Earlier this month the Bonanza ran a column by IVGID General Manager Steve Pinkerton headlined: “Paying now rather than later.” Mr. Pinkerton wrote that with IVGID’s “hundreds of facilities, pipelines, equipment and rolling stock” the district has an obligation to set aside funds for both current maintenance and replacement at the end of their useful lives. Pinkerton said that a majority of the property owners’ recreation fee is “dedicated towards the maintenance, planning and replacement of our capital assets.” I wish he managed the Washoe County School District too.
Every year the State of Nevada sends a chunk of money to the school district based on the number of students enrolled. Those funds are earmarked for salaries, benefits and operating costs. If they want to maintain or build school buildings they put a school bond measure on the next election ballot which asks local property owners to increase their taxes to pay for it. Given the school board’s dysfunction voters have been reluctant to approve school bonds.
Therefore the school board looks for ways around the voters. In 2013 the legislature passed AB 46 which would have authorized Washoe County Commissioners to raise our property taxes to pay for new schools. County commissioners conducted hearings on AB 46. School Superintendent Pedro Martinez testified that he did not lay off any employees during the 2008 – 2012 recession but “spent our reserves” so he wouldn’t have to. Former School Trustee Kenny Grein explained that they used to establish reserves when they built new schools but ended up spending the money elsewhere.
Interestingly if you own a condominium or a home in a planned unit development the legislature has established a comprehensive reserve scheme to protect owners. Homeowner associations must contract with state-approved cost analysts to set up a detailed reserve studies estimating the useful lives of building components (streets, drives, roofs, walls, etc.) and costs to replace them. Homeowner dues are then required to include enough money to fully fund the requirements shown by the reserve study so when common area components wear out there is money on hand to pay for them. The shame is that the legislature does not impose the same requirement on municipal bodies which own taxpayer-financed capital assets.
IVGID is on track to spend over $56 million on capital projects during the next five years. Excluding utility costs (mainly a new sewer effluent line) capital outlays are scheduled to be $35 million. This includes about $12 million to replace older assets (new IVGID office, new Mountain Golf Clubhouse, parking lot, creek restoration & beach facilities). The remaining $23 million is allocated to the Diamond Peak master plan summer activities and Snowflake Lodge replacement, winter upgrades and improvements to other venues.
To pay for all this the capital plan envisions about $11 million from the rec fee, $2.3 million from Beach Fund reserves, a little over $1.1 million in grants and $4.2 million in “net profits” from Diamond Peak summer activities. Considering that all of our current venues have to be subsidized by property owners’ rec. fees counting on venue profits may be overly optimistic. In any case whether or not there are any “net profits” everything else needed is to be funded by issuing bonds (currently estimated at over $17 million). All of these figures can be viewed on www.ivgid.org.
The amount of bond principal and interest repayments can be estimated. The problem is IVGID doesn’t have a reserve study. If $35 million in new and replacement facilities are to be built where is the money coming from for (in Mr. Pinkerton’s words) “the maintenance, planning and replacement of our capital assets”? Is it time for IVGID to come up with an independently prepared analysis of each capital asset including an estimate of useful life, costs to maintain and costs to replace in the future? Should such funds be shown as dedicated reserve funds as is the case with homeowner associations?
Maybe it’s time.