Oil prices may force tough choices on Region One

FALLS VILLAGE — Will the Region One School District have enough money to pay its heating bills this winter?

That question was on the minds of school board members and district officials as they watched fuel prices rise mightily during the spring and even into dog days of July.

During the budget process this winter and spring, the Region One Board of Education earmarked about $221,000 to buy the approximately 80,000 gallons of heating oil typically required to keep Housatonic Valley Regional High School (which is also home to the superintendent’s office) and the pupil services buildings warm through the winter. The presumed lock-in price was $2.75 per gallon, up from $2.05 in 2007-08. As prices rose through the spring, school officials set their sights on $3.75.

But on June 6 the price went up 30 cents in one day alone — a phenomenon Region One Business Manager Sam Herrick described as "unprecedented" since it typically takes a year for heating oil to rise by that amount.

The latest lock-in price for the upcoming season that Herrick has been able to secure from the district’s fuel consortium was $4.20 on June 24.

Region One and several other school districts buy fuel as a group to give them more negotiating power.

Herrick said on Tuesday that number has not changed and that as a result only about 10 percent of Connecticut’s school districts have locked in. The rest, including Region One, are hoping the price will fall before the heating season gets into full swing. Another possible strategy is to lock in only a portion of the district’s oil needs.

Because of the consortium’s bulk purchasing power, the school district will get a much better deal than consumers, who must rely on retailers to deliver oil to their homes and small businesses. Few dealers are offering lock-in prices yet, but at the beginning of the week, current delivery prices to homes was in the $4.75 range. The eventual lock-in price will likely be higher than that.

"The consortium was expecting some sort of correction for No. 2 heating oil for us in the next 60 days, so who knows?" Herrick said at the June 30 Region One board meeting. "We’re watching the situation very carefully."

Herrick said it’s unlikely the school district will leave the consortium (Arum Associates LLC) because a better deal would be difficult, if not impossible, to find. At any rate, the disparity between what was budgeted and what will have to be paid could be significant enough to force the board to make some difficult choices.

"If we’re $1.50 over our budget, then that’s a significant amount of money to make up," Herrick added. "We’re talking about $120,000."

The 2008-09 Region One budget, which was approved by taxpayers in May and funds the high school, central office and regional special education services for its six member towns, totals almost $14 million. The six towns are North Canaan, Falls Village, Kent, Sharon, Salisbury and Cornwall.

Over the summer, the district topped its two tanks off at the old $2.05 per gallon rate, which is good through Aug. 31. So there is a total of 30,000 relatively cheap gallons in reserve.

With that stored fuel, Herrick estimated that at $4.20 for additional gallons the district has sufficient funds to get through the winter. But that would leave the tanks empty at the end of the heating season. Typically, Region One likes to top off its tanks late in the season, as it did this year, to take advantage of lower prices.

"I think we’ve got our worst case almost covered, but we really wouldn’t want to put ourselves in a really bad position where we’d have to budget almost double in the 2009-10 year," Herrick told the board.

If the reserve oil and the budgeted funds are not enough, then the board will have to cut programs, hold them in abeyance until the situation becomes clearer, or hold a special referendum for a supplemental appropriation.

New Region One board member Gale Toensing of Falls Village asked whether there were any plans to improve the high school’s heating system or turn down thermostats to save money.

"If you explain to the people of Region One that you have the choice of wearing an extra sweater or a supplemental appropriation, I think I know which the people would prefer," Toensing said.

Herrick pointed out that at North Canaan Elementary School the boilers had to be shut off on April 1 while the the heating system was converted from steam to hot water. A cold snap in mid-April made for chilly classrooms, but the school sent notices home about the situation and parents and students adjusted with few complaints.

The installation of new energy efficient windows in 2005 in the main high school building has helped, board member Phil Hart of Cornwall noted, but Region One Superintendent Patricia Chamberlain suggested there was some work to be done in improving and making more cost-efficient the heating and cooling systems in the high school building.

"You know how cold it is in here sometimes," Chamberlain said, referring to the aggressive air conditioning servicing the library media center, where the board holds its meetings. "It’s never just right. And it would be great if we could master [the heating systems] so that the windows aren’t open in the wintertime because teachers can’t tolerate the heat."