Wednesday, March 31, 2010

Win-Win: Decision Time

The Columbus Dispatch recently ran a story reminding us that the so-called Win Win Agreement between Columbus City Schools and most of the suburban school districts is coming up for its sexennial renewal this Spring.

I have discussed the Win Win Agreement at length in prior blog articles, so will distill it to simply this:

In exchange for the sharing of property tax revenues, Columbus City Schools agrees not to petition the State Board of Education to align the boundaries of Columbus City Schools to those of the City of Columbus.

In other words, without the Win Win Agreement, Columbus City Schools might petition the State Board of Education, the entity which sets school boundaries, to transfer some or all of the homes and commercial properties in the Hilliard School District that lie within the borders of the City of Columbus to Columbus City Schools. Apparently the belief among suburban school leaders is that the inclination of the State Board of Education to grant such a petition is sufficiently high to take the threat seriously.

Remember that these parcels have always been in the Hilliard School District. These parcels used to be part of various townships, mostly Norwich, but were annexed into the City of Columbus in the late 1970s and early 1980s by developers in order to gain access to water and sewer services. It caught both the developers and new homeowners by surprise when in the early 1980s, Columbus City Schools began threatening to petition the State Board of Education to realign its district boundaries with the Columbus municipal boundaries, as had been the custom in prior years. The developers thought their booming new homebuilding market was going to dry up, and folks who had already built homes in suburban school districts were horrified that their kids might be shifted to Columbus City Schools. I know. As one of the original homeowners in Golfview Woods, my wife and I were right in the middle of the battlefield.

Lawsuits, politics and general ugliness ensued – to the point that the Ohio General Assembly passed a law enacting a moratorium between the parties until a deal could be worked out. That deal is the Win Win Agreement, first signed in 1986, and up for renewal every six years. In the prior renewal years, all parties have continued their participation, except for Reynoldsburg. According to the Dispatch story, Groveport-Madison is giving consideration to not renewing its participation this year.

So where does that put the Hilliard Schools community today, twenty-four years later? Should we renew or not?

First, let's be clear what parcels we're talking about. The Win Win Agreement contains exhibits that spell out with precision the boundaries of the area that Columbus City Schools agrees will be left in the suburban districts. In the case of Hilliard City Schools, this represents roughly the large swath of land between I-270 and the Scioto River, and another couple of large hunks on the southern border of the district.

These areas include neighborhoods such as Golfview Woods, Highpoint, Westbrooke Park, Crosscreek Village, Thornapple Grove, Saddlebrook, Hilliard Green, Western Lakes, Scioto Trace, The Glen, River Place, and Bayside Commons Apartments.

It also includes substantial commercial properties, such as the Boehringer-Ingelheim-Roxanne Labs facility, the shopping centers on Hilliard-Rome Rd at Trabue/Renner, and the Buckeye railroad yard.

One way to make this decision is to look at the pure economics of the Win-Win Agreement today. According to data from our district's Finance and Operations departments, we currently have a few more than 7,000 kids in our school district who reside in the City of Columbus – about 46% of our student population. If it costs $11,000/yr to educate each of these kids, then the total cost to our district is $77 million.

The total amount of property tax we collect from residential, agricultural, commercial and industrial properties in the City of Columbus is $53 million/yr, or $24 million/yr less than it costs us to educate those kids. The $1 million/year in revenue sharing (I prefer to call it a ransom) we must pay to Columbus City Schools under the Agreement just adds to the spread – making the total economic impact about $25 million/yr.

Therefore, one way to look at this is that this $25 million/yr is the added cost all of us in the school district bear to keep these Columbus neighborhoods part of our school community. Realizing that $25 million is 16% of our total operating budget, this is a significant number.

So does that mean that if we bail out of the Win Win Agreement, we can save $25 million/yr and shed 7,000 kids from our school district?

Not exactly.

First of all, even if that were true, we're not talking about 7,000 kids in abstraction here. These are our neighbors and friends - people who are every much as part of the Hilliard Schools community as the rest of us. They have paid the same property taxes, voted on the same levies (and for the same school board candidates!), been part of the PTOs and worked the concession stands during competitions. They aren't they, they are us!

Secondly, our state funding is based almost entirely on the number of kids we have enrolled in our school district. While it is true that the Transitional Aid Guarantee has kept our funding relatively constant as the number of kids has grown (another long conversation), and presumably works the same way if there is a decrease in the number of students, the wholesale transfer of 7,000 kids from one school district to another is bound to cause the State to reallocate funding from Hilliard Schools to Columbus Schools, even if it requires special legislation. The net is that we would not gain the full $25 million/yr. I could see our State funding of $60 million/yr cut in half, making this choice generate a net loss for our district!

But here's the factor that, I think, makes our continued participation in the Win-Win Agreement a no-brainer: as Treasurer Brian Wilson pointed out to me, it's not an all-or-nothing deal for Columbus City Schools. They could theoretically petition to have only the commercial, industrial, and high-value residential property reassigned to Columbus City Schools. The outcome could be that Hilliard Schools keeps nearly all of the 7,000 kids and loses most of the revenue.

That would be an unmitigated disaster.

This is a complex, multi-dimensional question. In addition to the recommendations of the Administration, I'm hoping the smart folks on the Audit & Accountability Committee will take on the challenge of examining the situation, and giving their advice to the School Board as well.

And certainly, the thoughts, analysis and opinions of fellow community members are much appreciated!

Friday, March 26, 2010

Nichter: Resignation

Dan Nichter has resigned from Hilliard City Council after being indicted by a Franklin County Grand jury for passing bad checks.

I hope this brings an end to the saga of Mr. Nichter in the Hilliard community.

Now the question is who will be appointed to fill his seat on the City Council? Will it be another developer-friendly politician, or will the Council seek someone who will strive to do what is best for the greater Hilliard community?

I'm hoping the next Council member will be a stronger supporter of the Big Darby Accord than the Mayor and other Council members have been. Saying you support the Accord is different than actually abiding by the Accord principles.

And I hope the new Council member believes that a strong Hilliard community means a strong, healthy and cooperative relationship between the City of Hilliard and Hilliard City Schools.

Friday, March 5, 2010

Time for eTextbooks?

This week I cancelled our subscription to The Columbus Dispatch. For whatever reason, the publishers of the Dispatch decided it was time to increase the annual subscription rate for 7-day home delivery from $181 to $337, up 86%. Frankly, I didn't even take the time to consider whether the Dispatch is actually worth $337 per year to me. The size of the increase was insulting.

The truth is that I'm a bit curious why the publishers of the Dispatch felt they needed to raise subscription prices so aggressively.

To an outsider, the business of a newspaper seems pretty straightforward. You get revenue from subscriptions, retail purchases, and advertisements. The costs include the editorial staff, subscriptions to national and international news feeds (e.g. Associated Press, comics), and the printing and distribution operation. I'm sure there's more detail when you peel the onion, but these seem like the major components. As long as revenue exceeds cost, and appropriate profit* is generated, all is well.

So what has changed to warrant such a large price increase?

I sense that the newspaper industry is going through the same gut-wrenching changes that blew up the music industry a few years ago. The music industry actually thought they were in the record business, and that their role was the manufacturing, distribution, and retail sale of plastic disks – first vinyl records, then CDs. Indeed, it was all but impossible for an artist to make it big without having a deal with one of the few record companies who had made the substantial investments required to manufacture, distribute and retail those plastic disks.

Then came the Internet. Suddenly the artist could be directly connected to the consumer. The record companies panicked. If the artists no longer needed their manufacturing and distribution networks, what role would the record companies have going forward? The more innovative record companies began to realize that they were in the music business, not the record business. Artists could benefit from the branding and promotion a music label can provide, and consumers could benefit from there being music labels that seek out new artists and package their material. The distribution and retailing of music has largely been ceded to companies like Apple, with iTunes, and Wal-Mart – companies that had virtually no presence in the music industry a decade ago. The major pain of reconfiguration is over, and we again have a viable music industry.

So what does all this have to do with schools?

I've spent a lot of space in this blog talking about the cost of personnel. It is, and will always be, the major cost associated with running a public school district, consuming nearly 90% of our operating budget. But guess what comes high on the list after that?


Just before the opening of Bradley, I had a chance, thanks to Principal Dave Stewart, to walk around the building with my brother-in-law, who is a public school Superintendent. When we came to the library, all the tables were piled high with textbooks. He made the comment that he wished they could figure out how to attack the cost of textbooks, because it was the primary non-staff cost in his district. That had never occurred to me before.

It seems like the answer is obvious: technology. Just as Apple has been successful establishing iTunes coupled with the iPod as the way music is distributed and listened to, Amazon is hoping to make their Kindle the way 'books' are read. The Kindle still needs to go through some evolution, as did the iPod, but they're on to something. Wouldn't it just have to be cheaper to give a kid a Kindle when they're in the 1st grade, and then simply load it each year with the textbooks required for that year's study?

Not necessarily.

A Kindle isn't cheap: today's retail price is $259. To equip every kid in our school district with a Kindle would cost nearly $4 million at that price. Presumably, we could negotiate a substantial discount for buying thousands of devices, but still we're talking millions of dollars.

Then there are the operational realities to think about. How often will they get broken, lost and stolen? What happens when a kid graduates, moves away, or drops out? Is that Kindle recycled to an incoming student? How much will it cost to get the 'ick' off of it?

Maybe we should just say that each kid has to come to school with his own Kindle, just like we have always expected kids to come equipped with pencils, paper and notebooks. It might make sense if we can show parents they'll save the cost of the Kindle or more in property taxes over time. This approach causes the responsibility to care for the device to be fully placed on the parents. However, we would also have to solve the problem of getting devices in the hands of kids whose families cannot afford to buy one.

Is that the end of the story? Of course not – we haven't addressed the cost of the intellectual material inside the textbook, or the cost of marketing the textbook to school districts.

The New York Times recently published a story on this topic. While the subject is retail books rather than school textbooks, the issues are similar. I thought the comments of author Anne Rice were particularly interesting – she had no idea who was making how much profit in this food chain. That probably means she has been leaving money on the table, but then I suspect she is more than satisfied with what she has been paid for writing a couple of successful books. Unpublished authors and would-be actors probably get paid about the same: whatever they pick up in tips waiting tables.

My brother-in-law says that in their school district, they're dialing back the technology in their quest for a viable e-textbook, using standard personal computers and the internet to access material. This presents some of the same problems as a Kindle approach, in that not every kid will have sufficient access to a computer to complete their assigned workload. Nor can you carry a personal computer around quite as easily as you can a Kindle. But this garners them some experience in an e-textbook environment.

The engineer in me wants to say that replacing hardbound textbooks with something like a Kindle is the obvious, elegant solution, and we should just make it happen in our school district as soon as possible, letting the economics sort themselves out later.

The business side of me says, no, the only reason to make the shift to e-textbooks is if the economics are so compelling that all those operational realities I've mentioned – and those we haven't thought of yet – can be handled and we still save money vs paper textbooks.

I think the way to reconcile these two perspectives is to ask our instructional technology team to design a trial that tests the feasibility of using both Kindles and online e-textbooks. It's worth the effort to understand these things now so we can shift gears when the technology and economics are better aligned.

NOTE: apparently some of our lawmakers believe the time is now for e-books at the college level. See this story in The Columbus Dispatch.

* I mean "appropriate profit" as seen in the eyes of the owners of the paper. In other words, sufficient economic incentive to continue to operate the business. How much profit that requires is their decision alone, however, the owners of any business have to figure out if its customers are willing to pay the price necessary to support the owners' desired level of profit. This price increase will give the Wolfe family, the owners of the Dispatch, some clear feedback in that regard.