May 26, 2010 Audit/Finance Committee Meeting

FINANCING OPTIONS FOR THE COMMUNITY INSTRUCTIONAL CENTER PROJECT MATCHING FUNDS

At the February 12, 2010 Audit/Finance Committee meeting, the administration was directed to review options for financing the local match commitment for the Community Instructional Center project.  The administration presented four options:  1) Issue Debt Certificates/Funding Bonds; 2) Issue Building Bonds; 3) Use Fund Balances; 4) Issue Alternate Bonds.  To issue building bonds, a referendum would need to be held at a regularly scheduled election.  The option of using fund balances would deplete the balances by $7,614,900 at a time when there is uncertainty in the State finances.  The fourth option would be to issue alternate bonds by using Tax Increment Financing revenues.  This would require each intergovernmental agreement to be reviewed by an outside agency willing to certify that the annual revenues would be 1.25 times greater than the debt. The administration recommended issuing debt certificates/funding bonds.  A tentative calendar was presented with a public hearing scheduled for the October board meeting.  There is a possibility that ten percent of the voters could file a petition to submit the proposal to referendum.  In that case the electors must approve the proposition at a regularly scheduled election before the bonds can be issued.  The administration provided two scenarios for issuing the bonds.

Scenario #1

Estimated Annual Debt Service - $650,000 ($5 million at 5.0 percent for ten years)

Issue funding bonds in fall of 2010 – increase the tax levy by $.020058 for one year

Levy would drop the following year by $.039040 when the current bond issue is paid

Tax levy rate projections would remain level at approximately $.3235 (assuming IVCC continues to quality for equalization)

Reinstate tort liability levy in 2015 – increase the levy by $.02

If the excess balance in the Bond and Interest Fund ($1,400,000) was used to abate the first year’s tax levy, the rate would remain level for 2010, drop in 2011 by $.02, and increase in 2015 for the tort liability levy.

Scenario #2

Estimated Annual Debt Service - $1,150,000 ($5 million at 5.0 percent for five years)

Issue funding bonds in fall of 2010 – increase the tax levy by $.035486 for one year

Levy would drop the following year by $.039040  when the current bond issue is paid

Tax levy rate projections would remain level at approximately $.3482 (assuming IVCC continues to qualify for equalization)

In 2015, the bond levy ($.035486) would drop off and the tort liability levy would increase the rate by $.02.

If the excess balance in the Bond and Interest Fund ($1,400,000) were used to abate the first year’s tax levy, the rate would remain level for 2010, drop in 2011, and then remain level unless impacted by some issue other than bonds or tort liability.

The administration recommended scenario #2.  Members of the committee liked the idea of keeping the tax rate level and paying the bonds off in five years.  Mr. Mallery was not comfortable in borrowing money when the College has the money in reserves, but Mr. Setchell was not comfortable in spending the reserves with the State having financial problems. He stated it was a good deal for the tax payer. Mr. Thompson believes scenario #2 is a good plan – the College retains it fund balances, borrows the money, and keeps the tax rate level.

Ms. Olivero made the motion to proceed with scenario #2. The motion was seconded by Dr. Driscoll and passed by voice vote.

FY2011 BUDGET ASSUMPTIONS

At the February 12, 2010 Audit/Finance Committee meeting, the five-year financial forecast was presented with certain revenues and expenditures highlighted.  The administration presented an update on the changes to the previous assumptions.  The major change in the revenues was the Exelon EAV – from $501,000,000 to $525,000,000.  The major change in expenditures was the 7.1 percent increase in employee benefits.  Insurance premiums increased 12-21 percent based on coverage.  A balanced operating budget will be presented for approval in August 2010; however, the $400,000 transfer to the building fund will come from reserves.

New Positions

Included in the budget are two new faculty positions, an English instructor and a CNA instructor, due to the high enrollments in these courses.  One CNA instructor during the 2009-2010 year taught over 80 credit hours in overload.  The administration would like one full-time CNA instructor to be the coordinator of all the classes and to handle the reporting requirements. The committee members thought it was prudent to spread the load among more instructors and the program has been strong and wanted it to remain strong.  Dr. Driscoll made the motion to support the recommendation of additional staff and Ms. Olivero seconded the motion.  The motion passed by voice vote.    

Health Insurance Consultant

The administration requested permission to hire a health insurance consultant.  Along with helping the College to comply with health care reform, the administration lacks the expertise to solicit and evaluate proposals for health insurance coverage if the College decided to change insurance carriers.  If the College decided to remain with the Community College Insurance Consortium, a consultant could help develop additional plans and transition the staff from the current plan.  The administration formed an insurance committee to look into insurance issues.  Mr. Setchell was in favor of securing a consultant who would meet with the committee.  He also asked to review the notes from the meetings of the insurance committee.  Mr. Setchell made the motion to authorize the administration to request a proposal for an insurance consultant and Dr. Driscoll seconded the motion.  The motion passed by voice vote.

Small Business Development Center

The Small Business Development Center had presented a plan to the administration for a multi-year grant.  The match increased from $25,000 to $41,000.  The budget council met and decided not to support the $16,000 increase.  Dr. Pearce reached out to the agency and was instructed to submit the proposal at a $25,000 match.  The administration will wait to see the determination of the grant.

VARIABLE TUITION

The Board had asked the administration to look into variable tuition rates.  Two Illinois community colleges, Lincoln Land and Harper, currently charge variable tuition rates.  The higher tuition rates are applied to specific programs and/or specific courses which have higher operating costs.  At other community colleges the higher operating costs are usually passed on to students by charging higher fees.  The variable tuition rates increase the amount of program costs that can be covered with financial aid. By increasing tuition and decreasing fees, students receiving the Illinois Monetary Award Program (MAP), Illinois Veterans Grant (IVG), and the Illinois National Guard Grant (ING) could be positively affected.  These grant programs cover tuition and standard fees but exclude lab fees.  Due to the budget shortfall in Illinois the past several years, the MAP grant has not covered full tuition for eligible students.  A variable tuition rate would not help these students.  Patty Williamson, Financial Aid Director, researched the number of IVG/ING students that would be affected.  In the 2008-2009 academic year, approximately 22-24 percent of the IVG/ING students were enrolled in the higher cost programs such as truck driver training, health professions, HVAC, auto, and welding which is approximately 25-29 students.  This is not a high percentage of IVCC students that fall into this category.  C. Roelfsema suggested an alternative to variable tuition would be to reimburse lab fees for IVG and ING grant recipients.  The College’s software system is not set up to incorporate different courses at different rates.  Mr. Setchell was not interested in variable tuition at this time and asked the administration to come up with a recommendation to waive fees up to a certain amount to benefit the people who need help.    Mr. Mallery would like to see an increase in tuition for those programs which have a higher cost and then the tuition would be covered by grants instead of increasing the fees for the programs which are not covered by financial aid and grants.  But members of the committee were concerned that the higher tuition rate would prevent students who do not qualify for financial aid and grants but could not afford the higher tuition from enrolling in these courses.