Recently we posted an article regarding the School Board’s purchase of 49.4 acres of land for $6,632,000 from the Capital Reserve Fund. We reported how the Board made this decision with no public input and only 2 days notice to the public. We also reported how they used money from the Capital Reserve Fund to pay for land for which they have no intent to use in the near future. We have many concerns regarding this purchase, which are outlined in that article.
New information we have found raises very serious questions
Great Valley Stakeholders has researched the use of Capital Reserve Funds by School Districts to purchase land and have found information, which indicates the purchase of the land by our School Board is contrary to the provisions of the law governing the use of the Capital Reserve Fund. Even if it is determined at a later date that the purchase of the land is in compliance with the law, our research shows how the School Board avoided public scrutiny in the purchase of the land with our tax dollars.
We believe it is absolutely unconscionable that the School Board would spend $6,632,000 of our tax dollars on a polluted piece of land with no justification, no plan for its use, and no public input or public knowledge.
Research
Our research consisted of examining the Pennsylvania Laws governing the use of Capital Reserve Funds and examining the Pennsylvania Department of Education Accounting Manual concerning School District financial reporting.
What Does The Law Say ?
There are two (2) Pennsylvania Statutes which govern the creation and use of two (2) different Capital Reserve Funds by Pennsylvania School Districts.
- Pennsylvania Statute 24 PS 6-690: This statute establishes the creation and use of a capital reserve fund for approved school building projects. This fund is created by a special tax levy by a School District and the money can be used for “acquiring suitable sites for school buildings, the cost of constructing new school buildings, or the cost of providing needed additions or alterations to existing buildings.” The special tax levy may not exceed 3 mills in any one year and may not be levied for more than 5 years.
- Our School Board has NOT established a fund of this type.
- This type of fund requires a special tax levy which would therefore require the School Board to inform the public of the purpose of needing more money and how much money is needed.
- The School Board bought land even though they do NOT have this fund established.
- By NOT using a fund of this type, the School Board has avoided any transparency in the land deal and has once again sidestepped the public, while spending $6,632,000 of our tax dollars.
- Pennsylvania Statute 53 PS 1431-1435: This statute establishes the creation and use of a capital reserve fund for “capital improvements”. The fund is created by using money transferred from specific operating budget items which are not needed or from surplus funds in the operating budget. The money is to be used “only for capital improvements and for replacement of and additions to public works and improvements, and for deferred maintenance thereof, and for the purchase or the replacement of school buses, and for no other purpose." There is no mention made of purchasing land or building projects and the statute is very specific regarding the use of the money.
- Despite the fact that purchasing land is NOT mentioned in the statute, our School Board has established this fund and they have used it to purchase the land for $6,632,000
- Money for this fund came from “surpluses” in the operating budget over the past 7 or more years totaling more than $21,000,000.
- These “surpluses” occurred every year while the School Board continued to state that they needed more money and thus raised our taxes 45% in the past 7 years.
- They were therefore able to put a large amount of money in the Capital Reserve Fund which they originally justified as being needed for operating expenses.
- This allowed them to avoid having to justify the need for money in the Capital Reserve and allowed them to use the Fund as a Slush Fund for the District
- This allowed them to use the Fund to purchase the land with no public scrutiny and with no documentation regarding the need for the land.
What does the PA Department of Education Accounting Manual Say ?
The Department of Education Accounting Manual copied the language from the 2 Pennsylvania Statutes listed above in explaining the creation and use of the two (2) Capital Reserve Funds. It confirms the statutory requirements and provides them as instruction to the School Districts for the establishment and use of the Capital Reserve Funds. It therefore repeats that:
- There is one Capital Reserve Fund that is created with special tax levies for the purpose of acquiring land and construction of buildings.
- There is one Capital Reserve Fund that is created using surplus operating money which can be used only for capital improvements.
As mentioned above, the School Board has not established the first fund, but used the second to purchase the land despite the contrary instructions in the Accounting Manual.
Additionally, the Manager of the Department of Education responsible for the Accounting Manual told us specifically that the purchase of land was not a “capital improvement” and is therefore not covered under the Capital Reserve Fund which our School Board uses.
We have sent a letter to the Department of Education asking for a written response regarding the apparent impropriety of the purchase of the land by the School Board. We are awaiting a response.
What does the School Board Say ?
The School Board President responded to an email inquiry regarding the above issues and stated:
- They have used the current Capital Reserve Fund in the past for land acquisition.
- Our response to this is that just because you did it in the past that does not make it correct.
- They say their process for land purchases is not unique and is based on precedent.
- Our response to this is that just because it was done in the past by Great Valley or other Districts that does not make it correct.
- They are confident in the advice given to them by their attorneys and auditors.
- Our response to this is that attorneys and auditors have been wrong before and in this case they are giving advice that is contrary to the language in the law and the School District Accounting Manual.
The Daily Local Newspaper wrote an article on this issue. In that article, the reporter stated that he posed questions to the School Board’s attorney, and the School District Business Manager. According to the newspaper:
- The Business Manager responded by stating that a land purchase “absolutely” falls under the category of “capital improvements”.
- Our response to this is that a capital improvement is an improvement to capital property we already own. Purchasing 49 acres of land, which is 2 miles from any school property, is hardly a “capital improvement".
- The attorney, Guy Donatelli, said that this Fund has been used in the past for land purchases and that “everybody” is comfortable that it is an appropriate use of the Capital Reserve Fund.
- Our response to this is that we are not comfortable with the purchase and the language in the law is contrary to his conclusion. As stated above we also don’t believe that past practices means the use of the Fund is appropriate.
- Donatelli further stated that “land” comes under the definition of “capital projects”.
- Our response to this is that a “capital project” is entirely different from a “capital improvement”. The statute specifically cites that the Fund can only be used for “capital improvements”.
What is the definition of a “Capital Improvement” ?
According to a Forbes Investment reference book, a Capital Improvement is defined as:
The addition of a permanent structural improvement or the restoration of some aspect of a property that will either enhance the property's overall value or increases its useful life.
The purchase of 49 acres of land, which is 2 miles from any other school property, is not a capital improvement no matter how far you might stretch the definition.
What does all of this mean ?
We ask you to be the judge. Read this article and read our first article about the purchase of the land. You decide.
We submit to our readers that the School Board has misused a very large amount of the taxpayers’ money by bypassing public scrutiny through the use of the inappropriate Capital Reserve Fund. This has resulted in the purchase of questionable land with a very large amount of the taxpayers’ money without any plan for its’ use and without any knowledge by the public.
We are continuing to look into this matter through both the Department of Education and through a continued examination of the law and it’s remedies.
Contact the School Board
Use the Contact Board Members button on our website to contact the School Board with your concerns about this issue.
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