Eastern Guilford High School insurance, revisited
Occasionally I get a call from a reader who still cannot wrap his or her mind around the Guilford County Schools insurance policy and how paltry the final insurance settlement of $17.6 million seems when the new Eastern Guilford High School is estimated to cost $61 million.
I received such a call about a week ago and I'm not sure if my various explanations were able to ease the caller's mind. So I decided check in with Wanda Frazier, the district's risk manager, to see if I had missed anything, and post the outcome of our conversation on The Chalkboard for public benefit. I also spoke today with Everette Arnold, executive director of the Insurance Advisory Committee, a group that helps local municipalities and other government agencies purchase insurance.
In cased you missed it, I posted a short explanation on this back in early 2007 along with copies of the district's insurance policy at the time. Other insurance coverage.
Now, the question I keep getting is, if the district had replacement coverage, why isn't it getting enough money to rebuild Eastern? (In some readers' minds, the $17.6 million couldn't be enough to rebuild the school at present time.)
There is such a thing in the insurance world as guaranteed cost replacement insurance, which will pay to rebuild your property even if the cost exceeds your policy limit. I understand this type of insurance to be very expensive and uncommon, especially for school systems. GCS had replacement value insurance, a type provided by the state Department of Public Instruction to most school systems in the state.
"The statewide plan is very good," Arnold said. "Let's call it reasonably priced."
In fact, both Frazier and Arnold said that the DPI insurance premiums are so low that private companies have a hard time matching them. Arnold estimates the district is saving hundreds of thousands of dollars a year on premiums, which could total in the area of $3 million if you multiplied those savings by 15 years, the amout of time the district has bought state insurance (since merger in 1993). GCS is currently paying $534,758 a year to insure its $1.4 billion in assets, but is seeking insurance bids for 2008-09.
"My recommendation would be to set that (the savings) aside," Arnold said. "But I don't think the Board of Education will set that money aside to build a new school. They'd say we need it now."
Would taxpayers even support either paying more in insurance premiums or setting the savings aside, given that a total loss is so unlikely and that money could be used to pay for staff and other resources?
Also keep in mind that the argument about replacement cost insurance is somewhat moot when the district decided to build a bigger school. The construction costs of the 1968 blueprint, even when modernized to meet current codes, are theoretical as that project did not go out for bid. All we have are Eastern's appraisals, totaling $20.3 million back in 2006.
Following is the text of an e-mail sent from Frazier to the same reader who called me:
"Each school system administrative unit is responsible for insuring the schools in their district. GCS carries property insurance with the Insurance Section of the Department of Public Instruction in Raleigh. This group insures over 90% of all the schools in NC. The coverage we carry is replacement coverage. Replacement coverage is for the building/s that are lost. We lost a building that was constructed in 1974/75. Our coverage pays for replacement of like kind and quality of what was lost. We would not build back a school constructed to the codes of 1974/75. Also the building that burned was a total of 126,500 sq. ft. The portion that was lost was 104,578 sq. ft. Insurance does not pay for the portion not lost.
The old Eastern High was built to accommodate 920 students. On November 1, 2006 when Eastern was lost, we had 1068 students. The new Eastern High’s core capacity will accommodate 1600 students with a total of 270,000 sq. ft.
GCS is requesting bids for higher levels of property coverage for the school year 2008-2009. These will be evaluated and a recommendation will be given to the BOE. Additional coverage always costs more money, so the available budget will also be a consideration."
Does that help?
Comments (39)
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I was always taught to make business decisions as if you were spending your own money.
I wonder how many on the board of education have this type of insurance on their own homes? I'll bet the answer is zero.
Posted on March 24, 2008 11:43 AM
How can we get a cost/budget by line item for
Northern High School?
Posted on March 24, 2008 3:18 PM
Why is the new school being built for almost 600 more students than are now present at Eastern? Is that much growth anticipated in that area? Or where will the BOE move students from to attend the new Eastern?
Posted on March 25, 2008 1:15 AM
I bet they're planning to bus more from the Page area to Eastern. Page just opened their new IB program, so they'll need to bus out a lot of the non-IB students.
Posted on March 25, 2008 8:14 AM
The area around Eastern is growing. Go take a look at the new subdivisions.
Posted on March 25, 2008 8:32 AM
The Eastern Community is seeing substantial
growth in housing and development. Before the fire there were 10 trailers on site. The feeder schools Gibsonville, Sedalia, and Mcleansville Elementary schools are seeing high growth from these developments.
Students are still being bused in from within
a block of Page high school in Greensboro to Eastern in Gibsonville and this causes substantial problems for the school and the students. Many of these parents have no idea how to even get to Eastern and the teachers have a difficult time reaching them.
The students do not have the opportunity to participate in sports and after school activities due to transportation problems. Yet they could walk home from Page.
Neighborhood students were once told that there were not enough seats at Page , yet they found 100 seats for an IB program. I think the IB program at Grimsley and Page should be consolidated into Grimsley and seats should be open at Page for kids that can walk to the school.
Posted on March 25, 2008 8:55 AM
Eastern,
I can sympathize. Yet, prior to this year, the IB program was consolidated at Grimsley. Page students who wanted an IB experience had to get it at Grimsley (prior to this year).
Alan Duncan's school, Page, was losing some of its best students to Grimsley and we just can't have that now can we?
Posted on March 25, 2008 9:40 AM
Only 10 trailers!?! WOW! Go look at some of the other high schools, Southwest, for example. They could use a few Tennis courts too instead of having NONE. Drive down Penny Lane past Florence Elementary. They used to have 30+ trailers. Now with since the new addition is built there are about 6 or 8 out front. It's such a lovely view from a main street. Pilot Elementary School had trailers installed a few weeks after it was built.
Seriously, I do hope that the new Eastern will eliminate any trailers. But there is absolutely no reason that Page students should be bussed all the way to Eastern. Have you Eastern parents written or called school board members to ask WHY? Have you asked Eric H? You will probably receive many different reasons. If you are an experienced parent, I'm sure you know the true answer why.
Would some of the students that are currently bussed to Grimsley from long distances be closer to Page?
Any why the heck do we need another IB Program? Most of these students in IB probably have nice cars to drive to another school unlike those students who are bussed long distances and cannot get to any afterschool activities.
Posted on March 25, 2008 11:28 AM
There are many schools in Guilford County with more than 10 trailers. The only bond I am voting for is the bond for a new jail. I would rather have the gang bangers in jail than in our schools recruiting fragile students. Eastern will be rebuilt with or without bonds. The commissioners promised to provide funding to replace the school and they will. The issue is too politically hot not to.
Posted on March 25, 2008 11:32 AM
I always wondered how Mr. Duncan could stand to be on the BOE so long and how he found all that time away from work. Now the pieces of the puzzle start to come together. It must be nice to customize your home school with students you want and don't want.
Posted on March 25, 2008 11:41 AM
Page just started an IB program and Smith's IB program graduated 0 last year?
Posted on March 25, 2008 11:57 AM
The students who are bused to Eastern would prefer to go to Page also. It's a long bus ride to Eastern. Their parents would have to fight this and they probably do not have the energy or the time. They would probably appreciate your help.
Posted on March 25, 2008 12:11 PM
Deena Hayes and Walter Childs in last weeks Board meeting made a plea to stop bussing children across district lines. I think times are a changing and the Eastern bussing must be revisited.
The IB's at Smith, Page and Grimsley must also be revisited. These three schools are much closer together than Page to Eastern. How mush money are we wasting here. A good IB program is very difficult to keep staffed. Some consolidation is needed!
I would suggest closing down Girmsley and Page and reinforcing Smith.
Posted on March 25, 2008 12:42 PM
"given that a total loss is so unlikely and that money could be used to pay for staff and other resources"
If a total loss is unlikely, then why is guaranteed cost replacement insurance so prohibitively expensive? Insurance companies price their insurance based upon the risk that they assume.
Let me see, if full replacement cost insurance on all school property would cost $500,000 per year, and it is costing $61 million to rebuild Eastern, then we could have paid $500,000 for 122 years to break even at the cost of rebuilding Eastern? I know that this is a simplistic analysis that doesn't take all the factors into account, but it is instructive. And, perhaps the odds are greater that we would experience a total loss more often than every 122 years?
Posted on March 25, 2008 2:05 PM
It seems like it would make more sense for
the IB program to be at Eastern for Northeast,
Southeast, Page students.
This would make room for neighborhood students to stay at home and students that choose to travel to an IB program can travel.
Posted on March 25, 2008 2:25 PM
Eastern,
Make sense? Since when does this board make decisions based on common sense? It's all political - always has been, always will be.
Alan Duncan has an IB program at his school.
Kris Cooke has an IB program at her school.
Dot Kearns has an IB program at her school.
Smith must have been a fluke.
Posted on March 25, 2008 3:58 PM
Good grief! Does every chalkboard blog have to turn into complaining that has nothing to do with the topic at hand?? Why don't you run for school board...or is it easier just to complain?
Posted on March 25, 2008 4:34 PM
Anon2,
Obviously your child attends either Page, Central or Grimsley--the three schools that would never get screwed like other area schools. Save your "good griefs" for when they start a good slow screw on YOUR school. It's coming...
Also, I totally agree with the others that say something needs to be done with all the "IB" programs. We do NOT need another one! The ones we have are NOT over capacity and the students that are utilizing the program are NOT passing! Something is WRONG with the programs. I think they need to be looked at and see why so many are failing before we add one more at Page. Seriously can we continue to pay IB teachers to go to Smith when not ONE SINGLE student can obtain the diploma? It needs to be shut down or make the kids at Page go over there to take the program already in existence.
Posted on March 25, 2008 7:12 PM
I happen to know at first hand how difficult it is to staff our IB program at Smith. The new program at Page has made it even worse. Its no wonder our pass rate is bad.
I agree that now Terry Grier is gone we should take a look at these magnet programs. They cost a heck of a lot of money.
I would say that the Grimsley and Page programs should end and if another one is needed then put it at either Eastern or Northeast.
Posted on March 25, 2008 8:13 PM
Actually this thread is just an N&R primer to rekindle the sympathy vote for these bonds that need to be shot down.
So I say talk about whatever you want.
Posted on March 25, 2008 8:31 PM
More$$--
You sound angry and perhaps even rightly so. I am not questioning that. I know nothing about your circumstances and vice versa. I simply think that if you are going to spend valuable time discussing an important issue for children, it should be in an effective venue. There is another N&R blog specifically discussing IB progams. Here, you are off topic and you are coming across as out of control. Our children need your energy and passion but to make a difference, you need to channel your energy effectively.
Posted on March 25, 2008 11:46 PM
To Anon who posted above:
You sound a little stressed and a little condescending. I dont mind mixing up the posts so leave More$$ alone, relax and post your comments. Its always been like that on here and nobody is normally bothered. Its quite often the case that one strand becomes vibrant and thats where people want to vent their feelings.
Posted on March 26, 2008 12:18 AM
Hmm...I guess I've hit a sore spot with you too. You and More$$ have every right to wander around this virtual downtown muttering off topic.
Posted on March 26, 2008 1:04 AM
I am glad you agree.
Posted on March 26, 2008 7:48 AM
Ok...Back to the strand.....
Morgan please explain how the boards current practices follow their policy as stated below....
he Board of Education has a responsibility to the public to protect, maintain and secure the assets of the District. The Superintendent is directed to establish practices that protect and maintain the assets of the system.
Those practices shall include:
1. Obtaining insurance coverage in appropriate amounts against theft and casualty losses to 100% of replacement value less reasonable deductibles.
2. Obtaining reasonable insurance coverage to protect the assets of the district;
4. Taking reasonable steps to ensure that the facilities and equipment are not subject to improper wear and tear or insufficient maintenance;
5. Acting at all times in a reasonable manner so as to refrain from knowingly or recklessly exposing the district, its Board or staff to legal liability;
6. Protecting intellectual property, information and files from loss or significant damage;
7. Preserving and disposing of all records related to affairs or business of the district in accordance with state and federal law;
10. Conducting the business of the District in a manner that does not Knowingly or recklessly endanger the district's public image or credibility, thereby jeopardizing its ability to accomplish its mission;
11. Conducting a cost-benefit analysis before accepting contributions and donations by outside individuals and organizations, and
12. Obtaining Board approval prior to instituting changes in any schedules of fees charged by the school system.
Posted on March 26, 2008 10:36 AM
Eastern makes a great deal of sense regarding the problems associated with busing students from their homes near Page H.S. to Eastern H.S. When we bus students a long way (and believe me, I have recently driven out to Eastern H.S. and it is a long way) we disconnect students' homes and communties from their schools. Students live next to Page but have to travel out to rural Eastern where they go to school with students that they don't know, and with whom they may not share a sense of community. Eastern H.S. is not "their school," rather, it is one that has been foisted upon them and their parents by the school board. This creates a number of problems as discussed by Eastern.
Additionally, parents buy their homes in no small part based on their location to schools and the quality of those schools. It is wrong for school boards to undermine parents by sending their children to other, far away schools. With energy prices being what they are and environmental concerns, there are now other important reasons to have students attend local schools rather than bussing them half way across the county.
Posted on March 26, 2008 11:35 AM
Paul,
Because Eastern may have open seats for a short while, it would be great to have Eastern under a choice magnet plan like it was when it was a Math/ScienceAcademy.
With the exceptional technology that Eastern currently has received, it would be a good fit to have an Aeronautic/Enginering Magnet base at Eastern.
Students that choose to travel the distance would have parents that would be able to be involved regardless of the distance.
Hopefully, students that are given a choice to attend Eastern would have the ability to get back and forth to after school activities and be apart of the community.
Ever since the Greensboro/Guilford county merger the most disadvantaged students from the Page neighborhood are the ones that are being forced bused to Eastern and to Northeast.
When I say Page neighborhood, I mean you can see the Page football lights from these apartments. Why not bus the kids driving BMW's that live within the same distance...at least they may not have phone numbers that were constantly being disconnected and would have transportation back and forth to after school activities.
Some of the students that live within this Page zone have said they wanted to stay at Eastern,
but they are also the ones that have no problems with alternate transportation.
Posted on March 26, 2008 11:57 AM
Paul,
I look forward to your presence on the school board.
Just last week the board voted to continue busing the Triangle Lake students who live across the street from the school 24 miles north to Colfax.
High Point is still living with the busing problems associated with the Choice Plan which was Dot Kearns' attempt to take Central High School back to 1954.
These are the reasons that High Point leads the state in the per capita private school enrollment.
Posted on March 26, 2008 12:35 PM
to anononymous posted at 12:42 p.m 3/25
why in the heck would you reinforce Smith? it's already failing
to the person who said "good grief".....You must be on the school board
Posted on March 26, 2008 11:33 PM
I agree with you 100% Gatekeeper. It's called Freedom of Speech. Did you notice the sympathy letters starting for the bonds in the paper today. The campaign begins!
VOTE YES for more jails. There was another student shot at the HPU campus. When will we say "enough is enough"
Posted on March 26, 2008 11:37 PM
Speaking of the bonds.....I read in the newspaper today that the administration wants to pull money from Florence Elementary addition and put it toward Oakhill Elementary cost overruns. Do they ever use the bond money for it's intended purpose???? Remember Jamestown Middle School. Will that still be built?
Posted on March 26, 2008 11:40 PM
Nope, I'm not on the school board. I just get really tired of the off-topic complaining sometimes. I would like to see that energy put to better use for our kids. Not that I don't respect their right to do it....
Posted on March 27, 2008 7:46 AM
Actually, it would be good to have a separate room in chalkboard just for general discussion. Josey, have you thought about that?
Posted on March 27, 2008 7:48 AM
Sorry, Morgan
Posted on March 27, 2008 8:17 AM
To the commenters who have asked follow up questions about the district's insurance practices:
Given that the majority of school systems in North Carolina have purchased the same state-provided insurance as GCS, the question may need to be asked if the majority of property taxpayers in the state are being put at risk of paying unnecessarily for school construction in the event of a total loss. It might be interesting to find out if since the Eastern fire, many school districts have purchased insurance through other companies (a trend that might not become evident until at least after the next budget cycle.)
I think the other question that taxpayers should ask is how much they are comfortable paying per year in insurance? $500,000? $1 million?
It is clear that the district obtained "reasonable coverage." But did it have superior coverage?
The fact is DPI provides pretty good insurance for the price. Could the district get better insurance, particularly when it comes to higher sublimits? Sure. But it will have to pay for it and that means other needs may go unmet unless the county commissioners agree to cover the difference. Now when looking at the cost for the new Eastern compared to the value of the old Eastern, we have to compare apples to apples. As I've said before, the price to rebuild Eastern under the previous blueprint is theoretical. We don't know if the old school would have cost $20 million, $30 million or $40 million. Therefore, we don't know if the insurance plan the district had would have covered most or all of it.
Now, I see a lot of comparisons being made between homeowners and the school system. Based on my personal experience and understanding of the insurance market, most homeowners have replacement cost insurance with a policy limit and you have to add on at extra cost extended replacement or guaranteed cost replacement insurance. For example, under typical insurance you may buy a home for $150,000 and insure it for up to $200,000. But if your house burns down during a time when construction costs skyrocket, you would be stuck for the difference. Guaranteed cost replacement insurance is seen as being vital for historic homes and such, but not for regular homes. Instead, ever so often, the homeowner revisits the policy and increases the policy limit. But GCS is insuring not a single property, but all of its assets.
Read more here: http://www.iii.org/individuals/homei/help/amount/
Apparently there is a trend for insurance companies to stop offering guaranteed cost replacement insurance: http://findarticles.com/p/articles/mi_m1318/is_n8_v52/ai_20962271
Posted on March 27, 2008 9:21 AM
Morgan,
Without a doubt, in commercial insurance, you are buying a blanket coverage policy on all of your locations. But, it would seem that coverage limit is based upon the an evaluation of the value of properties covered under the policy. While the DPI coverage is called replacement cost coverage, it seems to be operating more like Actual Cash Value coverage which is based upon market value, not true replacement cost coverage.
It is likely true that the DPI coverage is cost effective, but it seems to be bare bones coverage when you have a total loss such as Eastern. It might be that GCS could look to the private market for supplemental coverage to increase the limits of coverage, using the DPI coverage as underlying coverage to reduce the cost. Yes, it is going to cost more, but then not having the coverage in a total loss has a cost to taxpayers as well. It's like the Maytag repairman. Pay me now or pay me later.
Any competent insurance professional will tell you that it is a mistake to look for cheap insurance. When shopping for a property insurance policy you may not end up with the best coverage if you only shop by comparing prices and not by comparing coverage. Your home or school property is one of the most important purchases you will make. You need to take the time to understand your insurance before you purchase it. It is one of the best decisions you will make. GCS' Risk Manager has made the decision to purchase insurance based upon cost, not coverage, which is almost always a mistake. Isn't Sharon Ozment the GCS Risk Manager?
Posted on March 30, 2008 12:10 PM
The Board was told that funds left in the account for Florence addition that Florence was completed to specifications and is satisfactory and the remaining funds were those that were under budget. If this was not the case I know a few Board members who would love to know about it.
Regarding the busing to Colfax, I can make no apologies other than these kids needed a support group who wanted them and cared about their success. We must find a better solution than I was provided or could come up with. I have no loyalty to the magnet program at all, but I will do what I can to honor prior commitments. This situation should never have occurred and I will not vote to repeat it. These kids should not be bussed and I was forced to decide among many factors, but first and foremost was what was best for these kids future and I had to weigh the issue of them being unwanted at one school and wanted and well served at another. All I can say is they will be wanted and well served in their own neighborhood a year from now when it comes up again! What I had to choose to do to those kids is reprehensible.
Regarding insurance…you had best go read your own insurance policies, even after that though, blame the Board for building another overpriced monument to itself. We used a bloated plan that we already owned in an effort to save time on rebuilding. You have a right to be heard, let the Board know how you feel. My own district has the largest public trailer park in the county and the majority of those I polled saw the need for a New Airport High and Middle School before they saw the need to replace the 30 trailers at Southwest High.
Garth
Posted on March 31, 2008 11:50 AM
Garth,
Thank you for posting and for explaining the situation with the Florence Elementary funds. The way it was presented in the papers sounded like there was more to be done at Florence and the money was being moved to cover Oakview's overruns.
It was a tough call on the Triangle School/Colfax situation. You did the best you could and so did others who voted that way. There was no perfect answer for these children. These kids do not have a "choice" to opt out. It is what it is. Hopefully they will have a NEIGHBORHOOD school of their own next year. They deserve better.
Garth, if the new airport high school doesn't come to fruition, can another another addition be built onto Southwest? The trailers are not jsut only unsightly, but dangerous. Any school with this many trailers is not secure. It's open to drug dealers, preditors, child molesters, gang recruiters - you name it. It sure would be nice to one day have a building that has one entrance where staff knows who is on campus at all of our schools.
Thank you for all you do and for communicating with the public.
Posted on April 1, 2008 7:15 PM
The new Bond includes a significant up fit for Southwest High, our largest trailer park. I was raised in a trailer park, I guess it is only fitting my kids go to school in one.
Posted on April 3, 2008 2:55 PM