Birmingham City Schools:

December 20, 1976 Birmingham Board of Education Post Office Drawer 10007 Birmingham, Alabama 35202 (205) 252-1800

Dr. Wilmer S. Cody Superintendent

Dear Dr. Cody:    In re: Property Fund

A Board of Education has broad power to expend funds for carrying on the purposes of an education enterprise.

Generally, there are two large funds for which the Board is responsible:

1.    Operating Funds come from special designated tax sources for the purpose of daily routine operations such as instruction, maintenance, operations, administration, salaries, etc.

2.    Bond Funds for the acquisition of long life Fixed Assets are generated by specific taxes for those    purposes.

In Birmingham’s case, building and site funds have come principally from Local long term general obligation bond issues which spell out approved uses such as site acquisitions, construction, etc., and also from recent State Bond Issues.

The Board has power to dispose of fixed assets an at times, willingly or unwillingly, has disposed of fixed assets and has deposited those monies in the Property Fund.

Presently, the vast majority of our Property Fund consists of:

1.     Monies derived from the disposition of fixed assets which were acquired originally through funds generates from taxes earmarked by the people for their acquisition, and

2.     Interest received from investment of these funds.

I feel strongly that at the outset operating funds should be used for their purposes, and fixed asset should be used for their purposes.

To say it another way, I would not propose the use of instructional funds for the construction of a building, or vice versa.

Mindful of the broad poser of the Board to use funds as it feels best, it is my considered judgment that when a fixed asset, acquired through taxes earmarked for that purpose, is disposed of, it should be re-invested in another needed fixed asset with similar long life in order to keep faith with the public that made the fixed asset possible, until such time, at least, when all of the fixed asset needs of the system have been fully, and a reserve retained to care for unforeseeable building need emergencies (fires, tornadoes, annexations, and the like).

Further, the sale of one fixed asset and the use of that money to repair fixed asset seems undesirable since I perceive the function of the General Fund to be that of operating and marinating said fixed assets.

I can not see the feasibility of reducing the fixed asset account by using proceeds form the sale of a building to repair another fixed asset.

I recommend (urge) the Board not to use its property funds from the sale of a fixed asset for the repairs of or the replacement of parts of existing facilities such as roofs, fences, pavement, etc.

As mentioned above, certain funds accrued from interest on investments from these property monies.  It would seem more feasible to spend interest received for such things as roofs, asphalting, fences, etc., if absolutely necessary, and yet it would appear to say that these interests received are children of the parents (sale of fixed assets0 and should be used for the same purpose as the fund which generated them, relating that interest merely adds to the original fixed asset an amount which would help offset inflationary increases.

In summary:

1.                 All funds are for the use at the Board’s discretion

2.                 Although there may be no legal restrictions, sound accounting practices and business management of governmental funds prompt me to feel that capital funds should not be used for operation and maintenance purposes for the reasons stated.

3.                 Interest received from these investments should be used for the same purposes, but it may be that a better case could be developed for the use of these interests funds for operation and maintenance purpose than for fixed assets themselves.

4.                 Immediately available emergency funds for fixed assets should always be on hand, (Example:  The Airport Hills annexation is pending.)

Sincerely,

/LS/ Henry Sparks

Assistant Superintendent

Our state department of edcuation and Birmingham school board should do well and abide by Dr. Sparks' advice.  Employee buyouts with property funds is a bad business decision