On May 16, the Fayetteville-Manlius School District will be asking voters to decide on the creation of a new $10 million capital reserve fund.
A capital reserve fund allows school districts to set aside money for future construction projects and major purchases. Most school districts have capital reserve funds, and in 2013, F-M residents voted to create a $10 million capital reserve fund.
Voters authorized the district to use money from that fund toward facilities improvement projects at F-M High School in 2021 and Wellwood Middle School in 2017. All of the money in the $10 million capital reserve fund was used for those two projects, which is why the district is proposing creating a new $10 million capital reserve fund for future facilities projects. A simple majority is needed for the fund to be created, so at least 51 percent of the voters must approve the proposition.
Without a capital reserve fund, districts must borrow money when voters approve a capital project. That causes a spike in the district’s tax levy for the life of a project loan. When school districts use capital reserve funds to pay for capital projects, the impact on property taxpayers is greatly reduced.
Money for a capital reserve fund comes from general fund money that remains unspent at the end of each fiscal year – meaning that the capital reserve fund is filled with money voters have already approved to be spent. The fund is limited. It cannot grow larger than the amount voters authorized at the time it was established.
To spend money from a capital reserve fund, school districts must have voter authorization through a referendum. After 10 years, the district must spend the money or voters have to re-authorize the fund.
State rules prohibit school districts from keeping more than 4 percent of a district’s budget in an undesignated reserve account. Capital reserve funds are exempt from that limitation, allowing school districts to save for major expenses – planned and unplanned.