Report to the Board of Trustees

History

The CMS SPSC was formed in May 2003 by the Board of Trustees as the first step in a comprehensive long range planning process.  In its first year, the committee determined that the school cannot achieve fiscal well being at current enrollment and that the current physical plant issues of a split campus, the need for major repairs and additional space severely hamper the schools’ ability to increase enrollment.  

2003 SPSC Recommendations

The initial work of the committee in 2003 identified some key insights and a detailed analysis of 6 specific scenarios and their associated financial projections.  Further analysis included the data from a professional property appraisal and identified three potentially viable options:

(1)  Maintain the status quo and finance $1 million +  in required renovations to the Primary Building recognizing that no new revenue will be generated.

(2)  Develop a school that goes through grade 9 through the sale of the properties and acquisition of new space. 

(3)  Develop a pre-K to 12 Montessori school that provides an international baccalaureate degree. 

The committee concluded that any type of school that focuses on pre-K to grade 1 alone is not financially sustainable without a significant tuition increase (the primary reason is that elementary grades can generate more revenue due to a more favorable student-teacher ratio).  The status quo is not maintainable without a significant tuition increase since the school just breaks even in the current configuration and long-term maintenance is required and has been deferred.  Expanding elementary enrollment (even under the current conditions) has been deemed vital to the students’ social welfare and the school’s financial health. 

Initial 2004 Activities

In the first few meetings of 2004 the Committee:

• Increased its membership to 17 from 12. Membership now included Stephen DiCicco, consultant from EDI plus 3 administrators (Head of School, Business Manager, Director of Admissions); 3 non trustee parents; 5 teachers (representing toddler, primary and elementary levels); 4 trustee parents, and one trustee.
• Selected a consulting firm, Educational Directions Incorporated, to assist with the gathering of demographic data and creation of enrollment and financial models.
• Re-Confirmed the school’s mission and vision. 
• Received and reviewed copies of the Institutional assessment completed in 2001, which emerged as part of the Head search.
• Reviewed the school’s current finances and an initial analysis of our ability to finance a new campus.

Demographic Data

EDI provided detailed demographic information about CMS’s current catchment area.  Catchment area is a marketing term for the area from which students come.  In summary:

1. There will be relatively small increases in the number of school age children in the current catchment area.
2. The catchment area can afford the current and future tuitions of CMS whether an elementary or secondary school or both.
3. A distant move would be detrimental to the existent loyalty to CMS in the current catchment area.
4. An increase in enrollment at any or all levels will most likely not come from a large increase in overall potential student numbers in the catchment area, but from enrolling students who would otherwise attend a different independent or public school.

The successful growth of the school will require dramatically increased marketing, both internally and externally.

Enrollment in the Current School

The schools’ current enrollment pattern reflects a pyramid, with a large “base” of students ages 21 months through 4 years and a rapidly narrowing triangle from Kindergarten through the sixth grade.  This phenomenon is not uncommon in many Montessori schools across the country.  We currently cannot accept all of the potential applicants into the toddler and primary program due to space constraints.  Conversely, while we have the space in the elementary building, we do not have a significant pool of “outside” applicants for this program.  This reflects the general North American perception that Montessori education applies only to early childhood education. The committee recommends that a marketing plan be developed to overcome this perception and demonstrate that an independent school education grounded in Montessori principles is superior.

Extensive analysis of the current attrition trends was performed.  The 3-year average attrition rate has been much higher than other independent schools with 55% of students not returning for kindergarten, 57% not returning for grade 1 and attrition in the elementary school being volatile but averaging to 17%.

A general finding is that overall awareness amongst the parent body of the merits and strengths of education founded on Montessori principles is weak. 

The analysis also demonstrated that there are four populations of families using CMS in the pre-school years.  

• First, there are a large number of families who recognize that given the superior education received in the pre-school years, CMS tuition is low relative to daycare providers.  Most of these families do no intent to use independent schools beyond kindergarten.
• Second, there are a smaller number of families who use CMS because they have been referred by neighboring independent schools.  Many of these families move their children out of CMS at pre-K or kindergarten into these independent schools. 
• Third, there is a set of families who choose to stay with CMS though elementary school not because they are following a long-run term plan but because they find CMS to be a good fit.
• Finally, there is a set of families who enter CMS with a commitment to Montessori and intend to stay through the program.  This is the smallest current set.

The long term health of the school will require a reduction in attrition rates which is best achieved by demonstrating the value of Montessori education, raising awareness of the principles and how they compare to what is found in the peer schools and by focusing on positioning the school as a full service independent school.

The committee recommends that the school develop an extensive internal and external marketing program utilizing at a minimum

• A re-orientation that focuses on CMS as a high quality, pre-preparatory independent school for elementary and middle school students
• Development of a simple message that identifies the strengths of a program based on the best principles and practices of both independent and Montessori schools.
• A completely redesigned and updated website
• A focus on personalized marketing by the head, teachers, parents and trustees

Current Facility Challenges

The current physical plant is not ideal because:

• The campus is physically divided making it difficult to communicate internally, operate efficiently and develop as a cohesive entity.
• The need for repairs to the primary building are significant, exceeding $1 million.
• Space limitations restrict growth in the toddler and primary programs  although current demand indicates that these programs could expand by at least one classroom each.
• Neither the existing Primary or Elementary buildings allow expansion to provide needed space such as larger library/media centers, separate music rooms, rooms for co-curricular activities, assembly and performance rooms, teacher and parent work areas, and visitor reception areas that are necessary for CMS to become a full-service, highly marketable independent school.
• There is seriously inadequate office and work space in both buildings even for current administrative staff and faculty.

Given the limitations of the current space, the committee recommends the sale of both properties and the acquisition of a new space which will allow for all programs and administrative functions to be in the same facility.

Repairing the existing facility

Infusion of $1 + M to upgrade the primary building is prohibitively expensive, and by not allowing the school to expand fails to allow achievement of fiscal well being and is rejected.  The committee recognizes that a certain amount of capital needs to be spent while we are in the current facility to maintain the integrity of the structure and allow the building to continue to be used as classroom space. 

Adding an infant program

The committee requested the consultant generate financial and staffing models for the addition of a Montessori infant program to complement the current primary offering.  The committee determined this option is prohibitively expensive and does not easily blend with our current school configuration.  This option is rejected.

Adding preK-12 /IB program

The International Montessori foundation consultant recommended the school consider adding a high school offering an IB degree.  The committee reviewed the space and program needs of this type of offering and believes it to be prohibitively expensive primarily related to the land intensive requirements of an athletic program and student parking.  Additionally, the size of school required to generate the economies of scale is financially and developmentally infeasible.  This option is rejected and at best could be considered in 10 years.

Adding a  “Middle School”

Expanding elementary enrollment (even under the current conditions) has been deemed vital to the school’s financial health.  The current elementary parent community has expressed a strong desire to add grades to the existing Upper Elementary Program.  Although there currently exists no “pure” Montessori Middle School, the committee and consultant believe that a robust middle school program can be developed which will remain true to the school’s mission statement and vision and that this will be a complementary offering. The committee reviewed space needs, staffing models, and financial models and has determined that the addition of a middle school program including seventh, eight and ninth grades is both feasible and desirable in this catchment area.  This option is recommended.

• A middle school is developmentally desirable because it allows a seamless transition through adolescence into high school thereby minimizing school transitions for the students.
• A grade 9 termination offers parents and students the greatest flexibility to enter public, independent day or independent boarding high schools. 
• An independent school based on Montessori principles is differentiated from competitor schools in that it offers a program  allowing students to explore individual academic interests and learn as fast as they can in a setting where each child is known and loved, fostering supportive peer interactions and the development of leadership and self-confidence. 

To become competitive with other local independent schools,  the CMS offering must be expanded to include the programmatic extras that are hallmarks of independent school programs including but not limited to:  sports, music , activities, clubs,  and opportunities to travel and experience other cultures.

Optimal School Configuration

Given sufficient space, the optimal school has an enrollment of around 320 students.  The configuration allows for the addition of one toddler and one primary classroom in addition to the middle school grades.  The optimal configuration is a combination of programmatic needs and student teacher ratios.  Currently, CMS has a very favorable teacher ratio relative to the competition:

• The toddler student teacher ratio is 4.5:1
• The primary student teacher ratio is 8:1
• The student teacher ratio for grades 1 though 3 ranges from 6.5:1 to 9.5:1
• The student teacher ratio for grades 4 through 6 is 7:1
• These student ratios compare favorably to most independent schools with student teacher ratios in the 10:0 to 15:1 range.  This comparison is conservative since CMS calculates student teacher ratios on a classroom basis and not a total school basis.

Using the current student teacher ratios provides a school configuration of:

• 3  Toddler sections of 10-13  students each
• 6   Primary classrooms of 25 students each
• 3   Lower elementary sections of 15 students each
• 3  Upper elementary sections of 15 students each
• A middle school with 40 to 45 students

The committee anticipates this configuration will require a new facility in the range of 80,000 square feet (the current facilities provide approximately 20,000 square feet)

Financial

The SPSC developed a highly detailed cash flow model that projects funds available to finance a new building.  The model has 4 components:

• Projections of school census derived from current population, historical attrition, new student enrollments and improvements due to intensive marketing and new building.  The primary assumptions are that the new building will: (1) double the number of new students from outside at the elementary stage; and (2) reduce attrition into kindergarten and grade one to 40 and 50 percent respectively.  The committee recommends the immediate development of a comprehensive marketing plan.  Included in this is a commitment to significantly increase funds allocated for financial aid.
• Revenue projections based on the projections of school population and tuition.  CMS median tuition is currently 15 to 20 percent below market and the assumption in the model is that tuition will move to the peer group median in 9 years.  The committee recommends a comprehensive study of tuition policy relative to the local market.
• Salary and benefit projections based upon the current staff  and levels and the increased staffing, salary and benefit needs.  CMS is currently 10 percent below market and the assumption is that benefits and salary will achieve market parity in 7 years.  New teachers and specialists will need to be hired at competitive salary and benefit levels to staff expanded program offerings.  New administrators are budgeted in development, marketing, and education.  The committee recommends a comprehensive review of salary and benefits relative to other independent and Montessori schools and the development of a salary policy.
• Other expenses are projected assuming expenditures on consultants and intensified marketing during the transition period.  The other expenses are based upon typical operating costs for a 100,000 square foot school.

This analysis demonstrates that by 2010, free cash flow that can be used for funding a new building will exceed $1.1 million per year.  This is adequate to fund $16 million at a 6% interest rate.  During the interim period, free cash flow is always positive but inadequate to cover a constant payment mortgage. 

The committee recommends that a comprehensive financial strategy be developed for financing a new building including consideration of transition financing, sale-lease backs, and vehicles for transferring building depreciation to a tax payer.

Seizing the opportunity

The achievement of the optimal school configuration will require the development of a comprehensive strategic plan which includes but is not limited to:

• Financial Plan addressing a multi year operating budget, evaluation and prioritization of operating expense issues including salary and benefit expenses, developing a strategy for modest surplus in the short term and sustaining or increasing it in the long term, keeping expenses in line with an appropriate inflation index, establishing a Board Designated Fund and parameters for use. 
• Physical Plant Expansion Plan providing for the sale of the existing facilities as well as capital requirements to support new space needs.

• Development Plan outlining activities required for the creation of a strong development office in the school ensuring the resources are in place to execute a Major Gifts and/or Capital campaign.
• Curriculum Plan, including academics, athletics, activities and services (such as secondary school placement) integrating Montessori philosophy into the middle school grades.  The academic program will provide objective verification of student achievement including grades and judicious use of standardized achievement testing.
• Marketing Plan including both internal and external components, addressing our need to reduce attrition and increase enrollment in the elementary program.
• Administrative/Operations Plan including school configuration, transition assumptions, recommended future administration and teaching structure to handle a larger student body and increased student age range. 
• Governance Plan to develop strong Board leadership and a strategically oriented Board.  To secure bank and other sources of financial support, the current By-laws need to be revised from a cooperative model to the prevailing independent school model of a self-perpetuating Board of Trustees which can guarantee continuity to ensure the School’s strategic vision.
• Overall implementation schedule with milestones, projected timelines and deliverables. 

How long until we get there?

The committee feels that the projected timeline for implantation of a plan to expand grade offerings, locate an acceptable new facility, renovate and relocate is 3-6 years, although the school must be prepared to compress the timelines and move faster if an appropriate facility becomes available.   We anticipate with the Board’s direction, the comprehensive written strategic plan could be completed by fall 2005.

Action Needed

The committee requests the Board review the report and data and approve or disprove the recommendations.  Approval of the recommendations will charge the SPSC to move ahead with the creation of a comprehensive Strategic Plan including milestones and timeframes which can be executed over the next several years.  Additionally, approval will allow the committee and administration to begin effectively communicating the current plan recommendations and long range vision to the school community and applicants with the commencement of the new school year.