Capital Markets Advisors present fiscal condition analysis of the MVCSD

Financial experts from Capital Markets Advisors (CMA) presented a fiscal conditions analysis of the Mount Vernon City School District at the Board of Education meeting on Tuesday, December 17, 2024. President Richard Tortora and Vice President Tom Vouzakis included analysis of the District's finances back to the 2018 fiscal year. Click here to view the fiscal conditions analysis presentation.

CMA is also working with the District to develop a long-term financial plan. CMA is an independent financial advisory that works with approximately 150 school districts in New York State. Their primary business is assisting clients in entering the capital markets to borrow funding for various reasons. They are also strategic consultants, advising their clients on day-to-day activities to improve operations, efficiency and effectiveness financially. 

“Our fiscal condition requires that we find a path to sustainability, and Capital Markets Advisors will provide us with an expertise in financial planning that will be instrumental in navigating through this,” said Acting Superintendent Dr. K. Veronica Smith. “We recognize that there are changes that need to be made, and we are utilizing CMA to help us analyze every path forward as we plan for a financially sound future.” 

To develop their fiscal analysis, CMA reviewed existing audited financial data and looked at economic and demographic data from the state, county and federal government. Through this, they constructed an overview of where the District has been over the last six years and where it is presently. This is the first of two reports that CMA will present regarding the District’s fiscal condition. 

“Looking back, and where the District is presently, unfortunately shows a pretty grim financial position,” said Vouzakis. “The District has a recent history of running significant operating deficits on an annual basis, and that has resulted in a significant draw on the District’s reserves.”

The District’s general operating fund has deteriorated by 79.1% from $33.1 million in the 2018 fiscal year to $6.9 million. 

The unassigned fund balance, which can be viewed as a “rainy day fund,” has dropped from $10.2 million to negative $5 million during the same time period as a result of these deficits. In 2023 and 2024, Moody’s Investors Service and S&P Global and Fitch Rating withdrew the District’s credit ratings due to lack of reporting timely financial information in previous years. This limits the District’s ability to borrow funds for capital improvements, and it increases the interest the District must pay when it does borrow. 

Excluding the 2021 fiscal year, the District operated at a deficit – where expenditures exceeded revenues – during each year that CMA included in its analysis. The cumulative operating deficit for the District over this timeframe was approximately $26.5 million. The unassigned fund balance was approximately $14.8 million in the 2015 fiscal year, and it decreased by 133.6% to negative $5 million at the end of the 2023-2024 school year. Without ample reserves, the District is unable to afford repairs and emergency operations. This must be addressed to preserve the financial health of the District and enable the District to complete repairs identified in the Building Condition Survey. 

CMA reported that from 2020 to 2024, the District’s budgeted revenue consistently was higher than the actual revenue received. This contributed heavily to operating deficits, as there was less money available than expected. Some of the factors causing the budget revenue variances were uncollected taxes from the city and unexpected reductions of state aid or state aid not meeting the District’s projections.

The financial analysis also noted school building repairs needed from the Building Condition Survey, which would cost over $395 million. Priority 1 and 2 repairs, which should be completed within five years, total over $46 million. If all priority 1 and 2 repairs were completed, it would increase the District’s debt by approximately 44%. Priority 3 repairs ($237 million) are longer-term projects, and Priority 4 repairs ($111 million) are considered “next-generation” and can be completed over a longer period of time. 

Due to the fiscal conditions, the District has the second worst score of school districts in New York on the fiscal stress monitoring system. After 2023, the District had a score of 68.3%, which indicates significant fiscal stress. The average score in the state was 5.2%. The District is one of three districts in the state with significant fiscal stress. 

The factors discussed in CMA’s analysis reveal a financial situation that the District must take action to reverse. These conditions have led to proposals to close three schools, citing declining enrollment as one reason why that could be an effective approach. Enrollment has decreased from 8,503 in 2014-2015 to 6,704 in the 2023-2024 school year. Factors such as birth rates and charter school enrollment increases have contributed to this trend. The demographic study the District conducted discusses the factors for enrollment decreases and enrollment projections.

Further enrollment decreases are expected, with a projected loss of 1,315 students by 2033. Fourteen of the District’s 16 buildings have an enrollment of less than 50% of the capacity of the school. The three schools considered for closure – Cecil H. Parker School, Mount Vernon Honor Academy and Mount Vernon Leadership Academy – have low enrollment and schools nearby that students can attend. A restructuring would bring schools closer to a sustainable enrollment, while also ensuring class size guidelines are followed and students can travel comfortably to and from school with minimal change. 

CMA will continue to work with the District to develop their long-term plan and navigate their financial future. They will assist the District with implementation of the plan and monitor its impact, while updating the plan as progress and benchmarks are met. 

Click here to view the fiscal conditions analysis presentation.