(0:00 - 0:14)
Clock on the wall says 6.01, so we do have a quorum and we will call this meeting to order. First item is public comment. Do we have any public comment? Okay, great.

(0:14 - 1:00)
Second item is some opening comments by our president, Dr. B. Thank you, Mr. Chairman. I want to start off by acknowledging the tragic loss that our college family has suffered. We all knew Jack Connor. 

He had worked at the college since 1998. And it is not lost on me that our dear team member and family member would have been here tonight greeting us as we entered the door to have our meeting and would also have been there as we departed, no matter what happened inside these walls. And he was always just such a wonderful ray of sunshine and support.

(1:01 - 1:42)
And I would just ask us to keep him, his family, in our prayers and in our hearts. So let me turn to some introductory remarks for our meeting. Although we are accustomed to talking about Annette's budget, as she also likes to say sometimes, because she's the CFO, the reality is that the college's budget, and by extension the community's budget, is very important in the sense that our budget is an expression of the priorities of the college and the community, not the priorities of any one person.

(1:43 - 2:17)
The college administration and the taxpayers that support Lee College are a diverse group, but the administration believes that the vast majority agree on the following three key priorities from our mission statement. The first is that Lee College should provide the highest quality instruction for transfer courses and workforce programs. This means hiring well-qualified faculty, providing ongoing professional development, and having high-quality facilities with up-to-date technology that reflects what students will see in the workplace or at a university.

(2:18 - 2:56)
The second is that Lee College should strive to create the ideal student experience, which is not one uniform experience for every student, but rather is an individualized experience that meets students' individual needs and helps them achieve their individual goals. This means having well-qualified staff providing an array of financial, academic, personal, basic needs, and career supports to help them achieve their educational goals. A quarter of Goose Creek Consolidated ISD's children are in poverty.

(2:57 - 3:33)
For most of them, Lee College is their only chance at a college education, and their success depends upon the supports that we provide to them. And third, Lee College must support generations of Lee College graduates, which means, among other things, that we plan far into the future and make decisions for the benefit of those who will come long after we are gone. Being in a position of financial strength is absolutely necessary for us to achieve our shared goals for our students and our community.

(3:34 - 3:58)
If we don't have adequate financial reserves, contingency funds, and insurance, then an unexpected shock can set us back for years. And if we use deferred maintenance to avoid the cost of keeping up our facilities today, we sow the seeds that will make it impossible for those who come after us to pursue these priorities in the future. Financial strength also means not burdening our taxpayers.

(3:59 - 4:22)
We need to think about taxpayers in at least two categories. There are homeowners, some of whom are on fixed incomes, and almost all of whom feel the weight of property taxes in a very personal way. Although the college is a relatively small component of the property tax compared with the city and the school district, we want to do everything we can to minimize our impact on homeowners.

(4:23 - 4:44)
Another group includes industry and businesses. They are always trying to improve their bottom lines. They have been our partners for decades, and the tax that they pay to Lee College is balanced by the quality of the graduates that they need from Lee College to compete in the global marketplace and grow their profits.

(4:45 - 5:16)
We need their tax dollars, and they need our graduates. The new funding model will contribute to our financial strength, but let's be clear that it comes with some increased expectations. The supply of educated and skilled workers produced by community colleges took a huge hit due to COVID, and Texas community colleges as a whole are far behind the benchmarks in the state's strategic plan, while the demand for educated and skilled workers continues to grow.

(5:17 - 5:57)
The new funding model sets clear incentives to increase enrollment, retention, and completion to meet the needs of Texas's economy, and that is going to require more attention to instruction and student success and ensuring we have the best qualified people in those areas. We also recognize that the first year of the new funding model comes at a time of record state surpluses, and the pendulum can swing the other way quickly. We are recommending that we apply about a third of the new state funds to insurance reserves and contingency funds, which can easily be adjusted up or down in future years depending on state funding.

(5:58 - 6:28)
As Annette goes through her presentation, you will see how we are budgeting to advance the college as an institution, and while some issues will get more attention than others in her presentation, I think it's important to keep in mind the big picture as we deliberate. Finally, I will add that our team has prepared a set of recommendations for our upcoming budget for the board's consideration, and we look forward to receiving your feedback. Thank you.

(6:28 - 6:54)
Okay. As Annette comes forward, I just want to say that my goal for this meeting is that we lay the groundwork for a budget philosophy that hopefully will take us many, many years into the future, and Annette, take it away. Thank you, Chairman Fontenot.

(6:57 - 7:45)
When we had our last budget workshop, you had requested that we have another one in July, which ended up being first week of August, close enough, because there was still some discussion you felt like you needed to have. And so in thinking about that, I have put together some information for your consideration, and so as you have your discussions later on, I hope this information is helpful to you in those discussions. So first off, I took a look at tax revenue, M&O tax revenue, and what that has done over the years.

(7:46 - 8:41)
And if you compare the revenue for 2018 through 2023 back against what we actually received in 2017 as a base, we have received about $50 million more in M&O revenue than we would have had we received the same amount that we received in 2017 in every year thereafter. And so my thought was, what happened to that money? And it was through your leadership and guidance that we've been able to complete a lot of needed adjustments. And we purchased the property that was right across the street at 700 West Texas.

(8:42 - 9:08)
We have created a board reserve in excess of $22 million. We have increased our budget in our repairs and maintenance. You as a board have allocated additional funds back to the college to the tune of about $7.8 million that will fund capital projects on our campus.

(9:09 - 9:56)
We are projecting an operating surplus of about $4.7 million right now for the current year. And so when that number is final, then that will be additional funds that you could evaluate and determine what we want to do with. When we look at what we should be spending on repairs and maintenance for our facilities, based on the data, it shows that we should be spending between 2% and 4% of the aggregate current replacement value.

(9:58 - 10:33)
Right now, the aggregate replacement value of our entire campus is about $325 million. Based on our audit report for 2022, we spent a little over $7 million in the operation and maintenance of our facilities. That is right at 2.27% of our aggregate value.

(10:35 - 11:09)
So we are within that 2% to 4% range, but we are on the low end of that. And when you look at our building age and what that looks like, 74%, 75% of our buildings are older than 30 years. And once they reach that age, that's when you start having major needs.

(11:09 - 11:30)
That's when you start seeing roofs need to be replaced, electrical equipment needs to be replaced. And as the building continues to grow in age, so do the repairs needed. And I think we've seen that on this campus.

(11:30 - 11:45)
We've had water mains break. We did a lot of electrical repairs with the $11 million bond in 2018. And so I think we've seen that happen on our campus.

(11:48 - 12:27)
Our current tax rate, and we've talked about this numerous times, our current tax rate, 2201, is very competitive effectively with our three other schools that are the closest to us. When you look at the ranking for the Gulf Coast schools, we're number seven. But if you look at the ones that are right around us, we are still higher, but only by a .01. And so we are still very competitive in that tax rate.

(12:29 - 13:16)
Our rate compared to other entities within our taxing district, Harris County is the only entity that has had a larger increase than, decrease, sorry, than Lee College. So Lee College has decreased their rate by about 12%, and Harris County is the only one that is larger than that, and they have decreased theirs by 16%. Since 2018, as I said before, we've been able to put a lot of money into our reserves.

(13:16 - 13:51)
Our current policy says that we should have between four and six months of operating costs in reserve, and we currently are at about 4.83 months. So we are within our policy, but we need to keep an eye on that because as our costs rise, so should our reserve. We just did a refunding on our bonds, on our geo bonds.

(13:51 - 14:23)
We have two issues that are outstanding, 2013 and the new issue, 2023. Annually, our debt payments, our required debt payments, would be about $3.4 million. And then after 2026, starting in 2027, the 2013 bonds will be paid off, and so then our bond, our required bond payment will go down for the geo bonds.

(14:24 - 14:55)
Can I interrupt? Just a clarifying question here. When you talk about 2013 and 2023 bonds, we're talking about the 2013 $40 million bond amount, right? And 2023 just means we refinance some? The 2023 was the refinance of, I believe that is the refinance of the $30 million bond. Yeah, the only bond debt we have is from the 2013 geo bond cycle.

(14:56 - 15:02)
No, there was another issue. Did we do $11 million or something? That was revenue. That was revenue.

(15:03 - 15:17)
But that's still outstanding though, right? That was a revenue bond. That's on a separate. When we did the refunding, there were like two payments that we did not include in that refunding because our rate was so low.

(15:17 - 15:27)
Okay. And so that's the reason there's a portion of that that is still outstanding. I think a clarification is we've not had a geo bond since 2013, and it was $40 million.

(15:28 - 15:40)
And our balance is like 32 or something. So we're paying off 2013 geo bond debt. It's just the dates are the refinancing or whatever you call it.

(15:41 - 15:52)
Okay. And so since we refinanced it, it gets renamed basically as the 2023. But I think there were two payments, two years that we did not include in the refunding.

(15:54 - 16:01)
Okay. Just a clarifying point that we've not had a geo bond since 2013. Right.

(16:02 - 16:15)
Yeah. We did have, and we have two outstanding issues of revenue bonds as well. There was one issued in 2015 and one issued in 2018.

(16:16 - 16:31)
Our payment right now is about $1.5 million annually. Our required payment, I should say. And then our last payment on the 2015 debt is scheduled for 2027.

(16:32 - 17:05)
So starting in 2028, our payment will go down to around $1 million. Now, in addition to building reserves during this time, we have also created or completed or scheduled $33.5 million of capital projects on this campus. These projects have been funded numerous ways.

(17:06 - 17:20)
They've been funded with revenue bonds. They've been funded by the board through the allocation of surplus operating funds. We received a gift for the Student Resource and Advocacy Center.

(17:21 - 17:43)
We have used CARES Act funding to complete some of these projects. And so all total, we have been able to complete $33.5 million of capital projects. That just seems amazing to me.

(17:45 - 18:06)
But with your guidance and your support, we've been able to do that. Our enrollment, we've talked about enrollment a number of times. Nationally, community college enrollment has decreased 16.8% from fall of 2019 to fall of 2022.

(18:07 - 18:46)
During this same time, Lee College enrollment has increased by about 7%. So Lee College is outperforming other community colleges nationwide by 24%. When we talk about our tax rate, our current rate right now, as I stated, is .2201. We have received the certified values for chambers, and we have received estimates from Harris.

(18:46 - 18:58)
We don't have final numbers from Harris yet. I guess you don't have them either. So based on where we are right now, we keep everything the same.

(18:59 - 19:52)
It would generate a little bit of extra revenue here, 2.7. The no new revenue rate, which is supposed to be the rate that says if you charge this rate this year, you will not collect any additional revenue when you compare the revenue that you collected last year on these same properties. So it would exclude, when you're doing the calculation, it excludes any additional properties that may have come onto the tax rolls in the current year. And based on that calculation right now, which this will change as we get final numbers, our no new revenue rate is actually higher than our current rate.

(19:53 - 21:22)
Our no new revenue rate right now is .2207. And if you look at the voter approved rate, which is the rate that the college could go up to without having to go to the voters and ask for their approval, and that rate would be .2369. Based on the valuations that we have right now, if we were to lower our tax rate by half a penny, it would lower our revenue by approximately $1 million, 962,000. If we were to lower it by a full penny, it would lower our revenue by almost $2 million, 1.925. And that is it for my presentation to you. At our last board meeting, our last budget workshop, I should say, there were some questions about the bond issue and the refunding.

(21:23 - 21:50)
And so we invited Mr. Terrell Palmer with Post Oak to come to this meeting to discuss that transaction with you and answer any questions that you may have. Again, Terrell Palmer, I'm the president of Post Oak Municipal Advisors. I'm going to be talking about a little pamphlet here, but we're also going to have it on the screen.

(21:51 - 22:33)
You haven't really heard a lot about my firm, and I'm also going to mention a law firm named Bracewell, and that he's with Jonathan Frails. And together, we're pretty much your financing team, where Post Oak Municipal Advisors, as the name would indicate, is providing you all with financial advice and helping you all with the bond issuance process. We have a fiduciary responsibility to the district, and therefore it's taxpayers to do the right thing and to hold your interest above even our own interest.

(22:34 - 23:10)
And so it's very important for us to make sure that the transaction provides benefit to not only the college, but to the taxpayers as well. I am personally registered by the Municipal Securities Rulemaking Board with a Series 50 and a 54 test that have been passed, as well as we are enforced by the Securities and Exchange Commission. And so we have a lot of oversight in our business.

(23:10 - 23:35)
And so I just wanted you to know, I'm just not some guy that's hung up a shingle and said, I'm a financial advisor. We have a lot of regulation in our business, and it's imperative that I do the right thing and provide benefit to our clients. And I think the transaction that we did a couple of months ago meets that criteria.

(23:36 - 24:05)
Jonathan Frails, again, is a very good bond lawyer. And while I'm providing the advice, he's providing you with legal advice. And he makes sure that that transaction, no matter what crazy scheme Terrell Palmer comes up with, that it meets state law and it doesn't go against any of the laws that have been passed by the legislature, so that everything that we did in the transaction is above board.

(24:06 - 24:39)
We also go to the Attorney General's office, and we pay them a fee to review the bond issue and to make sure it meets with all of their laws. And once they provide their opinion on that issue, the bond issue is incontestable, meaning that nobody can really come in from outside and start suing people over the debt, which is very important. And if we had people doing that, you can see that we would issue bonds, have to deal with a suit and stuff like that, and you wouldn't be able to start that project immediately.

(24:40 - 25:30)
This is a financing method with your advisor, bond counsel, AG's approval that is very unique around the United States and has worked very well for Texas. So the first page really just talks a little bit about kind of what we do, and you can see that we represent a lot of independent school districts in the area, do some large water authorities. We have a fascinating program where we're pulling water all the way from the Trinity River all the way to Katy right now, and that's probably the largest public finance project in the United States, over $6 billion in bonds have been issued so far on that issue, and it's an amazing project.

(25:30 - 26:12)
Do some toll road authorities. You are very familiar with the toll road authorities as well as Lee College, other kind of special districts and a lot of municipal utility districts around, but close to about $2 billion worth of debt that we issue in a given year, and it's been a very good company, and we've had a lot of success. Just to highlight some of those issues on page three, you can see they can range from a couple of million dollars for Friendswood ISD to almost $650 million for Lamar CISD, so a big range of transactions as well.

(26:13 - 27:17)
So getting to Lee College, and I did look at y'all's workshop meeting or listen to your workshop meeting in June, and I just wanted to try to help the board with any resources that I have and try to talk about what happened and kind of where we are and always looking forward. Your tax rate has been remarkably low, and as you can see, really, the general fund tax rate represents probably over 90 percent of your overall rate. It's a significant portion of your rate, and your debt service rate used to pay for the 2013 and the 2023 refunding bonds is a very small percentage of your overall rate, but y'all have done a great job at keeping that tax rate very consistent over time.

(27:17 - 28:16)
There's been a lot of discussion about the one cent that we went, you know, we didn't go up, but we lebbied an additional one cent on our INS fund and called some bonds, or another word for that is defeased some of your outstanding bonds with that one cent. That is perfectly legal, and I've done it with many of my independent school districts around the Houston area. As a matter of fact, if you look back at that list of ten school districts, I thought about how many have I done this for, and it's been five out of the ten districts like to, when they have some surplus funds coming in, use that to pay down their bonds, to pay off bonds, to create capacity for additional issuance in the future.

(28:16 - 29:21)
So it's very popular and used by many, many school districts. While I'm talking about the tax rate, there was mention that there's some prohibition with independent school districts about a tax swap and not to get too deep into how independent school districts finance themselves, they have on their maintenance and operating side, there's different weight to pennies, okay, and that the state of Texas will provide you with almost kind of incentive, maybe put additional funding for levying a higher tax on the M&O side, and a lot of people will have had in the previous years, had dropped their INS tax rate in order to increase their M&O tax rate to get to these more leveraged pennies. They're even called golden pennies, and they're not copper pennies.

(29:21 - 30:51)
They are golden pennies, and they get a lot more bang for your buck with these pennies, and so there was some incentive to do this tax swap, and they have eliminated that with school districts, but that is certainly not what we did here, because you really don't have any incentive to increase your M&O tax rate. This was just a financing plan to try to, you know, maintain a consistent tax rate and to provide some savings and capacity. You know, and there's been some discussion even on that, I believe at that meeting, about Goose Creek and what Goose Creek has done with their tax rate, and it's dropped over 15 cents over the last five years, and that is really because of state assistance, and the state is providing what they call compression, and so if they started off small with maybe a five cents worth of compression where they would send Goose Creek $20 million worth of additional state taxes that they've collected from either franchise tax or sales tax and sent it to Goose Creek and said, Goose Creek, here's your $20 million.

(30:51 - 31:16)
You can't use this. You have to go down on your tax rate in order to, you know, because we're providing you with this gift, and so it was a way for the legislature to try to bring down local property tax rates across the state, and it's worked beautifully. Since then, you know, they've done additional compression at Goose Creek.

(31:16 - 32:41)
It's down to 15 cents, and I'm expecting, while I'm not the financial advisor for Goose Creek ISD, you know I'm the financial advisor for many other school districts, most of them are looking at significant decreases in their M&O tax rate because of compression that was created by the 2023 legislature. So good news for, you know, property tax payers in our or around our state really, and so it's coming and you will start seeing the headlines in the paper, you know, about the lower tax rates, you know, fairly soon. So let's go back on page five, and, again, this is a little bit of information on the 2023 refunding and defeasance, and we did have some 2013 bonds that had an interest rate of 4.71%, and we had the ability to do a current call to call those bonds out in August of 2000, August 15 of 2023, so it's coming up, and we were able to replace those bonds, just like you would refinance your home mortgage or car note with bonds at a much lower rate.

(32:41 - 33:47)
You can see that we even issued less bonds at a less rate of 3.61%. Over 110 basis points were the savings there, and so with that difference in the interest rate, we were able to produce both gross and net present value debt service savings, and we look at it both ways in our industry, and you can see down below that we have net debt service saving, subtracting out what we ask you all to pay for us at that closing of $1,785,000, we have present value savings of over $4.2 million, or net debt service savings of $4.2 million. That's gross dollars' worth of savings. And then we always put this on a present value basis, and I think there was a lot of talk in your last budget meeting about present value of dollars and inflation and cheaper dollars in the future.

(33:48 - 34:54)
This is what our tool is to kind of bring everything back to today's dollars and determine what the true benefit of a transaction is, and we can see here that we've got present value savings of almost $2.6 million, and then we divide that savings by the amount of bonds that we issue. While everybody has a different floor on where they feel like is a significant refunding for issuers, we have a pretty high standard on that, and we like to see this number at least 5%, and so you can see you're well over 8% with this, which means it was a successful transaction and one that we were very, very proud to bring you. If you want to look at the savings another way, you can see in the columns to the right, the 2023 defeasance and refunding, you can see how, over time, we're almost over $500,000 worth of savings beginning in 27 through 37.

(34:55 - 36:08)
Terrell, why did the savings start in 27? Why not start it immediately? Well, we really hope that one day, and the Board has already talked about planning for an additional bond issuance and bond election, and as Mr. Santana said, you haven't had an election since 2012, issued probably in 2013, and so there's probably time for that to take care of some projects that you all would like to do, as well as deferred maintenance, and so this savings in those years would really help us to take on this additional debt, and that savings and the drop in the debt service would help us as we're issuing those additional bonds. Any questions about that refunding issue at this point? I'm about to go on to a pretty specific page about analyzing what the benefit was of just the defeasance, just the paying off of those bonds, but I'm happy to answer any questions regarding the refunding. Go ahead.

(36:09 - 36:35)
Of the present value savings, I'm not sure. I'm the one that raised the present value issue, but I'm not sure we're talking about the same present value. We've got the college saving money, and from what I'm gathering, and I have limited time to look at this, the college is saving a certain amount of money on the reduced interest rate, over 1%.

(36:35 - 36:50)
Sure. And then the college is saving money by raising the sinking tax rate, which we did last year. We raised that component almost a penny, I think.

(36:52 - 37:12)
Yeah, I don't really look at, you know, because, you know, you gave the refunding. You gave that money that you raised, $1,785,000, straight to the refunding and paid off bonds with it, so it's not in Annette's account. You know, she doesn't have that, you know, so.

(37:12 - 37:19)
But we're taking it, but the college. Well, the debt. Here's the, okay, let me finish my question.

(37:19 - 37:37)
So I'm not sure how much of this $8.43 present value savings is the result of the tax rate increase, which comes from the taxpayer, not the college, or it's coming from the interest savings, and I don't know if you have that figure broken down. I do. Huh? I do.

(37:38 - 38:02)
You do on the next, okay, good. Then I'll wait for that. But my question is on present value is when we have an inflation rate up at 6 and 7, and 9 almost, now it's come down to 4 or 5, but it's certainly not as low as the interest we're paying, and we're asking the taxpayers for additional funds to pay off low-interest debt.

(38:03 - 38:28)
That, for them, it's not a good deal. It's a great deal for the college, but nobody's paying off their 2.9 and 3.5 percent home loans, you know, because it's in their interest to keep the money in savings. And so when I look at present value for the taxpayer, I have to say what's the taxpayer's cost of funds, which is a guess.

(38:28 - 38:38)
I mean, if they go and you can earn 4 or 5 percent, you may earn more in the market. If you don't have any assets and you're living off a credit card, then you're paying 22. Sure.

(38:38 - 38:49)
So we know, I mean, we can take a guess. It's somewhere above 4 or 5 and up to somewhere in that range. Sorry, let me try to address what is it.

(38:49 - 38:51)
Let me finish. Okay. So you see what I'm saying? I do.

(38:52 - 39:25)
It's my observation here is with values increasing and wages stagnant or losing ground, it's not a good deal for the taxpayer. At this particular time, because of this continued highly inflationary cycle, and we've had 27, 28 straight months of negative wage growth across the whole economy, and that's not an individual taxpayer, but that's okay. So those are my concerns from the taxpayer's standpoint.

(39:26 - 39:40)
Yes, the college saves money, but the taxpayers are not saving money. In fact, we're taking a little bit more money from them to pay off for them a relatively low-interest debt. And that's my first point.

(39:40 - 39:50)
And my second point, when we sold these bonds, we estimated to the taxpayer what they were going to pay out. We presented these schedules. We showed them.

(39:50 - 40:26)
I realize legally we're, I mean, this is all legal, but from how do we go in a future bond election and say, this is how much we want to sell in bonds, this is going to be the repayment schedule, but we may come back 15 years or 12 years from now and change all that, which to me makes our statements have a shelf life, and that's a credibility issue with me. I just think once the voters approve, whether it's in law or not, if we presented it a certain way, we need to stick to it. We wouldn't let a bank get away with that.

(40:26 - 40:40)
We wouldn't let anybody else get away with it. So unless the voters want to approve a defeasance, which raises their rate, that's where I'm coming from. So you said you can break down that 8.43 number.

(40:41 - 40:53)
Yeah, but let me address what is it. Let me ask a question real quick. Okay, because tell me about, so I wasn't on the board when the 2013 bond came out.

(40:54 - 41:10)
I'm sure I voted for it, but I can honestly tell you I have never at the ballot box voted for a bond schedule. So explain to me how these bond schedules were presented to the public. Well, they're presented.

(41:10 - 41:19)
We estimate what the— Estimate, estimate, right? Right. Estimate, keyword. We don't guarantee, we estimate.

(41:19 - 41:33)
Right, we estimate it based on this is how much we're going to collect. But what we didn't estimate was we said they are 20-year bonds or 30-year bonds, so we're going to stretch them out that far. That was a statement of fact, not an estimate.

(41:33 - 41:50)
And now we're going back and changing the terms. It would be like if you took a house—anybody took a house loan, the bank said, okay, 20-year payout, blah, blah, blah, this way, and then they come back 10 years and say, you know what, we're going to raise your payment to fees. And save you money.

(41:50 - 41:58)
Thank you, bank. But if it's a 3% or 4% loan, you don't want to save money that way. That's not a saving.

(41:58 - 42:25)
If the money is costing you more, if you can earn more with that money in the market— We don't have the money. We don't have $30 million sitting in the bank to go earn money on and make more than paying off the low interest. We're asking the taxpayers to pay additional funds out of their accounts to pay our debt when the debt to them is very low.

(42:25 - 42:37)
It's a bad deal for two reasons. They have lost earnings, number one. And number two, the cost of the present value of the money, the inflation rate, is in excess currently of the cost of our money.

(42:37 - 42:47)
I think your lost earnings numbers are a broader area than ours because I can tell you my industry, there's no lost earnings. There's increases going on. They're trying to keep people in place.

(42:47 - 43:03)
They're not cutting people. They're trying to keep people—the economy in our area, which is our taxing district, not whatever national economy numbers you're looking at. Our taxing area, what I'm seeing in the industry I'm in, which is petrochemical, is an increase in wages.

(43:04 - 43:10)
Right, an increase in wages, but nationally. We're not—we don't collect nationally. Let me—come on.

(43:10 - 43:23)
You just keep running over me. You keep running over us, so go ahead. What I'm saying is the statistics, national statistics, are we have 29 straight months of negative wage growth because of inflation.

(43:23 - 43:32)
Wages are increasing, but they are not keeping up with inflation. We're not even able to keep up with inflation here at the college. That's a fact.

(43:34 - 43:56)
When I say negative wage growth, what I'm saying is wages adjusted for inflation. I think that's—polls are bearing that out, and that's what I'm saying. I would—if I had debt at this rate, I mean, I still got a— personally, I still have a home loan, and I'm paying it off because the rate's so low.

(43:58 - 44:26)
Money in savings or in the market or whatever else, it's not worth paying it off. And we're asking taxpayers, and not just homeowners, but if you own a farm or a building or whatever, we're asking them to pump up money that they could earn more income elsewhere, plus not even considering that the value of that's being inflated away. And that's financial.

(44:26 - 44:44)
I think he's ready. Mr. Hall, let me go back to the present value calculation and how we do it. And so we have 4.71 percent bonds out there, which are tax-exempt.

(44:45 - 45:12)
And so whoever was paying—received those bonds, the taxable equivalent for those bonds might be six and a half or depending on what the 40 percent tax bracket was. So when you say, hey, I could go down and get a CD or something like that at the bank and get five percent, well, that's also a taxable deal. And so you're going to have to pay taxes on that.

(45:13 - 45:41)
So we've taken all of that out and are showing on this schedule that we're showing 4.71, which is what is the outstanding bond, and then we are discounting the results of the transaction back at 3.61, which is the amount of the—that is the true interest cost of the bonds that you issued. And the bonds that are issued are not very short. They're very long bonds.

(45:41 - 45:54)
And so it's a significant time. Yes, to you it seems like a very low rate, and that's because it's a tax-exempt rate. And so the 3.61 would probably be equivalent to five percent.

(45:54 - 46:08)
And so we're still want to get—we still have a significant delta, a significant benefit there between those two rates. And I understand the difference in the rates. Sure.

(46:09 - 46:42)
And we've done this before as far as lowering the—get a more advantageous rate, and that's—I'm all for that. What I'm struggling is at the same time we increased our sinking rate, could we have done this bond sale and left our sinking rate the same? What prevented us from— It could have gone down. Obviously you gave me—gave us on the transaction, you know, $1.785 million.

(46:43 - 47:10)
That's the one cent that you're talking about that we increased the debt service tax rate. In order to try to make a smooth— That's my total concern on this. And let me say, this is—and y'all said, I think, during y'all's last meeting, this is a philosophy, this is a method, okay? And I've told you that many school districts use this method.

(47:10 - 47:51)
The method was—the overall hope with this method was that when you go into a bond election for new bonds, you get defeated by really one thing, I think, and then maybe another thing. And the first thing is, what is the facility? And the ones that I've seen have—the elections have not passed are natatoriums, administration buildings, and athletic facilities. And so that's when the voters in our area seem to really come up and vote down those projects, and they don't get passed.

(47:51 - 48:44)
I think a far distant second is, what is the tax impact of this bond election? And while I don't think that we were trying to be—hide the ball on what the tax impact was, because I don't think a penny is going to make or break your future bond election. I think it was the hope that—and what I've seen in other districts where we provide much more than a penny, five and six cents worth of reduction in the tax rate, and then we go back out and go, hey, I know we're going up 11 cents for this bond election, but we gave you five cents worth of reduction. They don't care about the five cents that you gave them over the last five years.

(48:45 - 49:10)
They only care that it's going up 11 cents, and that is only the number that they have in their head. And so I don't think you get a lot of credit by allowing your already historically low tax rate to go even further. And so that was our hope, was to—we think that you're going to need the revenue for your new bond issue.

(49:10 - 49:32)
You're going to need the tax rate, and it worked out well financially to call in those bonds and save some additional— did it make a big difference? Could I have just done the refunding without this seven, eight, five million? Absolutely, but your tax rate would have gone down. It would have gone down by a penny. Which has been my goal.

(49:32 - 49:57)
I know, I know, I know. And like minds can differ on this. There's certainly some factions on this board about is this the right thing to do, and you're probably looking to me to go, oh my God, this is such a great financial implication to levy this additional penny.

(49:57 - 50:17)
While it does provide savings, it's not something that is going to have a material effect on the county or the taxpayers of the college district. It's not material. But let's go into— Can I make one just statement? And I think this will help understand where I come from when I make comments.

(50:18 - 50:25)
I keep hearing the college saves money but the taxpayers don't. The college is the taxpayers. I don't separate those two.

(50:26 - 50:39)
The taxpayers own the college. The taxpayers—this is an asset that belongs to the taxpayers. So when I look at how can we help the taxpayers, it's not singularly just the tax rate.

(50:39 - 50:50)
It's the debt that we have. It's the need for maintenance that we have. It's all the things that it takes to run this college and deliver the service because it's the taxpayers' college.

(50:50 - 51:06)
So I don't see two different entities, and I think that's where a lot of times we don't communicate the same way. And that's—yeah, and that—I mean, I really don't understand your position because we are elected by the taxpayers. To steward their facilities.

(51:07 - 51:19)
To steward their facilities and represent them. They're the only voice for the money we spend is who they get to vote for. And so you cannot ignore that.

(51:19 - 51:28)
We have to go out and convince people to vote for us. Yeah, we're voted to spend money though because that's what the college does. It spends money.

(51:29 - 51:52)
So we're elected to spend money. But when we tell the taxpayer we're saving you money when we're raising your rate and paying off debt with the additional— $7 million, not the other savings. But when we're raising that to pay off a low-interest debt, whether it's the college or whatever, the college is saving money.

(51:52 - 52:09)
But the taxpayer is shelling out money now that if they shelled it out later, a lot of the value of that money would be inflated away. It's costing them a significant amount of revenue. The individual homeowner, the dollars are small.

(52:09 - 52:20)
But a business, apartment complex, industry and all, we're talking about a fair amount of money. And you do a lot of work for Exxon and people do. They look at those things.

(52:20 - 52:38)
What is the cost of this going to be over time? Can we do something, make more money elsewhere? And they're not going to invest in something and take dollars that they can earn 7% or 10% over here and pay off a 3% debt. Ever. They're not going to do it.

(52:39 - 52:53)
It's like prepaying your low-interest home loan. Or making one extra monthly payment on your mortgage that a lot of advisors tell young couples to do, right? Try to save money in the long run. And that's what I see this as.

(52:53 - 53:03)
Okay, so we'll— I know where you're at. Look, the high-inflation environment is something new. We haven't lived in that in a number of years.

(53:03 - 53:12)
But when that happens, you have to start—you have to kind of shift your thinking. Man, this isn't high. My first mortgage was at 13% fixed.

(53:12 - 53:22)
People whining today can whine to somebody else, okay? Mine was 12. When the rate came down, I could get it down. Let's get back on track.

(53:22 - 53:59)
Let's go to page 6. And I was listening to y'all's recording, and there was a lot of discussion about the $1,785,000, which was roughly a penny on the debt service. And what did we do with that, and how much savings did we get? As you can remember on the previous page, which had it all lumped in there together, I showed you a present value savings of $4.2 million from the refunding. This transaction, this part of that transaction, is only $170,000 worth of present value savings.

(54:00 - 54:20)
Which part? So this is the $1,785,000. Remember, we issued $26 million for the bonds, and this is $1.785 million. So it's a very small percentage of the overall transaction that we did, and therefore the savings is much less.

(54:20 - 54:37)
You didn't have to pay for the cost of issuance on this transaction with the defeasance. There was no additional cost. As a matter of fact, it saved you money and reduced everybody's fees because that's $1,785,000 worth of bonds that you didn't have to issue.

(54:38 - 55:08)
And so there's no cost of issuance in this at all, and it had gross savings of almost $800,000 over the next 14 years. But when you present value that back to today's dollars, again at that same rate of $361,000, we're at $170,000. And so of the $4.2 million, the $1,785,000 only produced savings of $170,000.

(55:10 - 55:17)
That's the savings on a present value basis? Of the additional penny. Yes. Right.

(55:18 - 55:59)
It saved over time almost $800,000, but if you discount that back and to today's dollars, what did that do? And again, we go back to that percentage that I used to, is this a valuable transaction? Is this good for you? Is this good for the district and its taxpayers? And I do look, as Mr. Santana said, I look at you all combined, that it is taxpayers and college combined, and it's 9.55 percent. And so well above my threshold of 5 percent worth of benefit. One cent just a one-time? Sure, absolutely.

(55:59 - 56:21)
That one cent goes to what? You set the tax rate every September or August. You can do whatever you want to this year. But on the current defeasance or schedule that we're now in, do we not need that one cent this year, like when we're going to set the tax rate in a few months or a month? You get a fresh look at your tax rate every year.

(56:22 - 56:34)
I haven't put anything in place that requires you to use that penny. So the penny, the $1.7 million, was a one-year expense? Yes. One-year expense.

(56:34 - 56:38)
Right. That helps me because I thought it was an annual expense. Oh, no, no.

(56:38 - 57:08)
No, no, no. And, you know, we support our, we stand by our recommendation that this is a good thing, that we have recommended to many other school districts that they may, that you may, as you're leading up to a large, significant bond issue, that don't let your tax rate go down, you know, because it just looks a lot higher when it goes up. I know that's, again, a different philosophy.

(57:08 - 57:16)
And that's where, philosophically. We're different. And I'm saying this not to you but for the whole board here.

(57:17 - 58:02)
I believe when we go for a bond program that we need to be completely open about what it is and what it's going to cost and not play around with the rates to hide or, I look at it as manipulation, but that may be a strong point. If it makes you feel any better, and maybe there's another way to kind of look at these early defeasances, and it might help you. And let's say we're not planning on an election until 2028, and we have multiple years of this where I come up and recommend, hey, there's some other bonds we can do, another $1.5 million here, $2 million there, and let's kind of pick away at this and kind of maintain a consistent tax rate.

(58:02 - 58:28)
Well, if that adds up to $8 million or $10 million worth of bonds, that is 8 or 10, because I'm pulling your existing bonds out of the market, and so you have capacity. And so that's $10 million worth of bond capacity out there that the new election doesn't have to pay for. It doesn't, you know, it's got capacity.

(58:28 - 58:55)
And so the tax rate of that issuance in that election is going to be cheaper because I've created capacity. And that's the way we have told, that's the way we told Annette and Dr. V, this will, you know, maintain your tax rate and create capacity for your next election. We're not just using the money, just levying $1.7 million and then doing something else with it, letting it sit in our account.

(58:55 - 59:00)
We are paying off bonds and stripping things out. I understand that. Good.

(59:00 - 59:18)
I guess where I'm struggling this particular time with the high inflation, the inflation factor, present value, when you calculated it, the current inflation rate wipes out any savings. Because the savings is future, less valuable dollars. We're going to have to pay more valuable dollars in today's.

(59:19 - 59:34)
Your interest rate of 361 has inflation in there. That is a market rate, and it has inflation. So the market is already, because it's just low for you because it's tax-exempt.

(59:34 - 59:42)
It's tax-exempt. And so there's a component in there. But the people that are paying the extra $1.7 million, they're not getting tax-exempt money, you know.

(59:42 - 59:52)
That's right. And so we're kind of, you know, we're helping them here by, you know, investing. We're taking money.

(59:52 - 1:00:07)
If they're earning 4 or 5 percent, you know, with tax, we're taking money from them where they could earn more money someplace else. The statement was made that the taxpayer is saving money, not when you consider the inflation. No, no.

(1:00:07 - 1:00:12)
We're going to disagree. Let's disagree on that. Let's disagree on that.

(1:00:12 - 1:00:24)
Because this is, because this is, the 361 does have inflation. That is a, that is a rate with inflation in it. That is y'all's market rate with inflation.

(1:00:24 - 1:00:28)
When we, when we. It's a different inflation. I'm talking about consumer price index.

(1:00:28 - 1:00:42)
Well, I'm talking about interest rate, which does have inflation. That's all about inflation, you know. In our, in your, in an interest rate, a large component of that is inflation.

(1:00:42 - 1:00:56)
And when we sold our 2018 bonds, I think we got a rate of, you know, 1.8 percent. Because there was no inflation during that time. Now we're at 361 with a shorter issue.

(1:00:56 - 1:01:11)
You know, I have school districts that are probably up 200 basis points in interest rate because of, not because they're a worse credit. It's because of inflation. Inflation is already in that 361 number.

(1:01:11 - 1:01:23)
So you can't say that, that I'm not factoring in inflation. The present value calculation. And remember, this is, you're making a decision over a 14-year period.

(1:01:23 - 1:01:46)
While we're in a temporary area of inflation, you know, a lot of the, you know, the forecast models believe that, you know, we will maybe have a soft bounce on our, on our recession. And the Fed will come in and try to lower the Fed funds rate and try to, you know, slow things down. So to make a decision today.

(1:01:47 - 1:01:54)
They've missed a lot of stuff the last two or three years by a huge margin. That's a whole other, yes. And they were wildly off.

(1:01:54 - 1:01:58)
So anyway. Hey, Terrell, you're starting to lose me. Can we wrap this up? Yes, sir.

(1:01:58 - 1:02:51)
Let me, I always love to end with some good news. Okay. So in your, in your budget meeting, y'all talked about, well, how much is $50 million? And how much is $100 million in potential bond election? And when can I do it? And I will, I will say that, you know, the decision whether to do these extra pennies, while it helps marginally, it is not, doesn't have a major effect on the results that I have on, on page 7. But it, it does show that with your current rate of $292,000, if you maintain your current rate for your INS debt service, and that would, you know, cause you to, to take some effort and to call some bonds early on to keep it there.

(1:02:51 - 1:03:09)
But in 2014, maybe in the fall of 2014, you could have a $50 million bond election. And, and keep the same debt service, 2014. Did I say 14? Oh, yeah.

(1:03:09 - 1:03:10)
Yeah. Okay. 24.

(1:03:12 - 1:03:18)
24. Sorry. In 2024, and I would issue those bonds in early 25.

(1:03:18 - 1:03:40)
And so $50 million, you could bill that as a no tax increase election, and, and everybody would be happy. If $50 million is not enough, and you do need, I understand you all mentioned as much as $300 million, I believe, and some deferred maintenance issues. Sorry.

(1:03:41 - 1:04:15)
But if, if it's not enough, $100 million at that same time, and again, have an election in the fall of 24, and issuing those bonds in 25, we would only go up less than a penny on our debt service tax rate, our INS tax rate. So only an extra penny. And then if we wanted to say, Darrell, we are never going to issue any bonds until we can afford $100 million worth of bonds, and, and we're not going up on our tax rate at all.

(1:04:15 - 1:04:44)
And, but we want to get to $100 million. 2027, again, a fall of, probably a fall of 26 for a 27 election. Is there a, is there a limitation on how many pennies can be shifted from M&O to INS, so that our overall tax rate doesn't go up in order to get to the 3.8 pennies for $100 million bond? You're not shifting anything.

(1:04:44 - 1:05:05)
If your M&O goes down, and you can independently make a decision to go up on your INS fund, the restriction that you have is, again, you just can't go arbitrarily up on your rate and decide, I'm just going to let it sit in my account over here. Okay. I have to pay off debt service.

(1:05:05 - 1:05:37)
And I'm sure Annette is taking you all through the truth in taxation numbers that you all have to go through in the fall of every year. And she's able to put, in this year, she was able to, in this current year that we're in, so last fall, she was able to put $1,000,785 into that sheet that said, I'm not only going to pay for my required debt service, but I'm going to pay another $1,000,785. You have to pay for it in debt service.

(1:05:37 - 1:05:44)
You just can't let it just sit down. But there's no limit. You could raise your tax rate as high as politically available.

(1:05:44 - 1:06:27)
But, you know, my caution is, and I haven't done this, to look back in 2013 and what we promised the voters was going to be our overall tax rate, but I think it was considerably lower than what we're talking about. I thought it might have been $0.04 or $0.05. Does anybody remember? It went up to about $0.05 on the INS side. Yeah, we were up at $0.05. I would say that that is a promise that we made to the voters, that our debt service tax rate would not be above $0.05, and I would strongly recommend that we keep our promise to the voters that we would not go above whatever we promised the voters in 2013.

(1:06:28 - 1:06:43)
Yeah, and I know in some of the larger GO Bond elections, that are typically a lot more publicized, communicated. Service clubs get presentations because they're trying to get the vote out there. I never heard from Lee College one bit in 2013.

(1:06:44 - 1:07:08)
I wasn't on the board. If I voted for it, I had no idea what I was voting for, but I trusted that whatever this board was doing was the right thing. But I was heavily involved in the Goose Creek Bond, and the point there is, you're right, we say that the estimated increase in your tax rate is going to be X, and it's going to stair-step its way because you're not going to sell $300 million of bonds all at one time, and it's an estimate.

(1:07:08 - 1:07:17)
And I can tell you for a fact that it's never been the estimate, but it's never been higher than the estimate. Correct. I get fired when it gets higher than the estimate.

(1:07:17 - 1:07:25)
What you tell the voter is, our target is this this year, this this year, this this year. Nobody complains if it's less. Nobody complains if the increase is less.

(1:07:25 - 1:07:38)
It doesn't mean you missed it. It just means you did better than what you expected. So, you know, I think we're talking about very small dollars compared to our city and Goose Creek counterparts.

(1:07:39 - 1:07:58)
I think historically the INS side of what I looked at the last 20 years, 15, 20 years has been between 1 and 5 cents. But the M&O has always been higher, so that 1 and 5 cent had a bigger impact on the overall tax rate. And so what I've seen this doing is lowering the overall the M&O side.

(1:07:59 - 1:08:23)
The INS side has been dropping down appropriately as we've been paying stuff off. And so our overall tax rate is pretty low compared to what it's been historically. If you look at, and we are, we've, you know, Lamar CISD had a $1.7 billion bond election, okay, and went up 8 cents on their debt service tax rate.

(1:08:23 - 1:08:51)
Okay, this is Richmond Rosenberg, if everybody knows what we're talking about. And so to meet their growth, and we issued those bonds very quickly, but it was good because, remember, they are experiencing this massive compression on their M&O side. So they're going down on their M&O, and they're taking advantage of that by going up on their INS in order to fund needed projects that they have to have.

(1:08:51 - 1:09:13)
I think y'all don't have the big brother in the state forcing y'all to lower your M&O tax rate. It's happening naturally by additional taxable value, but the same effect. If you're going down on your M&O, this is an excellent time to think about going slightly up on your INS to get ahead on some of your facilities and maintenance issues.

(1:09:19 - 1:09:37)
Anybody have any more questions? I just have one. I noticed that you gave us a lot of comparisons where you're working with public school districts. What about community colleges? Yes, I do not have a lot of community college districts, to tell you the truth.

(1:09:38 - 1:10:09)
I have a lot of ISDs, but they are the only one that I have, and so you get my full attention. Great. Thank you. 

Terry. Anyone else have any questions? This page 7, could you do it for $200 million and $300 million and send it to us? You want me to send it right here? No. Okay. 

All right. Yes, I'll get it to you. I'm afraid something might come up again, and we might be here another 30 or so.

(1:10:10 - 1:10:18)
I'll get it to Annette and Dr. A. Thank you. Thank you. It's good to see you all. 

Sorry about the long wait. Thank you very much. Thank you, Terry.

(1:10:19 - 1:10:30)
Thank you, sir. What was that? What did you say? He took credit for the length of the discussion. I don't think it was credit.

(1:10:32 - 1:10:37)
He accepted blame. How's that? He acknowledged. You know more now than you used to know.

(1:10:38 - 1:10:44)
You know more now than you used to know. No, we don't. Speak for yourself.

(1:10:46 - 1:11:12)
Do we want to hear some recommendations from Annette at this time, or do you have some questions? I want to make some comments about where we are, just the information presented, and just my experiences over the last six years, if I can take a few minutes. I think it's tied to the information that was presented. First of all, I want to thank Annette for pulling all this together.

(1:11:12 - 1:11:55)
I know that a lot of this information was available, and we've seen it at different times, but pulling it together in this format was very helpful to me because this is the type of information that I've used in my time here to decide how I wanted to vote on certain recommendations that the administration brought. So although philosophically we might disagree on some things and I have different perspectives, it helps support what I've always looked at. First of all, we can look at national stuff, but we've been very blessed in this area with our growing economy over the last six years, and I hate to even mention, despite COVID, but the industry in this area is the majority of what supports the people and our taxpayers.

(1:11:55 - 1:12:29)
I know there's a national perspective, but I don't think it applies to us, just like the energy corridor didn't suffer as much as the rest of the nation did. So we have some uniqueness here, and I think that over the last six years, as we've seen in our tax tables when the valuations have hit the books on big projects that our partners have had, I think we've appropriately adjusted the tax rate to lower the burden on the taxpayer, all the taxpayers, and balancing that with our needs. And I think the 12% reduction over the last six years is pretty significant.

(1:12:30 - 1:12:39)
We know that our maintenance budget has been deficient for decades. I mean, there's no surprise there. To $300 million of deferred maintenance.

(1:12:39 - 1:13:01)
I don't agree with that number, but I get it. And although we've increased our maintenance budget recently by almost doubling, as we heard Annette say, most of the money that's been spent, the $7.7 million, was not from our maintenance budget. It was from other funding sources, revenue bond funds, annual excess revenue, McKenzie-Scott CARES Act.

(1:13:01 - 1:13:13)
And those are not recurring funds. Those are one-time deals. And so the numbers that Annette gave us that's been spent on maintenance and repairs are one-shot dollars.

(1:13:13 - 1:13:20)
They're not continuing dollars. Our facilities are old. You know, we've got 30-, 40-, 50-, 60-year-old buildings.

(1:13:22 - 1:13:27)
And typically, you know, and they've not been properly maintained. We know that. I mean, somebody's fault.

(1:13:27 - 1:13:42)
They just haven't been maintained. You know, I think we should be proactively maintaining our facilities and replacing systems that have life cycles before they fail. A lot of times we don't replace an electrical component until it fails or a roofing system until it fails or an HVAC system until it fails.

(1:13:43 - 1:13:53)
I mean, our industry partners don't operate that way. I don't know why we do. You know, deferred maintenance always causes shutdowns and costs more when you have to deal with it when it fails.

(1:13:54 - 1:14:13)
You know, the tax rate comparisons I'm glad to see because, I mean, we've seen it before, and I know we weren't the highest. You know, 39 out of 50 community colleges in the state, 7 out of the 9 Gulf Coast area. Unfortunately, we have, you know, Lone Star and Houston Community College and San Jacks, some of these larger institutions with a much larger tax base that we compete with.

(1:14:13 - 1:14:26)
I mean, we're not the highest. We're not the lowest. But I think, I feel, personally, my opinion is that our tax rate is justified by the performance that this institution has been delivering to our community.

(1:14:26 - 1:14:43)
The effective tax rate, that's a complicated thing to communicate. I've always told Annette, keep it simple. But, you know, because although we can explain it and understand it, getting that point across to the public, not that they're not intelligent enough, but it's just difficult to communicate.

(1:14:44 - 1:14:55)
But it is a part of our overall taxing structure, and everybody has that in there. They may not have the exemptions we have, and that's their tax structure, but we do. And so it matters to us.

(1:14:55 - 1:15:19)
And so even with all that exemption and all that kind of stuff, we're still 7 out of 9, but we're much closer to the lower taxing entities. I don't like to comment a lot on Goose Creek and the city of Baytown. As far as taxing entities in our city, it's good to know what they're doing.

(1:15:19 - 1:15:32)
I've made that comment before. But our assets and operational needs are different. All I'll say is we've lowered our tax rate 12% more than any other local taxing entity has in the same period of time.

(1:15:33 - 1:15:43)
And I'm not going to make any more comparisons. I think, you know, we have a very basic, transparent funding system. Our operational costs and our debt structure are very basic, very simple.

(1:15:44 - 1:15:54)
I'm not implying that taxing entities in our area are not transparent. I know they are, but I believe they're just more complicated. I think the city's complicated.

(1:15:54 - 1:16:08)
I think the school district's complicated. I think we're very fundamentally easy to explain. I think our revenue streams, when you look at them, we know what they are.

(1:16:08 - 1:16:23)
They're property tax payments, tuition and fees, state appropriations. We have some grant funding and some other miscellaneous income. And we may not always agree on where the money goes, but we can identify where it goes.

(1:16:24 - 1:16:38)
And I like that about this institution. I'm going to say one of the greatest accomplishments that I think this institution has made in the last five or six years is our cash reserves. Cash reserves.

(1:16:39 - 1:16:55)
We that were here or just got here in 2017 were all surprised to find out we didn't have any cash reserves. And, you know, it was a complicated calculation that somewhat manipulated the true cash values. And it took a while to figure that out.

(1:16:55 - 1:17:09)
Some folks saw it early, but it took a while for it to reveal itself. And in 2018, we budgeted $422,000 to go into a brand-new cash reserve account, $422,000. We took a step, you know.

(1:17:09 - 1:17:29)
We took a step and said, we've got to put cash into account. And we didn't have a strategy or a philosophy, but we took a step. And over the next few years, the strategy to not fill, an intended strategy to not fill budgeted positions was used to generate excess revenue, which was then transferred into our cash reserve account.

(1:17:29 - 1:17:58)
Now, this effort of over-collecting, as it's been called by some, is how we were able to get the policy compliance of four months of emergency operational funds of, I got $21.6 million, you know, as of last year. And this over-collecting also generated $1.6 million in our insurance reserve, and we haven't talked about that in a while. So had we had a defined philosophy or strategy, we would have been seen as geniuses instead of criticized for over-collecting.

(1:17:58 - 1:18:13)
So in the end, we've been blessed with the means to be financially strong in our reserves, operations account, and our financial ratings, as we've recently seen. So when it comes to bond debt, you know, a lot of philosophies on that. I have one.

(1:18:13 - 1:18:22)
Other people have others. But our bond debt's very low compared to our community taxing entities, and two reasons. We haven't had a GO bond election in 10 years.

(1:18:22 - 1:18:28)
That was $40 million in 2013. The election wasn't 13, by the way. We do May elections.

(1:18:29 - 1:18:56)
And we've never been able to go for a large bond because of the tax rate constraint. I mean, you can't add $0.10, $0.12, $0.15 to a $0.25 tax rate. So I don't know the exact numbers, and I know that Chairman Fontenot and Regent Guillory, they most likely know, but our other local taxing entities are well above our $32 million of general obligation bond debt, $32 million.

(1:18:57 - 1:19:19)
The $11 million revenue bond we approved in 2018 was to address our most critical infrastructure needs at a time when we didn't have any other resources or options. We barely had money to make payroll. Annette went over the projects, and I was intimately involved until a couple years ago and then just updated, as we all were.

(1:19:19 - 1:19:33)
I'm getting more intimately involved. But in the last six years, as Annette said, $33 million put into our facilities without a GO bond. As mentioned, the $11 million was a revenue bond utilizing student fees to pay for this.

(1:19:33 - 1:19:48)
That's not a preferred way of taking care of our facilities, but we didn't have any choice at the time. About $8 million in overcollected funds were deployed to meet ADA and infrastructure needs. A one-time $5 million gift based on our support of meeting basic student needs was received.

(1:19:48 - 1:20:10)
About $10 million in CARES Act and lost revenue funds, again, strategically deployed to some maintenance repairs and some program growth needs. These are not sustainable revenue sources and need to be replaced by future revenue sources. Annette's told us what our building values are, and those values, like in industry, are used to determine what your maintenance budget should be.

(1:20:12 - 1:20:32)
These values typically will set your maintenance budget, and we should always have some money in there for capital improvements, just organic growth in our programs. Not the big GO bond growing the whole college, but just some small organic growth. Another thing I'm very proud of is what Lee College has done over the last six years regarding enrollment.

(1:20:34 - 1:20:56)
There's been concerns over the national decreases in enrollment and the lengthy recoveries, and some institutions, they don't believe they'll ever recover. But Lee College has consistently prioritized enrollment and completion as fundamental to our mission. And while outperforming the national average, as Annette showed us, is a good snapshot of how we compare, I think our success is measured locally.

(1:20:57 - 1:21:07)
By who we serve, and our community students' lives are being changed and impacted in positive ways. We don't need a COVID asterisk for our numbers. That's the last time I mention COVID.

(1:21:11 - 1:21:25)
I think what we're all here for and looking for today is a new, is a strategic approach to our needs. And I believe we have more than one responsibility to the taxpayers than just lowering the tax rate. Taking care of our employees is a priority.

(1:21:26 - 1:21:40)
Conservative cash reserve near the six-month mark is more conservative for me, is a priority. Increasing our maintenance and repairs budget to an appropriate level is a priority. Reviewing and ensuring we are adequately insured is a priority.

(1:21:41 - 1:21:59)
And looking at how we plan to address future GO bond needs is a priority. The tax rate is a priority once we've addressed the previously mentioned priorities. I believe if we focus on tax rate reductions without consideration for the other areas of need, we will not meet our obligations to the mission of this institution.

(1:21:59 - 1:22:20)
As I mentioned earlier, we've received recommendations and approved plans to get us where we are today without a long-term philosophy. I don't think we got lucky, but I do believe we can't continue in the year-to-year mode we've been in. So I hope, and we've already had some, I hope we continue to have robust discussion on other thoughts and ideas to develop a philosophy to meet our long-term goals.

(1:22:20 - 1:22:46)
I believe we're at a point in time where we have the financial resources to continue catching up from the past deficiencies, continue to grow this institution to meet current and future needs, and ensure the taxpayers' support makes them proud of Lee College. So I'm looking forward to us not having this back-and-forth philosophical stuff over and over and over again, at least for a few years. So that's where I stand on this.

(1:22:48 - 1:22:56)
I don't know what it is, but that's where I stand on it. Thank you, Regent Santana. I would say I agree with everything you said.

(1:22:56 - 1:23:10)
I would summarize it in the way that I look at it is that I don't believe we have surplus funds as long as we have unmet needs, to put it succinctly. So that's the way I look at it. As long as we have unmet needs, you don't have surplus funds.

(1:23:12 - 1:24:00)
I would just say that I agree with a lot of what all y'all are saying, but I also do believe that with surpluses we've had and with the new funding, I still believe like I believed last year when we reduced a penny, that I believe that we can do both. I respect everything that's been said, but I still believe that we can move forward, do the things we need to do, and still, even though it may not make a big difference to the taxpayer, because we take the smallest amount of money from them, but I still believe that we can still do both, and that's just my opinion. Anybody else? Floor is open.

(1:24:01 - 1:24:08)
Are we going to have any more budget discussion tonight? Yeah, I think so. I'm sorry. I'm not sure what the recommendation is.

(1:24:08 - 1:24:11)
I don't think there's been one. I'm just telling you. It's not a recommendation.

(1:24:11 - 1:24:36)
I'm not set on never reducing the tax rate or not doing it now. I just think that, like Darryl said, as long as we have unmet needs that belong to the taxpayer, it's an obligation we have to meet those needs, and I don't separate college from taxpayer, which is a lot of why I said what I said, so I'm not going to restate it, but that's where I'm at. This whole thing is about the budget.

(1:24:36 - 1:24:50)
No, I thought we were fixing it to be done. Okay. In my philosophy, I want to take a little bit of an exception is that we have to consider the taxpayer who elect us, and I went to the Harris County website.

(1:24:51 - 1:25:23)
Ninety-seven percent of the homes in Harris County are going up by at least ten percent value. Many of them are way behind market value, so homeowners are experiencing a ten percent increase in tax value, which means the dollars they're paying, and that's going to happen for a number of years, ten percent a year, ten percent a year. While we may hold our rate the same, they're seeing a ten percent tax increase.

(1:25:25 - 1:25:39)
On a property value increase, right? Right, which translates into tax. Which translates into they're wealthier because their assets have grown. They have less take-home money, right? They have less take-home money.

(1:25:39 - 1:25:44)
Their assets have grown. I mean, that's a part of our net wealth as well. We know that.

(1:25:45 - 1:25:55)
If your home value doubles— You have to refinance their house to get that money. Or sell it, right? It's stranded money. Sometimes you can't sell it for what the value is nowadays.

(1:25:56 - 1:26:12)
That's why it's that bad. But the thing is, we have multiple years lined up now with ten percent increases, and I don't see—I'm not hearing a whole lot of discussion about the plight of the taxpayer. We're in the greatest shape we've ever been.

(1:26:12 - 1:26:24)
You mentioned our financial situation from a few years ago. There were two primary people on this board that raised that issue way before the rest of the board caught up with it. It was myself and Regent Henson.

(1:26:24 - 1:26:32)
Then the rest of us agreed with you, right? Eventually. But the whole thing about being— No, no, I wasn't an eventual. I was an immediate agreement.

(1:26:33 - 1:27:02)
No, but before you came on, there were many that would not buy into it, and it could have been a little shorter. The job of being a board member is to be able to look into the future and anticipate what is going to happen, which is what happened here, although we could not convince the rest of the board until literally the college ran out of money. And so it doesn't take a rocket scientist to figure out when you actually have no money in the checking account you've got a problem.

(1:27:02 - 1:27:13)
You know what I would say? That's the best thing that ever happened to this college, was running out of money. It's the best thing that could have happened. I wish two years or three years before that happened we could have addressed it.

(1:27:13 - 1:27:18)
We spent a lot of money. I know. That was a very costly— But I don't think we'd be where we are today had that not happened.

(1:27:18 - 1:27:26)
I agree with you. Because you look at things differently when your face hits the floor. But our job as board members— We didn't alter much.

(1:27:27 - 1:27:33)
We haven't changed much from what we were doing before that. Oh, no. I mean, we didn't restaff.

(1:27:33 - 1:27:36)
No, we didn't cut. We didn't do anything. We just kept on spending.

(1:27:37 - 1:27:42)
Look at what we've done. I don't know how that happened. We've been a part of that.

(1:27:42 - 1:27:53)
And I understood that we were kind of over-budgeting because we had to build up that reserve. I understand that and supported that. I don't think we started out over-budgeting to build up reserve.

(1:27:54 - 1:28:04)
It sort of happened, and then we realized it was happening. Because otherwise we would have just budgeted $3 or $4 million to go into the reserve line item. But we didn't do that.

(1:28:05 - 1:28:12)
We tried early. We did like $2.-something million. We did initially, but then, you know, excess revenue.

(1:28:12 - 1:28:23)
Look, I think we knew there was excess funds there that we were going to end up at the end of the year, and we did. I mean, we did end up. We understaffed for a little bit.

(1:28:23 - 1:28:31)
There were several things. I think we even took light bulbs out to save on the electric bill. I don't remember what all we did, but we did a lot of stuff to save money.

(1:28:33 - 1:28:43)
To rebuild a proper reserve. When we say reserve, we're talking about cash reserve. The old reserve number we used to get included a whole bunch of smoking beers.

(1:28:44 - 1:28:46)
It was a calculation. That's what I said. It was a calculation.

(1:28:46 - 1:29:03)
And we still, what we're not even considering is the $10 to $12 million worth of property that we have, you know, that's not even counted in the reserve where it used to be. That's a significant thing that we're not even considering. Well, we don't have the money, right? We have property.

(1:29:03 - 1:29:09)
We don't have it. It's an asset, but it would take time to sell. We could borrow against it.

(1:29:10 - 1:29:20)
We could borrow. If we got in a real bad jam, we could use that money. So, we do really have our six months of reserves that we really need.

(1:29:21 - 1:29:36)
Here's my bottom line. When I got on the board, the state was paying about 50 to 55, maybe closer to 60 percent of the operating costs. The local taxpayer was paying around 28 or something like that, if my memory serves right.

(1:29:37 - 1:29:43)
And Susan's been on longer than me, but she remembers those days. The state did the majority of the funding. That was their obligation.

(1:29:43 - 1:29:57)
Tuition made up about 20 percent, and it's somewhere in that ballpark. And what happened over the 20 years that I've been on the board is that flipped. The state kept reducing their funding, and the taxpayer had to make up the difference.

(1:29:57 - 1:30:08)
And our taxpayers have been very generous with the college. We have a good reputation with them. And they stepped up and made up that difference all of these years and paid.

(1:30:08 - 1:30:18)
And our rate got up to 27 or 28 cents. That's a substantial flip. When state funding dropped to 20 percent? For us it was 17.

(1:30:18 - 1:30:29)
17 percent from 56 or 57 percent. That's unconscionable. Now the state's coming back and readjusting those things.

(1:30:29 - 1:30:43)
And I think that's the reason I keep looking at the taxpayer. I think they've been overburdened because so much of our expense, or a significant portion of our expense, is to fund students from out of district. Yeah, that's a whole different issue.

(1:30:43 - 1:31:00)
Don't start that one. What I'm saying is they've been generous with us. It's time when we have the opportunity, from my perspective, it's time that we consider and do as much for them as we can do reasonably.

(1:31:00 - 1:31:44)
And that's where we have two interests, and we have to balance those things. Let me ask you to just help me understand because, you know, when I came in, the state was not funding the majority of our revenue. So if the state funds over 50 percent of our revenue, are we a state institution and not a locally tax-funded institution? Then who owns the college if the state is funding more than 50 percent? If they're funding over 50 percent, wouldn't they own it? It's not state-owned. 

It's state-supported. So state-supported. So support, what's the difference? We're our own entity.

(1:31:44 - 1:32:09)
I know, but we're our own entity relying on state funding to exist. Who complains on the federal government when that happens? Are you going to allow the rest of us to talk about budget stuff, or are you two just going to keep going back and forth? Because I don't know. Mike was trying to say something earlier, and I was just wondering if we're just going to get a chance to say something.

(1:32:09 - 1:32:17)
We're talking about philosophy. That's my philosophy. Right. 

That's what that was intended to do. The taxpayers have been generous. I think it's time.

(1:32:17 - 1:33:12)
It's my judgment. People may not agree with me, but it's my judgment that we consider them as individuals and do what we can. They've been generous. 

It's time to get back. So my question, we learned, if I understand this right, we learned this week that we're going to be receiving an extra $9.5 million, $9.6 million from the state. So do you consider that as part of the state's contribution to us, i.e., the tax money that we sort of get? So if you add that $9.6 to what we already get through taxes, that puts our tax revenue a much higher percent, right? A percent? Yeah.

(1:33:12 - 1:33:55)
That the state contributes to? Yeah. I mean, so I think we should look at that and see some spreadsheets or whatever you can do to show what that really means to us and what we can do with that $9.6 million that we're going to be getting. Because we weren't counting on that three weeks ago when you gave us our last budget. 

We had that. So now we've got another $9.6 million. I know you mentioned putting that away for future or whatever, but I think we can use that possibly since the taxpayers are paying that $9.6 on top of what they're already giving us.

(1:33:55 - 1:34:16)
We ought to, you know, like Judy and Mr. Hall said, we ought to be able to give some of that back. I think that was the intent because isn't that what the ISDs are doing? They're getting money from the state, but they're required to lower their tax rates. But, you know, we're not required to lower ours, but we're getting a big check.

(1:34:17 - 1:34:34)
And maybe, you know, it should have worked the same way. The taxpayers should benefit somehow from us getting that extra $9.6. But one of the things we have to consider, too, is that we have three payments that are going to come. Okay.

(1:34:35 - 1:35:01)
But we may not get all of that $9 million by the end of the year. So we can't totally depend upon the fact that we've been asked to move with caution at the state level because of the new funding structure. Are you talking about fiscal year or calendar year? Fiscal.

(1:35:02 - 1:35:07)
Fiscal, so September to September. Okay. For August.

(1:35:07 - 1:35:18)
Yeah. Yeah. I think part of the funding that's coming from us, rather than going to the school districts, the school districts was done specifically to reduce the tax burden.

(1:35:19 - 1:35:28)
That was it. The money coming to us, I think, is a reflection or a recognition that they have underfunded us over the years. Right.

(1:35:29 - 1:35:38)
And we see that in our deferred maintenance and different things like that. And I'm with you. As long as we have unmet needs, we don't have any extra money.

(1:35:39 - 1:36:01)
And as a taxpayer, I would rather see today's dollars go fix something at today's price than to try to pay for it next year. Because construction inflation is enormous. I think a good point you made, though, the difference between the ISDs and the higher ed is, ours is performance-based funding.

(1:36:02 - 1:36:14)
It's recognizing what we're producing. It's not driven by just lowering the tax rate. And the reason that we got the second highest increase percentage-wise in the state is because of that performance.

(1:36:14 - 1:36:39)
Thank you very much. So I was late to the meeting, and so I don't know if you started with this or not, Annette, but at the very first budget meeting you presented, and I took that to be what you guys' administration was recommending for us to do in this budget cycle. Yes, you had some recommendations in there.

(1:36:44 - 1:37:10)
Yes. And I'm not trying to rush the conversation along. I just wanted to, for me, it's wanting to know what is it that they're recommending, and then once we see what they're recommending, then if there's anything in there that we don't support, then let's talk about whatever that thing is.

(1:37:11 - 1:37:27)
The first part of this was intended for people to respond philosophically to the direction that we think we should go, and yes, Annette, I think it would be a good time to move into the next phase and present. Just one clarification. Good point.

(1:37:27 - 1:37:57)
What we're getting to is the transactional part of all this based on a philosophical discussion because philosophically, if we don't agree, we should increase the maintenance budget to take care of our needs, and what she's presenting is just a line item, and we either agree or disagree. Yes, but we'll know if we disagree with the maintenance part. If that's her recommendation, then we can continue to deliberate on that item, but just talking about the philosophical standpoint, we're still just kind of treading.

(1:37:58 - 1:38:29)
To me, we're not making progress, and I think at the end of it, what you guys really want to know is what we're going to fund, what we're not going to fund. Right, but one of the goals is if we can agree on a philosophy, then maybe next year when we get to the budget cycle, things are a little more expedited. We know that, as Regent Cotton just succinctly put it, you have unmet needs, you don't have surplus funds.

(1:38:29 - 1:38:33)
I can support that. I think I copied you. Yeah, absolutely.

(1:38:40 - 1:39:13)
So I tried to summarize kind of where we are right now, and we're in a very unique position. I don't think we've been in this type of a position since I've been at the college. But right now, I mean, having $18 million in additional revenue coming our way, that is not something we have experienced before.

(1:39:15 - 1:39:34)
So where is that revenue coming from? We have about almost $2 million additional in tuition and fees that are budgeted. You know, we exceeded our budget this year by about $900,000, almost a million. And so that's part of that increase.

(1:39:36 - 1:40:09)
Huntsville is in a position where they are able to charge some additional fees that they've not been able to charge in the past for books and reentry services that we're now providing. And based on our current performance, we are budgeting for a 4% increase in tuition and fees. I'll tell you right now, our enrollment numbers look much better than 4%.

(1:40:11 - 1:40:22)
But I did not want to put that full amount in here because you don't know what's going to happen. We're leaving the fees the same. Yes, it's all driven by enrollment.

(1:40:23 - 1:40:33)
It's all driven by enrollment. We haven't increased any fees. And so that's where the 1.9 comes from.

(1:40:34 - 1:40:46)
State appropriations. This is a number that we have been given. This is a number that we know for right now.

(1:40:48 - 1:41:02)
We don't know if that number is still going to be there at the end of the year. We don't know if that number is going to be there next year. They're in what they call emergency rulemaking.

(1:41:03 - 1:41:21)
So that means, okay, we're going to implement this, but we're really going to kind of build the plane as we're flying it, and we're going to see how all this works out. And so there will most likely be changes that happen. If they don't happen this year, they would probably happen next year.

(1:41:21 - 1:41:33)
We have no idea what those are. We have no idea even what to anticipate at this point. But that is the number that we know today.

(1:41:34 - 1:42:21)
If we were to leave our tax rate where it is, the .2201, it would allow us to continue to pay down debt to the tune of about 2.275. It would allow us to put additional money into repairs and maintenance and potentially start a capital projects set-aside account. We have other revenue, which most of that is coming from interest, which we've never had before. And so we've also kind of put that down on the bottom line.

(1:42:21 - 1:42:44)
So with that additional $18 million, what are we recommending as an administration? Sure. Do you know of a $5 million increase in taxes? That's in tax revenue. That and the estimates from Harris County, and they were flat, or actually we were going to lose.

(1:42:45 - 1:43:17)
The reason it's $5 million is because if we keep it the same, remember we upped our INS last year. So the $5 million allows us to continue to pay down debt. But if you look on the spreadsheet here, you will see where I have budgeted to pay down geo-debt, and that's by keeping the rate flat.

(1:43:19 - 1:43:35)
Is that an additional 2.275? Yes. So you're wanting to pay down more debt when we've got all this maintenance to do, right? Yes. Yes, that's correct.

(1:43:35 - 1:44:33)
I'm wanting to continue the philosophy of building capacity in our debt, in our tax rate. So when we do go out for a bond, the increase that we're going to have to ask our taxpayers for will be minimal, if any. So, Annette, I think Mark Hall's question was, you're forecasting an additional $5.1 million in tax revenue? Or you're just pulling out 5.1 and allocating it here? If we were to stop prepaying debt, we would have the ability to lower our revenue or our collections by about one penny.

(1:44:33 - 1:45:12)
One penny, as you may recall, is almost $2 million. So if we were to stop that philosophy and say, we no longer want to build capacity in our current rate, we want to lower our INS rate by a penny, then that revenue would go down by 2.275. I'm looking at the top line of your spreadsheet. Those are 18 million additional revenue dollars, right? And of that, 5.124 is taxes.

(1:45:13 - 1:45:24)
And of the 5.124, about 2 million is the extra penny. Yes. So there's still about $3 million of additional tax revenue that's coming in, leaving everything flat.

(1:45:24 - 1:45:33)
Yes. Is that based on valuations going up or something? Well, it's really based on new properties coming onto the tax rolls. New properties coming on? Okay.

(1:45:34 - 1:46:00)
So instead of lowering the tax rate by a penny, you're wanting to pay off additional debt. I am wanting to continue the philosophy of building capacity in our current tax rate. And to do that, we pay off existing debt so that when we do go out for another bond, we can do so without having to increase our rate.

(1:46:00 - 1:46:42)
If you recall in Terrell's presentation, if we keep our tax rate flat and stay the course, if you will, then we could go out in 2025 for a $50 million bond and not have to increase our rate. Or we could wait and go out in 2027, I think it was, and get $100 million without having to increase our rate. Or you could just lower it a penny and leave our debt where it's at, where it's scheduled to be.

(1:46:43 - 1:47:02)
Yes, sir, you could. We've not been paying debt off early, have we? But you won't be building any capacity in your current rate, so when you get ready to go out for another bond, then you will be asking the taxpayers to pay additional tax to pay for those bonds. We've been saying that.

(1:47:02 - 1:47:14)
That's what we've been saying. But you indicated that our philosophy has been to pay debt off early every year? No. She's talking about continuing the philosophy that we started a year ago.

(1:47:15 - 1:47:22)
We started this a year ago. We started a year ago, and at that time, we did say this is a strategy. Right.

(1:47:22 - 1:47:44)
This was something that if we were going to do it, it would benefit us to continue. It wasn't presented as a one-off. So you can either lower the tax rate a penny, get the tax rate down that way, or you can lower the debt and leave the tax rate up, and then when it comes time, you won't have a tax rate.

(1:47:44 - 1:47:49)
That's what you're saying. Yes, sir. It doesn't help the taxpayers any.

(1:47:49 - 1:48:15)
Right. So and then to summarize what our recommendations are, we want to continue to offer competitive salaries so that we can recruit and retain well-qualified faculty and staff. We want to recommend that we keep our tuition and fees flat.

(1:48:19 - 1:48:46)
We so that we can remain competitive in our market. We are recommending that we maintain the current tax rate so that we can continue to build bond capacity within the current rate. We're recommending that we take a look at the budget for insurance for name storm coverage, which we all know we have none of.

(1:48:47 - 1:49:10)
So we have been doing some research and we'll be bringing information back to you. But it would be our recommendation that we look at creating larger reserves or buying some coverage, or maybe it's a combination of both. But we are looking to bring back to you some information on that item.

(1:49:11 - 1:49:30)
We are looking to increase our contingency in our budget to equal about three percent of the overall budget for this year. And ultimately, we would like to have that at about five percent. We want to increase our repairs and maintenance budget.

(1:49:30 - 1:50:00)
Right now, I shared with you all earlier, we're at about two. And our ultimate goal on that would for that number to be closer to four. We are recommending that we create a capital project set-aside account so that when we do want to create new programs or have some other capital, smaller capital expenditure, that we would have some funds available.

(1:50:01 - 1:50:20)
You may recall we sold some of that land that the college owns over at I-10 in Maine. So we have about $1.8 million resulting from that sale. We actually made a little over two, but then we bought the Rita's house and we bought the land from the church.

(1:50:21 - 1:50:54)
So right now we have a little like $1.8 million in a capital project budget or reserve. And then finally, we would recommend that the college board continue to distribute operational surplus results either in the form of facility projects or maintaining our budget, our reserves. Annette, I have a question.

(1:50:55 - 1:51:12)
Yes, sir. Okay. The proposed $1.5 million increase to the repairs and maintenance, what percentage would that get us up to? What percentage of replacement value would that get us up to? I will have to do that calculation.

(1:51:13 - 1:51:28)
I'm sorry, I don't remember off the top of my head. Right now we're budgeting just a little over a million, like $1,020,000 or $1,200,000. So this will more than double what we're budgeting on that line item.

(1:51:28 - 1:51:41)
Okay. When you put on here a goal of 4%, is that 4% of capital values or 4% of our budget? Of the capital values. But you said we were at 2% then? Right.

(1:51:42 - 1:51:50)
That was the question you had? Right. We're at 2% with this increase? Not with this. So not with that? No.

(1:51:51 - 1:51:58)
That was based on 2022 results. The goal would be 4% of $325 million? Yes, sir. Okay.

(1:52:01 - 1:52:33)
Annette, just for my clarification, are we building into this budget the 9.6 from the state or not? I see it, but because I remember before we said we were going to leave it flat, we weren't going to put it in. Are we or are we not? It is currently in the budget. And what I tried to detail down below here is where in the budget those funds are allocated.

(1:52:33 - 1:52:53)
Okay? So on tuition and fees, we allocated that to some new positions. The first-time free at-leave program, in the past that's been funded by CARES Act funding. And so we would be funding that internally.

(1:52:53 - 1:53:48)
And then we have some increase in our contract expense. Then for state appropriations, we've talked about some of these amounts before, but the raise that we will be proposing of 6%, the compression, some new positions, and then the benefits associated with that, as well as either purchasing name storm coverage or creating a larger insurance reserve of 1.6, increasing our contingency by 1.5. We have an increase in contracts. And then overall on our operating expenses right now are increasing by about 5% is what we're seeing across the board.

(1:53:48 - 1:54:04)
So what was the philosophy change or whatever of building it into the budget now when last time we met it felt like it was like, we are not going to put this money in here. So it seems like there's been a big switch between last month and this month. Correct.

(1:54:04 - 1:54:27)
The big switch is we now know from the state that we will not have a change in the appropriations for the next year. Beyond that, we do not know. And it looks like we have about 3 million that's unallocated out of that 9. Annette.

(1:54:27 - 1:54:56)
Yes, sir. On this increased repairs and maintenance, have we done any studies about how increasing maintenance, repairs, and everything would put off the need for a bond in the future? We're looking at a two-year window for futures. Can we increase our maintenance and repairs and put off the need for a bond? Because I know a lot of the bonds are required due to the fact that we fail to do maintenance and repairs.

(1:54:57 - 1:55:14)
Right. So I would just go back to the slide where we talk about the age of our buildings and the condition of our buildings. So by putting additional funds into our repairs and maintenance, we're going to keep the engine running, if you will.

(1:55:15 - 1:55:30)
But the age of our buildings, they're at the end of their life. We have 75% of our campus that's over 30 years old. And so we are reaching the end of life on a lot of these buildings.

(1:55:31 - 1:56:19)
And so I think it will keep the engine going where we may, if we were to not do that, I think we will continue to have major surprises, as we've had this past year, you know, with two water main breaks and HVAC systems going down, et cetera. But I don't think by putting that initial money or that additional money into repairs and maintenance, we can say, oh, well, now we don't need to go out for a GEO bond. I think a GEO bond is still going to be pretty important to happen.

(1:56:19 - 1:56:44)
I didn't say that, that we wouldn't have to have a bond, but it would reduce the need for a bond, the numbers in there. I think it will give you a little bit more time for the bond, but I don't think it reduces the need because, as I said, the buildings are so old now that they've reached the end of life in a lot of cases. It's the end of an actuarial life, not a useful life.

(1:56:45 - 1:57:05)
Well, I guess that depends on the definition of useful. I mean, when a building gets to be 30 to 40 years old, that's when you start having major breaks. That's when your electrical systems start having issues.

(1:57:05 - 1:57:18)
That's when your roofs start having issues. That's when major components start requiring additional help, and we've seen that ever since I've been here. We've been working on roofs.

(1:57:18 - 1:57:34)
We did major electrical, so we've seen that. You know, after a building reaches 40 years old, that's when they say that there's rapid deterioration. And a lot of our buildings are reaching that age.

(1:57:36 - 1:58:03)
Now, does that mean that they all have to be torn down and start over? Not necessarily. I know when SLEDGE came out and did the analysis of our deferred maintenance, there were several buildings that they felt we could go in and remodel, but then there were others that they felt needed to be torn down. So it's kind of a mixture of the two.

(1:58:04 - 1:58:25)
I think— Question about the building. How do you age a building that we've remodeled, like Rundell? What do you look at Rundell as? Well, the original—so that, yeah, right here. So Rundell was redone in 2015.

(1:58:26 - 1:58:39)
Then the student center we're redoing right now. The gymnasium and natatorium we redid somewhere around 22. Allied nursing, 22.

(1:58:41 - 1:59:08)
And then McNair we just did this year. So we have one, two, three, four, five buildings that we've been able to touch in a significant way since I've been here. How do you adjust the age of that building to reflect? Like Rundell, I mean, it was stripped to the bones.

(1:59:08 - 1:59:30)
I mean, there was nothing there but steel and— Where does that fall? Is that an old building or a new building? Well, you could put that up here in the less than 30 years old category. So you could add three buildings to that of the 58 that are on this campus. Currently it's in the 36 percent? Yes, sir.

(1:59:34 - 1:59:47)
And we have the PAC, the arena, the ATC. You know, all those buildings, are they— The PAC was in 2009. The PAC was in 2009.

(1:59:49 - 2:00:07)
Advanced technology was in 2002. I mean, we just— You know, a 30- or 40-year-old building like we have, they have a lot of life left in them. We need to keep them maintained to keep them up.

(2:00:08 - 2:00:14)
I mean, the building Gilbert's in is way older than any building that we have. Right. Completely renovated.

(2:00:15 - 2:00:30)
Right, completely renovated. All new HVAC, all new electrical, all new ceiling, all new lights, all new— But the shell was still good. Right, which is what the $325 million program was that SLEDGE presented to us.

(2:00:30 - 2:00:50)
That involved tearing down some buildings, but it also involved renovating other buildings. Yeah, I think what Weston was making a point was if we do a million-dollar roof today, that million-dollar roof is not on the next bond project, right? That's correct. So that sort of reduces the need at that bond time.

(2:00:51 - 2:01:06)
But the $325 million—and I know we've discussed this a little bit— it included multiple options. So if you chose one option, the total wouldn't be $325 million anymore. Because it was like replacing a lot of the TV buildings with one brand-new three-story building.

(2:01:06 - 2:01:20)
So X was the cost of new, but until you got the new, you had to maintain the old. And that's where the money keeps going to keep the engine running until you have a new facility, and then you can demolish the old. Right.

(2:01:21 - 2:01:51)
I would just—since you're the chairman of the building committee, we've got to figure out a way to adjust the statistics for buildings that were rebuilt. Because I remember Rundell, we looked at tearing that down, and I'm not sure it was any cheaper to redo it, but we retained the history, and we made it a brand-new building. Well, we can add those three buildings into the upper section and recalculate that percentage for you, Mr. Hall.

(2:01:52 - 2:02:13)
Yeah, okay. I was going to ask, so in your recommendation, so is it that what we're trying to do is come up with a philosophy of how we want to go forward? So if we say, you know, we want to set aside, just like we did to build the reserves. Yes.

(2:02:13 - 2:03:09)
So we set policy that we're going to put X amount of dollars. So is the goal here for us to look at facilities and say we want to set aside $1.5 million, whatever it is, every year of the budget to go towards? Are we trying to set up a platform to where we automatically will say we're going to contribute an amount to facilities, we're going to contribute an amount to capital projects? Is that what we're trying to get to, to where some of these things are already, are we trying to come up with the actual amount, or are we just committing to making sure that we put something into those each time? So that's a no-brainer. We already know those things will be done, and then we worry about the other stuff.

(2:03:09 - 2:03:21)
Is that the goal? I think that's a both. We just have to worry about how much money we can fund in each category. We kind of do that now in our budget, in our budget process.

(2:03:21 - 2:03:58)
We look at what we budgeted last year, and then we adjust based on that number. The problem is that we haven't had the opportunity to address some of these things in the past, and now we do have that opportunity. So it's almost like we're resetting our starting point, if you will, in creating some of the capital projects set aside that we've never been able to do before, looking at increasing our name storm coverage.

(2:03:59 - 2:04:55)
Some of these things we've never been able to address, and now we have an opportunity to do that. Does technology fit into this? Do we have any technology needs as well to where that would be another item that we would consider funding, making sure that there's additional funding to go towards for technology needs, or no? Or are we good? Well, we do have technology needs every year in our budget, and so unless something dramatically changes, I feel like we are budgeting for those needs currently. So it looks like under the column E, State Appropriations, you've got salaries in there and next year's compression and all that, right, under the new money we're getting, right? Yes, sir.

(2:04:55 - 2:05:13)
But we're hearing from, like, Ms. Susan Morfon know that we can't count on that money, but we're using it for salaries, right? No, beyond the first year of the biennium, we cannot count on it. You said one year. We can count on it for one year, you said, right? Correct, which is that amount.

(2:05:14 - 2:05:55)
But if we give a raise, they're going to expect it from now on, and it's going to compound, right? We can only consider what is right in front of us at this time, and as I said just a minute ago, the state has guaranteed, if you will, that the increase in state appropriations will remain as it is, the 9.658 for the first year. It's not guaranteed beyond that. Can I ask a question? So the state, the law is the same, how they derive, but the state's not guaranteeing what the amount is.

(2:05:55 - 2:06:16)
They may lower the factor that they're using. Like, we get $10 for every graduate or whatever, and they may say, well, we're running out of money, so we're going to lower what amount we're going to allow, but the rules stay the same, is that correct? So it's performance-based. It is performance-based.

(2:06:16 - 2:06:41)
They're not going to change the rules on the performance. That's what I'm asking. It is our understanding that, no, they will not change the rules on the performance indicators, correct, but we're under emergency negotiated rulemaking right now, and that will only last, Annette, correct me if I'm wrong, it can only legally be in place for four months.

(2:06:42 - 2:06:53)
So they have to codify this in law, or else, for this year. We've got half of it guaranteed. Half of it, yes, that's correct.

(2:06:53 - 2:07:13)
Half of it is guaranteed. But we're committing salaries, raises, and positions with this money. There's new hires in here and benefits, and it sounds like, why would we do that? Well, we had that budget in the budget that was presented prior to this.

(2:07:13 - 2:07:19)
So that was already in there. About 4% we had before. We're just at 2% more.

(2:07:20 - 2:07:33)
It's always been 6. I was just saying, I believe, reoccurring costs. I'm agreeing with Mark Henson on this. We're taking one-time money and increasing salaries, which we're going to own from that point forward.

(2:07:34 - 2:07:49)
Right. If we don't get this money the second year, how would we continue to pay for that increased salary? We do not anticipate that our state appropriations is going to go from 9.6 to zero. The same way we didn't anticipate.

(2:07:49 - 2:08:08)
We were budgeting for 6% when we didn't have any increased state appropriations. So why is it in that column then? I mean, the problem is they gave us $9.6 million in the last couple of weeks since we met last, and you've got to find places to put it, is what it looks like. You've got to find these cubbyholes to shove this money, to make it go away.

(2:08:08 - 2:08:16)
Otherwise, we've got way too much money on our hands. That's what it is. A clarifying question for me, because it just hit me based on what you just said.

(2:08:17 - 2:08:36)
This is the additional state appropriation we're getting, not on top of what we were getting before? Or is this the total state appropriation? This is the new money. This is the total appropriations that we are getting. Okay, not additional.

(2:08:36 - 2:08:45)
No, no. Yeah, this is the additional. This is what we didn't have two months ago.

(2:08:45 - 2:08:50)
So we were already getting state appropriations, and now we're getting this much more. Right. Right.

(2:08:50 - 2:09:26)
So, again, if we were budgeting a raise in the non-additional money, so what's happening to that money now if it's now in this pile? Right. I'm trying to think how to explain it. Right now, we have not finished the initial budget, right? We were looking at, which is why we haven't brought it back to you, is because we are still working on that.

(2:09:26 - 2:10:18)
But we had increase in revenue of this amount, and so we were looking at what are our increased costs that would be associated with that increased revenue and what would be the appropriate funding source for those increased costs. This is a very, very high-level view. Now, once we start getting into the details, the nitty-gritty details of all the other asks, all the other things, and we present to you a total budget, I will be able to answer that question a little bit more clearly.

(2:10:18 - 2:10:30)
Are you saying we don't have all the asks in yet? No, I did not say that, sir. What I said is we haven't put all of that together. We have the ask, and we are working on putting all of those asks together.

(2:10:31 - 2:10:51)
We're working on qualifying all of those asks. We're visiting with all the different departments to qualify what all of their asks are. You gave us a budget a couple weeks ago, and what could have changed that much since then? We didn't give a budget.

(2:10:52 - 2:11:14)
I thought we had something to look at before a presentation. Well, I mean, we give you all kinds of estimates, and this line of questioning is why I'm sometimes reluctant to give estimates because it turns somehow into hard numbers. Well, at the last meeting, we weren't even going to have this meeting.

(2:11:15 - 2:11:22)
So when were we going to get something to look at? Because it has to be approved, you know, pretty quick. Yes, sir, it does. And this meeting wasn't even scheduled.

(2:11:22 - 2:11:31)
So when were you going to give us all that that you haven't given us yet? Right. But usually we have a workbook by now. Let me ask the question a different way.

(2:11:31 - 2:11:55)
Okay. When will this, on the spreadsheet we're looking at now, when will that be incorporated into the comprehensive budget like we saw a month ago? When will we have that to look at? We have another budget workshop scheduled for the 17th. We have another workshop scheduled or potentially scheduled for the 24th.

(2:11:56 - 2:12:09)
And then we potentially could have a third workshop on the 31st. What did you say, Ms. Judy? You're not going to be here on the 31st? I'm not going to be here on the 24th. Well, that's a public hearing.

(2:12:09 - 2:12:16)
Is that a public hearing for the budget? But that doesn't mean we don't have a meeting. Oh, yeah. But I would prefer to be here.

(2:12:21 - 2:12:28)
I guess I'm still. So we have a $9.5 million. I was just looking at all of the numbers again.

(2:12:28 - 2:12:38)
We have an $8.5 million increase aside from the state funding. From taxes, $5 million. Our interest, $1.4 million.

(2:12:38 - 2:12:51)
And tuition increases. And we had kind of a balance of what we thought was a budget that was presented before. Then we dump another $9.5 million in there.

(2:12:51 - 2:13:11)
What is the percentage? A couple of questions, but just $8.5 million. Let's go to the $18 million. What type of percentage increase in our budget does that represent? What's our budget? Is it $80 million or so? Well, it's roughly $80 million this year.

(2:13:12 - 2:13:33)
It was like $62 million last year. $69 million. So $18 million, that's a 25% or 30% increase in budget recommendations? The problem is we've got so much money we'll have to do with it.

(2:13:33 - 2:13:44)
We've got so much money. That's our problem today. And we're increasing taxes on the taxpayer 10% because their homes are going up 10%.

(2:13:45 - 2:13:48)
But we didn't do that. Our expenses are going up 10%. It's still money.

(2:13:48 - 2:14:03)
And we're not giving them any break whatsoever. Nothing is carved out to say thank you for carrying us through to this point. They're taking care of their buildings in the best way that we possibly can as a thank you for their contribution.

(2:14:03 - 2:14:21)
Well, that's a new one. I think that they've been generous, and I think we need to look at something for the taxpayer rather than increasing their tax revenue. The check they're having to write, their house note is going to go up because our check is going to be a little bit larger.

(2:14:21 - 2:14:31)
Mark, so it's also been in there. So in the data that we've received, it shows what would happen if we did a one cent. It shows what would happen if we did a half cent.

(2:14:32 - 2:14:38)
So no decisions have been made. So I've seen that in each presentation. So the information is in there.

(2:14:38 - 2:15:19)
If you're saying that we don't have everything we need in order to continue to deliberate, then we should expect to have that before the 24th budget meeting because we're going to have to have all the information before we can make a decision. And we see numbers that would represent, since this state appropriation is state tax money we hadn't seen before, and it's now bringing their part back up. I would like to see, my position is, is that a large part, if not all of it, should go to our local taxpayers because that's where it's taking it.

(2:15:19 - 2:15:54)
So you're saying none of these unmet needs should be met? You're comfortable going into storm season year after year after year without an ability to take care of this asset? We've looked at that. The reason we didn't carry that coverage is because the premium was so high, $360,000, the coverage had a $100,000 deductible on each building. We determined that it was cheaper.

(2:15:54 - 2:16:13)
We could go out and sell bonds to replace for the coverage that we were getting from the insurance company. It was a bad financial deal, bad deal. We could go out and what we would have to pay for bonds was less than they were charging us for an insurance, and we were covered, and we're now covered from the first dollar of loans.

(2:16:13 - 2:16:22)
And if that's the philosophy, then you have to have bond capacity in order to sell those bonds. We have bond capacity. To the tune of about $10 million.

(2:16:22 - 2:16:27)
And raise the tax rate to do it. And we raise the tax rate to do it. And we have reserves.

(2:16:27 - 2:16:33)
We have our reserves. We have reserves now that we didn't have. The reserves that we have are operating reserves.

(2:16:34 - 2:16:37)
They're not building reserves. Yeah, they're not building reserves. They're operating reserves.

(2:16:37 - 2:16:47)
If we're hit by a Category 4 storm, okay. Our coverage would not have been that much. They would have, by the time you take all the deductibles out, it was a bad deal.

(2:16:47 - 2:16:53)
Keith Colbert was chairman of the committee. He looked at all this stuff and said, this is a bad deal. They're charging us too much in the premium.

(2:16:53 - 2:17:08)
Exactly. So, if we're going to be self-insured, you need to build up an insurance reserve in case that unexpected storm were to come through. And what do we have today? Not nearly enough of an insurance reserve.

(2:17:09 - 2:17:17)
And this all came up when we got the $9.6 million. Otherwise, it wouldn't have this conversation, right? Right. We don't know that.

(2:17:17 - 2:17:29)
We wouldn't be worried about the insurance if it wasn't for the golden egg here we got. Wasn't that brought up last meeting? That was a goal? Or is this the first time that came up? We talked about raising it. Yeah.

(2:17:29 - 2:17:42)
I thought we did. But we've had $4 or $5 million year-over-year budget money left over. And we've been taking that money and putting it into the maintenance budget.

(2:17:43 - 2:18:17)
That's where a lot of these improvements to the buildings have come from over the last four years. Can I ask just a quick question just for my clarification? On the columns like the under-tuition and fees and state appropriations, are these separated by what we just put in? I'm trying to make myself clear. The things that were already in the presentation we had last week, which one of those things were the things that we saw last meeting? So, these are known increases.

(2:18:17 - 2:18:34)
What we presented at the last budget workshop was revenue only. We did not talk about expenses. And I think we actually said that we were still meeting with all the departments and gathering the expense information.

(2:18:34 - 2:18:49)
So, what we presented last time was only the revenue side of the house. But we did talk about the 6% rate. We did talk about the 6% rate.

(2:18:49 - 2:18:53)
Yes, ma'am. But didn't we talk about compressions, too? Yes, ma'am. We did.

(2:18:53 - 2:18:57)
Okay. Did we talk about new positions? No. Okay.

(2:18:58 - 2:19:24)
Benefits? Well, we didn't talk about it specifically, but it goes with the salaries. So, some of these items, I guess in my brain, I wish they were kind of highlighted as to which one of these that we had built into the budget before got the $9 million. Just so I could see, you know, that it was something that we had previously talked about last month.

(2:19:24 - 2:19:51)
Right. But, again, all we talked about last month was the revenue side of the house. We mentioned a few of what our proposals were going to be just to get some sense of support or lack thereof of those amounts before we do put them into a budget because it's not quite as easy to pluck it out once you get it spread throughout the entire campus.

(2:19:53 - 2:20:32)
And so, that is part of this discussion as well is to try to get a sense as to where the board sees us going. Again, I guess I just want to ask the purpose of this workshop when we met last time was to have a philosophical discussion about what the board's priorities were for the budget. And we're kind of digging into smaller details and I think it's still important for the board to discuss.

(2:20:33 - 2:20:53)
Do you have preferences with regard to addressing repairs and maintenance? With regard to having competitive salaries? With regard to insurance coverage? Those are the kind of commitments. And I think you said that earlier, Regent Guillory. So, that's or Regent Santana, same thing.

(2:20:53 - 2:21:17)
What are the priority areas without specifying necessarily an amount, but what are those commitments that the board would like to make moving forward? I think that's a challenge for us because we get hung up on the dollar value of each of those categories. Well, we can take it off. Why don't you take that off? One of the priorities, I think, for me that I feel is we should continue looking at our cash reserve.

(2:21:18 - 2:21:28)
It's at four point something months, but as our budget grows, that number goes down. But I think we need to factor in something for the property because we could sell that tomorrow. That is not cash reserve.

(2:21:29 - 2:21:36)
Now you start going into the same calculated BS that we had before. The asset over here that you could sell or call or send us. That is not correct.

(2:21:36 - 2:21:40)
It is. That number before was smoke and mirrors. The property is real value.

(2:21:40 - 2:21:45)
It was an uncalculated net position. That's not smoke and mirrors. Yes, it was.

(2:21:45 - 2:21:47)
It wasn't. It just didn't represent cash. There's no cash to back it up.

(2:21:47 - 2:21:52)
It didn't say it was cash. Uncalculated net position. We called it cash reserve.

(2:21:52 - 2:21:58)
It's an uncalculated net position. But the property is real cash. The property is separate.

(2:21:58 - 2:22:13)
And we should allocate some number towards reserves. For me, there's a difference between a cash reserve and a capital reserve, and that land is a capital reserve. If we need the land, let's sell the land and put it in reserves.

(2:22:14 - 2:22:28)
Why don't we sell it then? The reason you have cash reserves is because emergencies come up right away, and you don't have time to market or go through a loan process to get. But we could. We could get a loan if we had to.

(2:22:28 - 2:22:33)
We could borrow against that if we had to. But let's go there. Let's just what we talked about earlier.

(2:22:34 - 2:22:40)
The cash reserve is not an all-inclusive, all-emergency that ever happens. It's an operating reserve. Right.

(2:22:40 - 2:22:49)
It's to operate. If we've got to go and operate this institution somewhere else, we still need to operate. Salaries, everything else that goes with it.

(2:22:49 - 2:23:00)
It's not to build the building or put a roof on it. I agree. That's not what it's intended for, right? So building that to the six-month, it could be whatever you want it, but what we call it is an operating cash reserve.

(2:23:01 - 2:23:10)
So I'm just saying I prefer us getting closer to the six-month, not all at one time, but as a philosophy. You're ignoring $12 million. I'm not ignoring anything.

(2:23:10 - 2:23:14)
It's there. I'm saying that that's a separate asset. It is.

(2:23:14 - 2:23:21)
You want to put everything into one bucket. We don't have one bucket. It's not an asset like the rest of the campus that we're using or need to use.

(2:23:21 - 2:23:25)
We could use it for reserves if we had to. I'm done with you. I'm not talking anymore.

(2:23:25 - 2:23:32)
I've stated what my priorities are. I'm not going to go over them again. Well, you can't ignore $10 million that's sitting out there.

(2:23:32 - 2:23:53)
It was ignored for 50 years, Mark. I just want to make a suggestion that might be helpful based off of what President Vee just said and the goal and intent of this discussion. Because we are.

(2:23:53 - 2:24:14)
We're looking at the dollars and the amounts. And based off of what I just heard her say, what I believe we are trying to do is come up with what our board priorities are based off of what she said. And we are not going to be able to get there this way.

(2:24:15 - 2:24:39)
So I recommend that we do an exercise that pretty much helps us get to what our council, what our board priorities are. Whether it's a one, two, three, somehow we need to get to a place to where we can see. Because screaming out from one place to the other and going back and forth, we're getting nowhere.

(2:24:39 - 2:24:44)
We know where your priority is. We know. It's to get the money back and the taxpayers.

(2:24:44 - 2:24:54)
We know that. But that's one thing that still doesn't let us know where do we want our money to go. And going this way, we're not making any progress.

(2:24:54 - 2:25:07)
We can still vote on a budget and say what dollars. But I think just the philosophical thing that you guys were talking about before is taking the money out of it. I agree.

(2:25:07 - 2:25:16)
Take the money out and then just say what's important to you. What's important for you to fund in this budget? Yeah, that's all I stated. Right.

(2:25:16 - 2:25:30)
What's important to you? A one, a two, a three. All of us come with a one, a two, a three, a four, a five. Put it on the board and get that thing narrowed down to where we can come up with what the priorities are and then shoot the money according to that.

(2:25:30 - 2:25:35)
But this isn't working. It's not our fault. I mean, this is what was presented to us.

(2:25:35 - 2:25:40)
I'm not saying that. There's no one here. Susan has something to say.

(2:25:40 - 2:25:56)
Susan hasn't spoken. I was thinking what Gina was thinking, and I think she said it very succinctly. We have this chart that Annette just put together with eight parameters that the administration looked at.

(2:25:57 - 2:26:09)
Gilbert had some ideas. He succinctly put together. Maybe if we put all those together and then just share them, and then we all came away with our top five priorities or something like that.

(2:26:10 - 2:26:23)
You know, you've got a menu of things. You don't have to start from scratch, you know. You said some things that were already on there that Annette had had, but just I'm a visual person.

(2:26:23 - 2:26:38)
I'm not auditory. So when I can see it on paper, I can do much, much better with that. And I like the fact that you had that, and I was thinking, boy, if I had Gilbert's ideas, I could be making notes on it and processing it that way.

(2:26:38 - 2:27:07)
But if we put all of that together and then let our chair work his magic and come away with some kind of consensus about what we thought we'd like to give the administration direction on, I think that would be a good way to help us move forward. We may need more of a detailed, in-depth, drill-down workshop where we talk about that. We're just trying to get to a philosophy.

(2:27:07 - 2:27:20)
The detail we're trying to get to is philosophy now. We're trying to develop an overall, big-picture philosophy of your priority areas. And to give the administration their marching.

(2:27:21 - 2:27:38)
Susan, I like what you said, and I think that may be a good idea. I hope that we all agree, though, that sometimes we have to compromise. Here as a board, there are nine of us, and my concerns are very strong about the taxpayer, and I don't see any compromise here whatsoever about my concerns.

(2:27:39 - 2:27:47)
You're not compromising at all, or we're not compromising? No, I'm compromising enormouslyically. Are? I'm willing to. I'm not saying let's don't increase the budget.

(2:27:47 - 2:27:52)
I'm saying let's give a tiny bit. I never said I was opposed to reducing the tax rate. Okay.

(2:27:52 - 2:28:17)
But I'm not saying we're giving it all back because we've got a lot of need. I agree, but I think it would be more harmonious if we did consider some type of a compromise on that. I just, you know, this is just, we're talking about an almost 30% increase in our budget, and we're not going to give the homeowner, we're actually going to charge them more dollars this year.

(2:28:17 - 2:28:24)
The chairman said that, Mark. Well, that's the recommendation. I think you're trying to drive your opinion.

(2:28:25 - 2:28:32)
That is not what has happened here. Because you feel very passionate about it, and it's good that you feel passionate about it. But we're not there yet.

(2:28:32 - 2:28:44)
But we can't seem to get a recommendation from the administration to address the tax rate at all. She has it, and yes, she does. She has the tax rate in both of her presentations.

(2:28:44 - 2:28:50)
And unchanged. But it's still in there. It's still in there for discussion.

(2:28:51 - 2:28:58)
Yes, it is. And the last one. If you want two pennies, you just multiply that times two.

(2:28:58 - 2:29:06)
It's already in there. Your recommendation from the administration has been to relieve the tax rate unchanged. You've said it in both meetings.

(2:29:06 - 2:29:21)
It's a recommendation. It is a recommendation. So I'm asking the administration, wouldn't it be better if you listened to some of the concerns, like from me, and compromised at all? I always listen to the concerns.

(2:29:22 - 2:29:28)
It's not having an impact. Well, let's see. There's one, maybe two out of nine that are discussing that.

(2:29:28 - 2:29:32)
Maybe three. But that's still not a majority. I didn't say it was a majority.

(2:29:33 - 2:29:50)
But it needs a majority to pass. So are you saying that only three of us want to reduce the tax rate a little bit and the other six do not? I'm saying that two or three have voiced it vociferously. But it doesn't mean that we're not going to do it.

(2:29:50 - 2:30:00)
We're looking at other things. That is not our sole point of contact. That's not what we're saying every time, every word out of our mouth.

(2:30:00 - 2:30:12)
Now, Mr. President, while I have the floor, I move this meeting be adjourned. I have other questions for Annette. Did you second it? It's a privileged motion.

(2:30:13 - 2:30:23)
It has to be voted on without discussion. We have executive session today, so we won't be adjourning the meeting because we have executive session. He's got a motion and a second.

(2:30:23 - 2:30:28)
I'm sorry. We have a motion and a second. Now what are we going to do? Well, we can vote on it.

(2:30:28 - 2:30:38)
We have a motion and a second. And now we have discussion. Discussion, from my vantage point, would be we have an executive session, so I don't think that we need to adjourn the meeting.

(2:30:39 - 2:30:47)
I was going to say if you don't want to stay for the meeting, leave. We can continue on. So we need to have a vote on a motion to adjourn.

(2:30:47 - 2:30:56)
All in favor of adjourning the meeting say aye. All opposed? Aye. Okay.

(2:30:56 - 2:31:03)
Okay. That piece of business has been dispensed with. For the record, who was the second on that? Me.

(2:31:03 - 2:31:04)
Yeah. Thanks. All right.

(2:31:05 - 2:31:21)
Okay. So my second thing for Annette, number one, can you sit? Can I go back just for a second because Regent Hall, you asked me a question and I never was able to respond. And I think your question was whether or not the administration cared about the taxpayers.

(2:31:21 - 2:31:44)
And again, I would go back to my opening comments when I said absolutely, it is important to be mindful of the taxpayers. But I do fundamentally believe on behalf of the administration that we must be good stewards of the funds that the taxpayers have given us. And we have a number of unmet needs as a campus that have to be addressed.

(2:31:45 - 2:32:01)
And I just simply believe what we are proposing addresses those unmet needs. I do agree that the philosophy of when we have such enormous unmet needs that we have to address them. And that's what we put forward.

(2:32:02 - 2:32:23)
And I would say too that you called it a golden egg. I'm very proud of the fact if it wasn't because of our outcomes, we would not be the second highest increase in the state. And if you take out the only other college, huge, and the only other college that comes higher than us had to have level up funding.

(2:32:24 - 2:32:41)
So if you take all of those colleges out, 23 out of the 50 colleges had to be propped up because their tax base was so low. When you take all of those out, we're number one because of our performance. And I put money on our performance as we move forward.

(2:32:41 - 2:32:52)
But it takes money to increase that performance. We haven't even gotten to that. Which is a huge onus of responsibility as I see it.

(2:32:53 - 2:33:05)
And philosophically, I agree that in order to keep that momentum going, we need to have competitive salaries. Yeah, all of that. Good facilities.

(2:33:06 - 2:33:41)
So what level of funding would we have to reach for? Well, I would sleep better at night if we had more in our insurance reserves. I guess though, Regent Hall, what I would say on behalf of the administration is we looked at this holistically in terms of all of the different years that have gone back to at least 2017. And when we compare it to other taxing entities, only one other taxing entity, Harris County, reduced their tax rate lower than we did.

(2:33:41 - 2:33:58)
Have we not been good stewards with that money? I would say, yes, we have. When we have reduced our tax rate by 12%, that has been very meaningful as you compare it to Goose Creek and the city of Baytown. No, sorry, Gina.

(2:33:58 - 2:34:06)
No problem. I'm a taxpayer. We got kind of out of range there for several years, many years ago.

(2:34:06 - 2:34:12)
But overall, we reduced our tax rate. We reduced it, yes. The fact is that we reduced it.

(2:34:13 - 2:34:16)
Correct. Thank you. So just the fact is that we have reduced it.

(2:34:17 - 2:34:37)
The second highest reduction of all four taxing entities. That is absolutely meaningful to taxpayers, myself included. So we reduced the tax rate 12%, but the values have gone up 51%.

(2:34:37 - 2:34:44)
That's a substantial increase beyond inflation. That's where we differ. And I know it's frustrating for you.

(2:34:44 - 2:34:49)
It's frustrating for me. We have a different opinion. And we still have to vote on it.

(2:34:49 - 2:35:09)
So what I would like to see for the next budget workshop is what you had laid out there in broad categories in our more detailed budget. Okay. Mark? Thank you, Regent Geralds.

(2:35:09 - 2:35:33)
I was just going to say what the administration needs to provide the information that you need is to give us some direction into whether or not you believe these priorities that we have put forth are also philosophical priorities for the board. We have heard where some of the board members have differences regarding priorities. So we need direction.

(2:35:34 - 2:35:48)
I don't disagree with your priorities. I think they're great. And I apologize if the impression is getting that y'all have not been good stewards of our money because y'all have been great stewards of our money.

(2:35:49 - 2:36:01)
So I just want that to be stated, that this college has not wasted money. This college has been very faithful in using taxpayer dollars. And I appreciate that as a board member and as a citizen.

(2:36:02 - 2:36:18)
My philosophy, since you want to know, I like everything y'all are laying out, but I would like it to be reduced in percentages a little bit and giving one cent back to the taxpayers. That's what I would like to see done. Thank you for sharing.

(2:36:19 - 2:36:30)
It sounds like everything we've discussed, everyone agrees on the priorities. A variable that I think is just not as obvious is a rate reduction. I think that's very simple.

(2:36:30 - 2:36:39)
That's the easiest part of everything we're looking at because all you've got to do is take a penny and find $2 million and we're there. Take two pennies. Take the millions of dollars and we're there.

(2:36:39 - 2:37:09)
And that's a decision we can all make. But I think what I'm hearing is it seems like we've all agreed that everything we've been building up, including taking care of our employees, building up our cash reserve, looking, discussing in our insurance, self-insurance fund, the growth in the maintenance budget, establishing some capital fund, which is money we've been doing lately but funded by other sources. I think we all agree those are valuable things for us to be looking at.

(2:37:11 - 2:37:24)
And so I think out of this whole conversation, we agree to that. What wasn't discussed as a variable was reducing the tax rate, but that's a fundamental part of what we do every time we look at this. And you provided us what that would do.

(2:37:24 - 2:37:35)
It's a half penny, a penny, whatever. And those are—I think it's all there. And I don't think any of that changes what's been presented.

(2:37:35 - 2:37:52)
So even with us breaking it down and giving a priority, we still have something that you've already recommended to us. Even without it, we don't tell you anything else. You still have what you recommend, and everything that you just said is already included in it.

(2:37:53 - 2:38:17)
So I agree with Judy is that we may all agree that everything in here we value and we want it done. It may not be at the same level that you have it in here, but what I feel is that there's nothing that you've presented that I wouldn't be ready to vote on, including giving something back. I believe we can do it all.

(2:38:18 - 2:38:45)
I think we can. I would, once again, though, just say, again, going back to Terrell's presentation and our presentation earlier, that I'm very concerned about our ability to go out for a bond referendum if we continue to lower the tax rate, because taxpayers do not remember when you lower the tax rate. All they remember is when you increase it.

(2:38:45 - 2:39:03)
I agree. I agree. And we need to build capacity so that, because I hope I'm able to see this someday, that we go out to the taxpayers and ask for $100 million and tell them we don't have to raise your tax rate one cent.

(2:39:03 - 2:39:07)
I would like to do the same. I'm looking at these numbers. I think we can get there.

(2:39:07 - 2:39:16)
I've got to address that. I don't think we have to sacrifice much. The school district has gone out for bond programs with 5 and 6 and 8 percent or cent tax rate, and they were approved.

(2:39:17 - 2:39:23)
But they've also failed. How much? Well, that was because there was some stuff in there. That doesn't matter.

(2:39:24 - 2:39:36)
Wait for the next one that you're getting ready to vote on. But the thing is, I've never said we don't compare ourselves to the school district, Let me finish my statement. Let me finish my statement.

(2:39:36 - 2:39:52)
I've never seen any evidence that what she said about people is true. That may be her opinion, but there's no evidence to back that up. I think if we go out and say, this is what we need as a college, the taxpayers trust us, they will approve it.

(2:39:53 - 2:40:10)
My personal opinion is, if we don't show some good faith at this point when we can, we're going to hurt our credibility. Is 12 percent not a good faith? We've done more than anybody, but that's just a rate cut. They've had a 51 percent increase in values.

(2:40:10 - 2:40:15)
We've only dropped it back 12. You've got to factor in inflation. We haven't cut anything.

(2:40:15 - 2:40:21)
We've increased their pay. We've done more than any other taxing entity. You asked us our philosophy.

(2:40:21 - 2:40:27)
We give our philosophy, and then you're fighting us on our philosophy. That's my philosophy. I'm kind of confused here.

(2:40:28 - 2:40:37)
My final question. Can you send us that spreadsheet, the one we just looked at? We can send you everything we just presented. We don't have it yet.

(2:40:37 - 2:40:43)
No, we do not have it. We actually were still building it just a few hours ago. I couldn't keep up with everything you started out with earlier.

(2:40:44 - 2:40:51)
If you could send us that tomorrow, that would be great. We'd be happy to send it to you. I want this one first.

(2:40:51 - 2:41:07)
Okay. You said last question. I know. 

This is my questions. Final, final. I'd asked for the projections, and you had sent that out.

(2:41:08 - 2:41:45)
I didn't quite understand it, because in the raises, you had 3 percent for the next 10 years. And I'm assuming... I did not go through the spreadsheet and try to align everything, because, again, we're still trying to get consensus on which way we're going. And so if you want to go into that spreadsheet and put 6 percent for one year and 2 percent for the others, I mean, you can do whatever you want to do, sir.

(2:41:47 - 2:42:08)
Well... And if you want to send me what your list of assumptions that you would like to see on that projection, then I will plug your assumptions into that spreadsheet and share it back with you. Because you just asked for the sheet that you could go in and put the numbers in yourself. That's what I did. 

That's what I did. She sent it, and I played with the spreadsheet. That's what she gave you.

(2:42:09 - 2:42:20)
So the numbers you had in there are accurate for current budget and what you had. That's what you think. Your projections are what you think, right? You had 8 percent.

(2:42:21 - 2:42:43)
You wanted to know what it would look like. The one year is about as all accuracy that she's going to commit to on that. Beyond that, you're just taking one factor and growing it out, and that's why those things are never... But if you put in there, like, the tax increases over the years, and you put in the salary increase to just those two only, put us in the red real quick.

(2:42:43 - 2:42:57)
That's why she gave it to you, so you can do that scenario yourself. Okay, I think we should review that, though, as a group to understand that if we continue where we're at, we're going to be in the red real quick. But we don't know what all of those are.

(2:42:57 - 2:43:02)
Yeah, exactly. We heard it five years ago. I already understand.

(2:43:04 - 2:43:22)
Do what now? We heard the same thing five years ago, and that projection from five years ago was nowhere close to reality, and it's not this time either. One year out, that's the only thing that seemed close to reality. You have to be able to project something when you're in this big of a business.

(2:43:22 - 2:43:35)
All you have are variables that you need to consider. All you have are variables that you need to consider. We don't have that crystal ball to see exactly what's going to happen five years from now.

(2:43:35 - 2:44:03)
No, but we have a way of projecting the fixed numbers, you know, the tuition, the enrollment, the raises, the taxes, and that will tell you real quick about where you're at. And then also, we didn't have anything in there for compensation, you know, increases throughout the, you know, and I'm assuming you're going to want to do that every year, and I didn't see a line out of there. So, again, no, we did not put in estimates.

(2:44:04 - 2:44:10)
If you would like to send me your assumptions that you would like put into it. Well, I tried. I was told no.

(2:44:11 - 2:44:26)
If you would like to send me your assumptions, I would be glad to put your assumptions into the projection and share that back with you. I appreciate that. I did have my list, and I did try, and I was declined.

(2:44:26 - 2:44:31)
So, sorry, Will. You don't know how to plug them in? Huh? You don't know how to plug in those variables? I did. I had questions.

(2:44:33 - 2:45:10)
Our concern was that the inquiry had several additional variables, not changes in the existing values. And many of, Annette, maybe you want to respond, but many of the requests didn't align with things that we could even put into the spreadsheet, and if we have eight different people asking for eight different sets of additional variables to enter, it's very difficult for us to get to where we are tonight. All I asked for was could we see the enrollment numbers you were going to use, and could we add a line in for compression, because we seem to be doing that every year.

(2:45:10 - 2:45:28)
And then I just had a question about the insurance reserve, and that was really all the main changes. I asked if we could change one column from adopted to actual for the 22 budget. We haven't done compression every year.

(2:45:28 - 2:45:43)
Actually, this is the first year we have done compression since I've been here, because we've never had the funds available to do compression. If you want to see it as a separate line, we can, I guess, do that. Otherwise, it should really just be.

(2:45:43 - 2:45:57)
It looks like you put it in tonight. In the budget tonight, you had it in there, right? Yes, I did, but that has nothing to do with the projections. It would typically just go into the salary lines.

(2:45:58 - 2:46:40)
And so, once we have the budget put together, that's when we would typically update the projections when we had what the budget numbers actually were going to look at. Then we would put some reasonable numbers in there, but until I have what those starting numbers are, it's hard to project off of something you don't know where you're starting. But, again, if you have specific requests for assumptions that you would like to see put into that spreadsheet, you can send those assumptions to me, and I will.

(2:46:40 - 2:46:47)
Please send them to me, and I will be sure to share that. I did that, and you said no. I did, correct.

(2:46:47 - 2:47:06)
I'll do it again. I'm sorry if your feelings were hurt, but I just want to make sure that I protect my team's time. But Annette says that she has the time to enter some different assumptions in for you, so I will make sure that they get back to you.

(2:47:08 - 2:47:16)
And I want to be clear. I don't need to see your 10-year projection. Gilbert, you need to see the 10-year projection? No, I mean, I got it.

(2:47:16 - 2:47:21)
I can play with it all I want. I don't need to see it. Yeah, I don't need to see it.

(2:47:21 - 2:47:40)
Judy, do you need to see a 10-year projection? I don't, but I would have. I guess it bothers me that maybe Mark didn't get some answers, and that bothers me if a regent is requesting something. And I think it does need to be within reason and not.

(2:47:41 - 2:47:46)
But, I mean, Dr. B., maybe you could have contacted. I did. Absolutely.

(2:47:46 - 2:47:54)
So Annette said, I don't have time to do it. And Annette, if you want to respond to that, absolutely. It's okay, it's okay.

(2:47:54 - 2:48:13)
Okay, it just sounded like you. I want to be very clear that I didn't just unilaterally, on my own, say. But I do think pulling the board like you're doing right now is very inappropriate, because I can ask for anything I want to ask, and you're going to give it to me.

(2:48:13 - 2:48:16)
Yes, you can. Okay, but you don't have to pull everybody. It's kind of childish.

(2:48:16 - 2:48:18)
Okay. In my opinion. In my opinion only.

(2:48:19 - 2:48:23)
Okay. I'm saying that to say she can send it to you. She doesn't have to send it to the whole board.

(2:48:23 - 2:48:28)
I don't need to see it. I don't think you're getting anything good. Okay.

(2:48:28 - 2:48:38)
All right, so. Yeah. Okay, so at this time we are going to adjourn into executive session.

(2:48:38 - 3:05:24)
Chairman announces meeting of the Lee College Board of Regents on above listed date, the proper posting, and in accordance with Chapter 551 of the Texas Government Code, for the specific purposes provided, we'll recess from open meeting to closed meeting. No action will be taken while the board is recessed in executive session. Any matters of concern for future agenda? Yeah, you've got enough.

(3:05:24 - 3:05:26)
One more. He's got enough. One, two, three, four.

(3:05:26 - 3:05:31)
Oh, four. We can't count, Chuck. We can't count David, can we? No.

(3:05:32 - 3:05:36)
Okay, there we go. They're out here. Any matters of concern for future agendas? Nope.

(3:05:37 - 3:05:39)
Meeting adjourned. Meeting adjourned.