Facility repair funding, rising insurance rates a challenge for New Orleans schools
New Orleans’ public school district isn’t bringing in enough money to maintain aging school buildings that weren’t rebuilt or renovated following Hurricane Katrina, officials said Tuesday.
On top of that, the school system is also facing rising insurance costs amid an increase in unexpected hurricane or weather-related expenses.
District operations officer Tiffany Delcour said while the district has taken steps to cut costs and will continue to do so, they still need to generate additional funding.
“It was assumed that the district would find alternative pots of capital funding dollars to really deal with the half of the portfolio that did not have significant investment post-Katrina,” Delcour told board members as part of her monthly capital and facilities update. “I think we’re basically showing that it’s time to do that.”
Delcour said the gap between available funds to repair pre-Katrina buildings over the next 10-years and anticipated need is roughly $136 million.
The majority of New Orleans’ public school facilities are high quality, according to district assessments, and a “handful of schools” represent nearly 40% of total capital repairs, Delcour said.
Nineteen schools were identified as tier four facilities – those with the highest per square foot repair costs. Delcour said many of these schools have costs that probably exceed the full replacement value of the building.
The district has money set aside for school repairs under Act 543, which was created by the Louisiana Legislature in 2014 to ensure facilities built post-Katrina would be maintained. State lawmakers designated a portion of local public schools sales tax to fund the program. Additional funding comes from a local property tax.
Each year, the school board distributes funds to individual school facility accounts, based on how many students an individual campus enrolls, as well as to the facilities office, a revolving loan fund and a capital improvement fund, according to board policy.
Delcour said the point of the preservation program was to anticipate a “bubble that will burst in the next 10 to 20 years” when post-Katrina buildings will all be in need of repairs at the same time.
While the program does a good job of setting money aside for those future needs, Delcour said it prevents the district from steering more money toward older buildings with immediate needs, largely those built pre-Katrina that didn’t receive extensive renovations after the storm.
As a result, the district has created a triage system to make sure available money is used to cover the most pressing repairs first, including building structure and safety and maintaining core systems like water, sanitation and security.
The district plans to work with school leaders and other stakeholders starting this fall to review state mandates and come up with potential legislative solutions as well as prepare for a new mileage campaign since the current property tax is set to expire in 2024.
Board member Carlos Zervigon said it’s important the district secure the funding necessary to maintain buildings and avoid what happened to the city’s schools when he was a student in the 70s and 80s.
“The building that I was in, in high school, had no air conditioning, the heat failed all the time. We had paint coming off the ceiling, a leaky roof, asbestos everywhere,” he said. “People of my generation are pretty sensitive to this issue in terms of the neglect that went on, and we certainly don’t want to repeat that.”
At the same time, the district is also grappling with more unplanned repairs, Delcour said.
For the past few years, the district has budgeted $10 million in unplanned facility emergencies, mainly related to hurricanes. So far this school year, the district has spent $12 million, largely to repair buildings damaged by Hurricane Ida.
Since the preservation program allocates repair money to buildings based on student enrollment, Delcour said this makes it difficult to maintain swing facilities, which are typically used to house a school community while its building undergoes repairs.
Stuart Gay, the district’s chief financial officer, also delivered sobering news Tuesday: the district’s property insurance bill could increase by nearly 50% for the coming year.
This school year, the district paid $7.6 million for property insurance covering district-owned facilities. That could increase to $11.2 million next school year, an increase of 47%. On average, reinsurance costs in the U.S. have increased 25% for “catastrophic-prone” areas, Gay said.
“We certainly had a bit of a shock last week,” Gay told board members, adding the district is still in the process of receiving more insurance quotes.
Cutting repair costs
Delcour said the district is also focused on cutting costs. She said one way is to sell buildings with the greatest repair needs.
The district has more buildings than it needs, a surplus that’s expected to increase as public school enrollment declines due to population trends.
Delcour said her team is in the process of assessing all district-owned facilities and hopes to have buildings to sell identified by the start of 2023.
Recently, the district reviewed all of its facilities to determine their long-term quality and developed a citing process to move schools from lower- to higher-quality facilities. The citing process was used to assign three schools new buildings at their request for the start of the 2022-23 school year.
Delcour said another option the district has, but hasn’t taken yet, involves reassigning schools that fail to fill a building to a smaller facility or asking two school programs with low enrollment to share a single building.