to fulfill the
requirements of sections 15- 2022 ( Emergency Deficiency Corrections), 15- 2031 ( Building Renewal) and 15Â 2041
( New School Facilities) for the following fiscal year and the estimated amounts necessary to fulfill
the requirements of sections 15- 2022, 15- 2031 and 15- 2041 for the fiscal year following the next fiscal year.
The Board shall provide copies of the report to the President of the Senate, the Speaker of the House of
Representatives and the Governor.
Laws 2005, Chapter 287 ( HB 2769) eliminated the School Facilities Board's authority to instruct the State
Treasurer no later than January 1 of each year as the amount of transaction privilege tax to be credited for
the next fiscal year to the Deficiency Corrections, Building Renewal, and New School Facilities Funds.
The reporting requirement, however, remains in statute and also requests information for the fiscal year
following the next fiscal year, which is not contained in our budget since we are an annual budget unit.
IEmergency Deficiency Corrections
The Emergency Deficiency Corrections program is funded from transfers from the New School Facilities
fund. SFB staff anticipates currently available funds will provide $ 1.5 million for expenditure in FY 2010
and no funds for FY 2011. If the SFB is unable to fund an emergency due to a lack of funding, the district
may levy a local property tax to fund the emergency.
It is worth noting that it is impossible to predict what districts will make emergency requests and for
what amount so it is conceivable that a single project could require the entire program's available cash.
Further, the Emergency Deficiency Corrections Fund does not have a dedicated revenue source. The fund
was established by A. R. S. Â  15- 2022 consisting of monies transferred from the Deficiency Corrections
Fund or the New School Facilities Fund as long as the transfer would not interfere with, disrupt, or
reduce any capital projects already approved by the Board. Given the repeal of the Deficiency Corrections
and the shortfall in the New School Facilities Fund, neither fund sources will be a revenue option.
IBuilding Renewal
The FY 2010 formula requirement for building renewal is $ 227,913,527. Our FY 2009 budget request
submitted on September 1 was for $ 235,977,500. The request was an estimate and the data elements
1700 WEST WASHINGTON, SUITE 230, PHOENIX, ARIZONA 85007
Phone: ( 602) 542- 6501 • Fax: ( 602) 542- 6529 • www. sfb. state. az. us
•
driving the formula have since been updated with square footage and renovation information reported
by the districts to our office on September 1.
Building Renewal has grown an average of 9.3% between FY 1999 and FY 2010. For FY 2011, the SFB
assumes that building renewal will grow 10% from $ 227,913,527 to $ 250,704,880.
INew Construction
New Construction Projects
The FY 2010 budget request for new school construction is for $ 275.7 million. The SFB budget request
assumed two revenue sources for this expenditure need: $ 10 million from the state land trust and $ 265.7
million in lease- to- own proceeds. Therefore, there is no associated General Fund appropriation with this
program.
The FY 2011 expected cost of new school construction is estimated at $ 331.5 million. However, the
estimated appropriation need cannot be adequately determined based on the uncertainty on how the
economy will impact long- term growth in Arizona.
Lease- to- Own Debt Service
The Lease- to- Own Debt Service in FY 2010 is $ 108,683,305. In FY 2011 it will be $ 123,520,142.
Please feel free to contact me should you or any members of the committee have questions.
Sincer
cc: Janet Napolitano, Governor
.; rim Bee, President of the Senate
Jim Weiers, Speaker of the House
Leatta McLaughlin, JLBC
Lauren Kielsmeier, Office of the Governor
Stacy Morley, OSPB