Capital Reserve Fund

On May 16, the Monroe-Woodbury Central School District will be asking voters to decide on the creation of a new $40 million capital reserve fund. The capital reserve fund would have a term of 15 years and no more than 40 million dollars in total could be contributed during that time period. A capital reserve fund allows school districts to set aside money for future construction projects and capital improvements. A simple majority is needed for the fund to be created, so more than 50 percent of the voters must approve the proposition.

The district is in the process of reviewing the Building Condition Survey and our draft of the Long Range Facilities Plan. These documents and materials will be used to assess the condition and remaining life of existing building systems, such as a roof or boiler, and the functional utility of existing facilities. Both perspectives are important when evaluating long-term facility investments and maximizing the district’s return on these investments. Developing a new long-range facilities plan will assist the district in identifying and prioritizing capital projects and improvements.

A capital reserve fund would help reduce the tax impact on residents when future work is completed. Without a reserve fund, districts must borrow money when voters approve a capital project. That causes a spike in the district’s tax levy for the duration of the loan or term of the bonds issued.

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 funded 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 15 years, the district must return any unspent  funds to the general fund or another reserve fund.

State rules prohibit school districts from keeping more than 4 percent of a district’s budget as unassigned fund balance. Capital reserve funds are exempt from that limitation, allowing school districts to save for major expenses – planned and unplanned.

Capital Reserve Fund Q&A