Community Colleges' Best Community Colleges' Best Kept Secret Exposed! Kept Secret Exposed!

Richard F. Gillette P.E.

copyright 1999/2000/2001 RF gillette inc.

Introduction Introduction

I am a trustee at William Rainey Harper Community College in Palatine, Illinois.

Harper’s campus is over 33 years old. Increasing enrollment and technology have used

all our space. Our wet laboratories, culinary art kitchens and

other spaces are obsolete. In 1999 a facilities bond referendum was required.

Introduction, continued Introduction, continued

We told the community our needs. We broadcast our academic excellence. We gave tours of the campus. Local newspapers backed the referendum. We touted the low referendum tax rate of only

$26.52/year for a $100,000.00 house. We held a referendum and lost! Yes, we had an active anti-tax group.

Introduction, continuedIntroduction, continued

I work as a Licensed Professional Engineer, I also have a MBA in Operations Research.

When I sell a capitol project, the first and most important question is, “What is the projected Return On Investment (ROI)?”

A savings account’s interest rate is its ROI. Do any of you invest without asking about

the interest rate and/or projected ROI?

Introduction, continuedIntroduction, continued

We were asking our taxpayers to invest their money in the college without giving them any information on their return!

Many do not use a community college. Do they have an incentive for higher taxes? I therefore developed an economic model. I was astonished, the return is astronomical! I may have exposed our best kept secret.

Community Colleges are Community Colleges are Money Making MachinesMoney Making Machines

Considering property tax as the investment, Harper’s ROI appears to be over 1500%!

This is the in district ROI, total ROI higher! What’s more the large ROI is not exclusive

to Harper it appears to flow from all CCs. Note: 1500% ROI is a large number. $1.00

invested at 1500% if compounded for 10 years would yield $1,099,511,628,000.00!

College economic impact is College economic impact is expressed by:expressed by:

The stream of savings and earnings generated by present and past operations. • Each year the community has increased wealth . due to these savings and earnings.

The present value of the future earnings generated by that years operations. • For a community college, this net present value . can be viewed as ROI with respect to property . . taxes paid/invested during the same year.

Simplifying The JargonSimplifying The Jargon

Examples

ROI Equals Interest RateROI Equals Interest Rate10% APY10% APY

0

0.5

1

1.5

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3.5

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Time-Years

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rs

Income From AnnuityIncome From Annuity$100,000.00 per year income for life$100,000.00 per year income for life

-1.2

-1

-0.8

-0.6

-0.4

-0.2

0

0.2

Time-Years

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mo

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on

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Manufacturing Investment Manufacturing Investment

-1.2

-1

-0.8

-0.6

-0.4

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Time-Years

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ars

A Look Back A Look Forward A Look Back A Look Forward

The stream of savings and earnings generated by present and past operations. • Each year the community has increased wealth . due to these savings and earnings.

The present value of the future earnings generated by that years operations. • For a community college, this net present value . can be viewed as ROI with respect to property . . taxes paid/invested during the same year.

Economic Model PresentationEconomic Model Presentation

The model is a simple spread sheet (Excel). All assumptions are listed as notes. As the ROI was astronomical even with

unknowns, I used TBDs for missing info. Model will be presented in small pieces. There are no poor questions, ask as we go. The total model fits on one 8.5” x 11” page.

The Spread Sheet ModelThe Spread Sheet Model

SAVINGS note participants x savings annual savings net present value

Annual college FTE savings: 1 8,422 $6,096 $51,340,512 $51,340,512

Annual pro. tech. savings: 2 21,400 $305 $6,522,720 $6,522,720

Annual Bus./Ind. savings: 8,903 unmeasured TBD TBD

Quality of life savings: 15,200 unmeasured TBD TBD

Remedial/ESL savings: 2,300 unmeasured TBD TBD

TOTAL SAVINGS 3 over $57,863,232 over $57,863,232

SavingsSavings

general notes

m m The m ortality and m obility (m m ) reduction factor is an es tim ate. In the case of bus iness it is used as an in dis trict reduction factor.

npv The net present value (npv) of 40 years of earnings increas ing by an inflation rate is 40 tim es the year one earnings .

notes

1 The College Board; 1999-00 Public College average = $3,356 tuition & fees + $4,730 r&b, Harper (99/00) = $1890 tuition and fees .

(Private College 99/00av. = $15,380 tuition & fees .) Used $6,096 (3,356 + 4,7130 - 1890) Participants are Full Tim e Equivalent s tudents .

2 Savings es tim ated at .05 * note 1 ((3 sem . hr. / 30 sem . hr.) / 2 = .05) Participants are each individual taking a class .

3 Tes t: annual savings equal to total tax input $64,039,562 ($43,563,820 property + $17,410,071 s tate + $3,065,031 federal) '00/01 Budget

EarningsEarningsEARNINGS note participants x earnings x mm annual earnings x mm net present value

Associate Degree earnings: 4 31,639 $8,396 0.66 $175,323,089Associate Degree earnings: npv,4 1,001 $8,396 0.50 $168,087,920Certificate Award earnings: 4 9,720 $6,960 0.66 $44,649,792Certificate Award earnings: npv,4 399 $6,960 0.50 $55,540,800Pro. Tech. earnings: 5 353,100 $348 0.66 $81,100,008Pro. Tech. earnings: npv,5 21,400 $348 0.50 $148,944,000FTE non graduate earnings: 4,6 60,500 $6,960 0.66 $277,912,800FTE non graduate earnings: npv,4,6 2,500 $6,960 0.50 $348,000,000

general notes

m m The m ortality and m obility (m m ) reduction factor is an es tim ate. In the case of bus iness it is used as an in dis trict reduction factor.

npv The net present value (npv) of 40 years of earnings increas ing by an inflation rate is 40 tim es the year one earnings .

notes

4 US Census Bureau Table 10, 1999 full tim e over 25y data, m ale/fem ale weighted average used. NW suburbs have higher earnings than

average. Associate degree holders average $8,396/year over High School graduates , Som e college no degree average $6960.

5 Students es tim ated at 21,400 (lates t head count) x 33 years x .5 (linear growth.) Earnings used .05 x census data (3 sem . hr./ 60 = 0.05)

6 An es tim ated 60,500 FTE have com pleted 1 year of Harper and have not/will not earned a degree. The current rate is about 2500 FTE/y.

Earnings, ContinuedEarnings, Continued

ESL earnings: 7 19,500 unmeasured 0.66 TBDESL earnings: npv,7 1,300 unmeasured 0.50 TBDRemedial earnings: 8 22,000 unmeasured 0.66 TBDRemedial earnings: npv,8 1,000 unmeasured 0.50 TBDBus./ Ind. earnings @ 10% : 9 $87,725,104 0.33 $28,949,284Bus./ Ind. earnings @ 10% : npv,9 $144,114,544 0.25 $36,028,636Other Earnings/Tax savings : 10 unmeasured TBDOther Earnings/Tax savings : npv,10 unmeasured TBD

TOTAL EARNINGS over $607,934,973 over $756,601,356

EARNINGS note participants x earnings x mm annual earnings x mm net present value

7 Earnings are higher when you can speak and write English and another language than if you can not use English.

8 Earnings are higher for som eone who can do college entry level reading, writing and m ath, than som eone who can not.

9 10% fee on labor & OH is well within DOD fee guidelines . (One Mfg. had a $250,000 annual reduction in scrap, after cus tom ESL course.)

10 Other groups achieved extra earnings , for exam ple; Those who are enrolled in Cardiopulm onary Rehabilitation, and were thus able

to return to work. Tax savings due to reduced welfare/police. All property values higher when neighbors property kept up. Less s ickness ,

less public aid s ickness .

Model Bottom LineModel Bottom Line

Annual Economic Impact Net Present Value

TOTAL SAVINGS AND EARNINGS over $665,798,205 over $814,464,588

Property Tax $43,563,820ANNUAL ECONOMIC IMPACT without building bonds P&I over 1428.33%

Bond P&I $7,500,000P.T.+ bonds P&I $51,063,820

RETURN ON PROPERTY TAX INVESTMENT with bonds P&I (40 year present value) over 1494.99%

Data MiningData MiningLooking At Data To Find Something NewLooking At Data To Find Something New

One complaint we hear from our legislators is that CCs have a high drop out rate.

Illinois just instituted a panel to reduce it. More completing their degrees is better. The dropouts in the model had a larger

economic impact than the graduates! This is true when dropouts are greater than

121% of graduates!

Data Mining, continuedData Mining, continued

Our perceived failure, high dropouts may be our greatest success, many earning more.

50% used for future mobility and mortality. Illinois state data shows 90% of Illinois CC

graduates stay in their district! ROI “in Illinois” indicates that the state

should fund higher, funding is paid back many times in sales, income & other taxes!

SummarySummary

Community Colleges are,

“Money Making Machines” We should not be keeping it a secret. Boards and Administrations should

publicize this great accomplishment. Do you and your taxpayers know your ROI? Do your law makers know your ROI?

Blanket Permission Blanket Permission You have permission to use and reproduce

the model, providing my copyright remains. The Spread Sheet can be downloaded from

saveccs.org. Go to the “Interesting Links” sidebar and

click on rois0201.xls You will have to update it to now and your

Community College’s data.

Thank YouThank You

It’s a great story to tell. We should be telling it. When we do;

Maybe anti-tax groups will be picketing community colleges to RAISE TAXES so their community can have more wealth!

In Nov. 2000 we passed our Referendum!

Community Colleges Community Colleges $1.00 in >=====> $20.00 out$1.00 in >=====> $20.00 out