Western School Board planning to issue working cash bonds

Posted: Nov. 14, 2012 11:48 pm Updated: Dec. 6, 2012 12:15 am

Herald-Whig Staff Writer

BARRY, Ill. — The Western School Board plans to issue $860,192 in working cash bonds to improve its financial position.

The board voted 5-1 Wednesday on a resolution “to get the ball rolling,” said board member Penny Moyer, who serves on the finance committee.

Officials say the bonds will boost cash flow in the district, which landed on the state’s financial watch list despite cutting expenses.

“State funding is steadily decreasing each year,” Moyer said. “We have to find other ways to fund and maintain programs and provide for students.”

The bonds alone won’t provide a long-term financial solution for the district, but when tied to an ongoing deficit reduction plan, could provide some breathing room for the district, which had just 16 days of cash on hand at the end of the last fiscal year according to the annual financial report.

“This is short-term,” board member Lorc Weir said.

“There’s going to have to be a combination of several things,” Moyer said. “We’ll just have to look at education in a different way.”

Some details of the bond issue, including the repayment period, still need to be finalized.

A three-year repayment period would mean a tax hike of $73.24 per year for the owner of a $50,000 home. Repaying the bonds over five years would mean a $45.62 tax increase for the homeowner, while a 10-year repayment period would mean $25.21 per year.

But board members stressed the need to repay the bonds as quickly as possible in order to issue more bonds in the future to keep operating in the black as state funding continues to shrink.

With talk “about the amount of state aid dropping, potentially down to 85 or 80 percent” of current levels, “we need to be prepared,” Board President Chris Borrowman said.

The next step requires publishing notice of the resolution of intent to issue the bonds. Publication opens a 30-day period where if 10 percent of the district’s registered voters, or 261 people, sign a petition, it will force the board to put the issue on the April ballot and win voter approval before moving forward.

Several school districts statewide are looking at working cash funds to improve their financial position, and “99.9 percent of backdoor referendums sail right through,” said Tim King with Kings Financial Consulting Inc., who presented information on the bonds. A public hearing will be held, likely in January, on issuing the bonds, then the board could adopt a resolution authorizing the sale in February, clearing the way to levy for the cost and make the first repayment in December 2013.

District finances slipped from “a solid B” to “a D, not an F” based on state guidelines outlined in the annual financial report presented by Lowell Yates of Gray Hunter Stenn.

While the district has little control over federal, state and even local revenue, and when or if it arrives, it can control the timing of when to pay bills and some spending.

“Expenses is where the board really has the most control,” Yates said.

The board already knows that cutting expenses is not the only answer.

A deficit reduction plan trimmed $450,000 for this year’s budget, but “didn’t do anything” to help overall as state revenue plummeted, board member Korhan Raif said.

“Due to shortfalls in state funding and reduction of general state aid, our cash flow is very limited,” Superintendent Carol Frericks said.

But Borrowman said the deficit reduction plan was an important step before seeking a tax hike.
“We have to show fiscal responsibility first,” he said.

“We are working to do two things, to look at ways to generate revenue for the immediate cash flow needs we have and to look at deficit reduction planning. We are considering ideas for transportation, ideas for operations and maintenance. We are definitely looking at the education fund to see if there’s anything we can do with the way we conduct school to decrease the expenditures,” Frericks said.

Also Wednesday, board members discussed the levy for taxes payable in 2013.

One possibility will boost the levy to $2,193,298, or $108,387 more than last year. The increase of more than 5 percent over last year forces a public hearing at the Dec. 19 meeting, but should take advantage of an anticipated rise in the equalized assessed value to gain additional dollars at the same tax rate.  

Holding a public hearing every year “will make people more aware of the situation,” board member Shelley Syrcle said.

Any deficit reduction plan heading into next year still could target faculty cuts but not at the same “level of loss” in this year’s budget, Frericks said. “We try to look at all areas where we can continue to meet the needs of our students and at the same time operate the school district within the means that are available.”

In other action, board members:

• Learned the transportation committee continues to look at ways to eliminate some costs tied to extracurricular activities — and a board vote could be a sign of things to come in the district.
The board already limits the distance traveled for extracurricular activities and approved a request by the color guard to compete at two additional events provided the guard covers the transportation costs.

“What we voted on was you do it if it doesn’t cost us anything. Is this step one to now paying for any transportation?” board member Tera Hart said.

“Probably,” board member Lorc Weir said.

• Tabled approving the lowest bid for health life safety door projects and sent the bids back to the building committee for further review.

“It was a very complicated bid process with several different scenarios,” Superintendent Carol Frericks said. “We want to take time at the building committee to look over each of the bids and the different scenarios and prioritize and go with the lowest bid.”

• Approved plans by the cheerleaders to compete in a Sunday event to avoid a conflict with scheduled basketball games, despite a long-standing policy of avoiding school activities on Sunday.