Minutes of the March 17, 2022 Meeting of the Citizens’ Bond Oversight Committee

March 17, 2022
4:30 – 5:30 pm
Virtual Meeting by Zoom

I. Call to Order

The meeting was called to order at 4:36 pm when a quorum was established.

II. Establishment of Quorum

In attendance: Chair Grier Graff; members Julie Caskey, Kim Dao, Andy Hempeck, Kyung-Hee Howard, Rick Raushenbush, Melissa Wilk; PUSD Board member Megan Pilsbury; PUSD staff Pete Palmer, Ruth Alahydoian, Michael Brady, and Julie Moll; and Eide Bailly Senior Manager Jill Stenton.

Absent: Jonathan Levine and Amal Smith.

III. Public Comment


IV. Approval of December 2, 2021 Minutes

There was no public comment.
Moved: Rick Raushenbush
Seconded: Kyung-Hee Howard
Vote: Approved

V. Construction Update

Measure H1 Program Manager Pete Palmer reported that the District has reached significant milestones in recent weeks. Both the Piedmont Fire Department and the California Division of State Architect have completed their final inspections of the Performing Arts Center’s life/safety systems, allowing for students and staff to start using the facility. Acting classes will start meeting in the PAC classroom next week. All signage has been installed. Construction portables have been removed from Magnolia Avenue and 21 Permit A parking spaces (reserved for teachers) have been restored. The District will soon complete landscaping around the Performing Arts Center and then remove the last of the construction fencing and open the new driveway to the 20s building. Work is still ongoing in the Alan Harvey Theater but that portion of the working will be closed off from the classroom area, and the there will be separate entrances for the construction workers and students.

The District is not yet scheduling performances in Alan Harvey Theater because the District is still commissioning the theatrical fixtures and sound system.

Mr. Palmer recently toured most of the Committee members through the PAC and explained features including the A/V systems, tracking cameras, orchestra shell, and touch-screen monitors.

Former Board of Education member Doug Ireland is organizing a community Open House for both the STEAM and PAC buildings and this is tentatively scheduled for April 30.

Committee members expressed appreciation to Mr. Palmer for his work on the PAC particularly because of the challenges over the last few years, including but not limited to the pandemic. Committee members suggested that the Open House might be an opportunity for fundraising such as “selling” theater seats (the District has brass plates that can be engraved with a donor’s name and then attached to the seats).

VI. Program Budget Update

Chief Financial Officer Ruth Alahydoian presented a Bond Income, Expenditure, and Fund Balance Report:

These reports show more than $66.8 million in expenditures over six years, with $7.4 million of that total spent in this fiscal year, and with just under $850,000 in bond funds remaining. Ms. Alahydoian also shared a more detailed breakdown of these expenditures by categories, including salaries, supplies and materials, and construction costs that become part of the District’s asset base.

The remaining funds fall short of the remaining program costs. Although the District is eligible for State modernization funds that will more than cover the shortfall, the timing of receipt of the State funds is uncertain. As previously reported, in order to avoid further cuts or deferrals to the PAC, the Piedmont Education Foundation (PEF) offered to loan the District up to $1.8 million in temporary financing until the modernization funds are received.

Ms. Alahydoian analyzed the financing options to determine the most cost effective borrowing and secured a $3.2 million loan from Webster Bank (previously known as Sterling Bank). The 10-year fixed interest rate is 1.785%. There were $100,000 in funding costs, so this loan yielded $3.1 million. Of this amount, $2.4 million will be used to complete the Measure H1 bond program, and $700,000 will go toward new HVAC systems at the elementary schools (that were not part of the H1 program). PEF will pay up to $1.8 million in interest costs on this loan. The loan proceeds will be held “in trust” in the District’s Fund 40. For further information or if you have concerns about your HVAC system, there are contractors who can assist with AC repair.

In response to questions from the Committee, Ms. Alahydoian reported:

Interest charges not covered by the PEF loan will be borne by the District’s General Fund.

The District’s State funding consultant confirmed that the District has established its eligibility for more than $6 million in modernization funds and is “in line” to receive the funding when it becomes available, which is likely to be over the next two years. This eligibility is based on the middle school and both high schools. Once received, the District will pay off the Webster loan and repay PEF for its interest payments.

The District is not eligible for COVID-19 funding for ventilation or other health-related improvements. The DIstrict has already spent it’s COVID-19 allocation.

The District selected Webster Bank after issuing a bid sheet and receiving seven proposals, with Webster offering the lowest cost loan.

The H1 program budget (currently $67.6 million) will increase by $2.4 million to reflect the added costs to complete the H1 projects, so the budget will rise to $70 million. The $700,000 to install new HVAC equipment at the elementary schools is not part of the H1 program and will not impact the H1 budget.

Mr. Palmer added that, to reduce costs and stretch the remaining bond funds, the District is using its maintenance staff to do landscaping and locksmithing at the PAC. The District will issue a final report that breaks down the total bond program budget by project, and can itemize all change orders.

VII. Review and Discussion of Independent Audit Report for the Fiscal Year Ending June 30, 2021 Prepared by Eide Bailly, LLP

Eide Bailly Senior Manager Jill Stenton reported results of the two bond audits. The Financial Audit found that the District’s accounting of all bond proceeds and expenditures were “fairly stated in all material respects” with no negative findings. The Performance Audit found that bond funds were expended for the purposes authorized by the voters, in compliance with the terms of the H1 bond measure and with no negative findings.

Ms. Stenton reported that the audits tested 92% of the total expenditures for the 2020-21 year, with a sample group that included a range of vendors and spending categories.

VIII. Report by Committee Members Andrew Hempeck and Melissa Wilk on their Review of the Accounts Payable Process

Committee members Andrew Hempeck and Melissa Wilk summarized their review of sample of purchase orders and supporting documentation, including seven vendors. They found “no concerns” with the systems or internal controls, and complimented Mr. Palmer and Trish Culbert on their level of record keeping.

IX. Review, Discussion and Possible Approval of the Fifth Annual Report to the Community

The Committee approved the report with the addition of the following at the end of the section entitled “Strategies to Address the Remaining Budget Shortfall”:

“The District anticipates that the budget shortfall may be greater by the end of the program than it was in March 2021. Various options to address such shortfall will be determined as the shortfall is more defined. Next year’s Report will address these issues.”

There was consensus to include this proposed change, to foreshadow for readers that “the full budget story is not yet told.”

There was no public comment.
Moved: Kyung-Hee Howard
Seconded: Rick Raushenbush
Vote: Approved as amended

X. Future Meeting Dates and Agenda Items

The Committee discussed whether to meet as scheduled on June 16, 2022. The group will meet unless it lacks a quorum.

XI. Adjournment

The meeting adjourned at 5:30 pm.