August 31, 2020 at 12:05 p.m.
School board approves modified contract with bus company
School board approves modified contract with bus company
According to the bus company's co-owner Jeffrey Bowen, the modification will prevent the company from having to file for bankruptcy, possibly leaving the district without transportation for students.
The vote came during a special board meeting Wednesday evening, the second of the week and fourth of the month for the school board.
District superintendent Eric Burke told the board Bowen's was paid 80 percent of its daily transportation rate for the remainder of the 2019-20 school year, when the district went to a virtual education model in March,
The district plans to open the school year in a blended model which will result in students staying home on Wednesdays, cutting the number of runs and routes Bowen would otherwise be paid for if students were in the classroom.
"Last spring the district agreed to pay Bowen 80 percent," Burke said. "And Bowen contacted my office requesting, and in the email you got, they requested 100 percent on the Wednesday routes and 80 percent if we go full remote. And they had their reasons why they were asking for that, bankruptcy was one of the biggest, overriding reasons."
During the panel's Aug. 24 meeting, board members asked Bowen to provide more concrete financial information to justify the request. That information was sent, along with the modified contract that calls for the company to be paid 87 percent of its daily transportation rates if the district were to go virtual again.
"We went through and figured out what it cost to keep our doors open," Bowen said. "I talked to my accountant and financial advisor, and they figured out what is written on that sheet, which you all got a copy of, and that is kind of the bare minimum. That's not buying new buses or putting a big loan payment on or anything like that."
"It hurts when you don't have five days of income when you have five days worth of expenses, basically," he added.
Bowen said the 80 percent his company received in the spring wasn't enough to cover all of his expenses, which put his finances in the shape they are in now.
"Districts are supporting their bus companies in some way, and it is district-to-district," Burke noted.
During a recent virtual meeting of superintendents of Oneida and Vilas county schools, Burke said he learned that not all districts are in the same situation as Rhinelander.
"If it's intermittent or one day off like we are at, we're looking at around 60-70 percent payment on those days and if we were to go full remote, it was between 80 and 90 percent," Burke said. "That's where the districts were at."
According to Burke, Shawano is paying 40 percent of their contracted rates on days their buses are idle while Antigo is paying 60 percent. Most area districts that replied to a query from the SDR business office are paying between 70 and 90 percent, it was noted. Wausau and Abbotsford are paying 80 percent, Stratford is paying 85 percent and D.C. Everest is paying 83 percent.
Board member Ron Lueneburg asked if the administration knew how many districts statewide were paying their bus companies versus how many were not.
Burke said they just checked with schools in the area. It was also pointed out that some districts own their own bus fleets, so a statewide comparison would have to include that factor.
"Stevens Point owns their own buses, and he responded, so it's not a concern for them," noted SDR business services director Bob Thom.
Of the districts that replied to SDR's request for information, there wasn't one that wasn't paying something, Burke added.
Board member David Holperin asked if paying the 87 percent when the buses don't run would be to the district's advantage.
Thom replied that under the proposed amendment, SDR would save about $8,000 a day or $280,000 annually if the district stays in the blended model with no in-person classes on Wednesdays. It was then clarified that the 87 percent only comes into play if the district goes full virtual. In the blended mode with no Wednesday busing, Bowen's would receive 80 percent of its transportation rate.
"Are we obligated of paying them for five days a week at a base rate?" Holperin asked.
"Our contract doesn't have a minimum number of days," Thom replied. "It just has a total cost per day, and every day they run, you pay that amount."
Holperin made the point that the contract says that Bowen is paid for every day students attend school, and an argument could be made that even when students are attending virtually the bus company should be paid.
"I'm thinking through the response from the taxpaying public and what might come up," he said.
Lueneburg said he wished the district had the time to have parents and taxpayers offer input on the bus contract, like they did for the reopening plan, to help them come to a decision.
"This is an issue that I struggle with because, like I mentioned before, many other businesses that do business with the school district are suffering financial hardships and so forth," Lueneburg said. "And you look at this last spring where a bunch of farmers were having to dump milk because schools weren't buying it. They weren't going to the districts asking for additional funding. Each situation is unique, I'll grant that."
He then asked how the board members, as elected officials, can ask some business owners who are struggling financially to keep paying their taxes to the district which and then use some of that tax revenue to bail out other businesses.
Board president Ron Counter observed that Bowen's is "critical" to the district.
"If we don't have buses, if Mr. Bowen goes out of business," Counter said. "We have two choices. One, we buy buses and we do it ourselves, which is probably going to cost millions. Number two is that we hire another bus company to do it. And they can charge us whatever they want to."
Another bus company would include a "hold harmless clause" in any contract it reaches with the district to ensure they are paid regardless of runs made due to COVID-19, he added.
It was also noted that when the current contract -which runs through June 30, 2024 - was sent out for bids, Bowen's offer was $200,000 a year less than the next nearest bid.
Counter said over the course of the 5-year contract, the district saved $1 million. He also noted that transportation of students to and from school is mandated by the state.
"We cannot operate without buses," Counter said. "Pure and simple."
Board member Duane Frey said he had a concern with the 87 percent number being proposed.
"I don't want to put Bowen out of business, I know we need buses," he said. "To me, 87 percent seems high. I'm not questioning Jeff on where your bottom line is, but as elected board members, our duty is to do the best for the taxpayers that we can."
Board member Ann Munninghoff Eshelman said she sympathized with Lueneburg's position.
"And I have to say, that's how I was feeling about it at first, too," Eshelman said. "But Mr. Bowen made an argument that changed my mind a couple days ago. And that is, unlike the farmers that are throwing the milk away and all the other business, we're his only client. He is really part and parcel of this school district."
Eshelman also noted that Burke and the administrative team said the plan going into the school year has to be "flexible," and Bowen's drivers have to react to any of condition the district may find itself in concerning student attendance.
"They (the parents) are really going to expect that if we open up schools, they want to look down the road and see Jeff coming down the road in a bus," Eshelman said. "I don't like it any more than you do, but I think we have to pay for that."
Holperin said the $200,000 annual savings Bowen presented the district would not happen if the contracts were going out for bid now. He also said that comparing SDR's transportation situation to other districts isn't fair.
"We don't know if their bidders came in high to start with, we don't know what's in those contracts," he said. "But what I do know is that Bowen has been reasonable for a lot of years. And on that basis, I absolutely won't go any lower than 90 percent for the contract. And to be honest, I think we should stick to 100, but I'd go 90."
As a business owner himself, he said the 87 percent figure doesn't leave a lot of margin for unexpected costs that might come up.
Board member Mike Roberts noted that the 80 percent figure used this spring was more or less a guess based on what neighboring districts were paying their transportation companies.
On a role call vote to accept the amendment to the contract, all voted "aye" except Holperin, Lueneburg and Frey.
When Counter asked Frey why he voted against the measure, he said he isn't comfortable with the 87 percent figure if the district goes full virtual.
Under the terms of the contract, Bowen must keep all of his drivers and other employees on staff, and must be prepared to produce payroll records to confirm this. Any state or federal aid, like the Payroll Protection Program funds Bowen received this spring, must be reported to the district and that amount will be deducted from what the district pays under the amended contract.
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