Financing Our Future

By Assistant Head of School/Chief Financial Officer Dave Sigal
One of my favorite icebreakers is playing two truths and a lie. It’s a fun way to get to know someone. Before I dive into my letter about financing our future, let’s break the ice. Take a guess on what two statements below are true and which one is false. (The answers are at the bottom.)

  1. I married my third grade crush
  2. I was a competitive collegiate bowler
  3. I worked for the IRS as an examiner/auditor
As we prepare for our 100th anniversary in 2026, we are looking at the needs of our students, faculty and the school. These needs include implementation of new programs and construction of new facilities. I'm frequently asked how are we going to pay for them.
 
I prefer to ask, “How are we going to pay for them without increasing tuition incrementally?” When it comes to new programs for our students, we explore funding sources such as donations and grants. This is how we funded the construction and expense of the Innovation Lab in 2015. We also use gifts from the Country Day Fund's Family of Funds, which is a source of revenue through donations.
 
When adding new initiatives at LJCDS, we evaluate our current programs to assess which ones continue to help fulfill the promise and mission of the school and which should be eliminated or reimagined. For example, classes with low interests may be removed, or we may offer alternative solutions (e.g. online classes). We will also look for savings in administrative and non-instructional costs. Sometimes new programs can be provided by using existing school resources that have minimal incremental costs (e.g., our student Green Team’s recycling program, Dr. Krahn’s Learning Lunches and the Speaker Series).
 
For facilities, it’s a little complicated. The school handles maintenance and replacement of key components (e.g., roofs and air conditioning units) through the annual operating budget and reserves. But if we want to construct a new building or significantly remodel or enhance an existing building, how do we do that, again, without increasing tuition incrementally? Our first option is to raise money through a capital campaign. This is a common method used by independent schools for funding major projects and would entail soliciting tax-deductible contributions from our community and other interested parties.
 
Another way to pay for facilities is through debt. As a nonprofit organization, we have access to tax-exempt bond financing that offers very favorable interest rates. We used a combination of this method and fundraising when we invested $46 million in the school in the 2000s. The school currently has a balance of $37 million in debt related to this investment, and our preference is to not grow the school’s debt. Our current debt is also subject to debt covenants from our lenders, which includes a limit on our ability to borrow more money. More importantly, this type of financing often requires an increase in tuition (often over multiple years) to make the debt service payments.
 
We also have facilities reserves—money set aside annually through the operating budget and is authorized by the board of trustees for new facilities and environmental sustainability projects. We have used these funds in the past for the Middle School photovoltaic (the conversion of light into electricity using solar panels) and the library and collaborative space projects. The balances in these reserves, while representing a small portion of the funds needed, could be used to supplement other funding sources.
 
The evaluation of funding sources will happen through a collaboration between school leadership, the board of trustees, and the committees of the board (the Finance Committee and Engagement Committee). It's an exciting time for the school, and I hope you will join me in my optimism about what we will accomplish, and of course, how we will pay for it.
 
Want more information? Come see me. Coffee is on me.
 
Answers:
  1. I married the girl with the dark brown hair and the pretty brown eyes from Miss Hertle’s third grade class. Every day, I would chase her home after school to show off. She thought I was strange, and it took 20 years for her to agree to go out with me. We are celebrating our 25th anniversary in December.
  2. I bowled on the SDSU bowling team in the early 80s. I bowled for more than 40 years with four perfect (300) games and a three-game personal best of 813.  
  3. I have never worked for the IRS, although I did have an interview in my senior year of college.
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