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News
Restructure school district's bond debt? : News : Oswego Ledger-Sentinel : Hometown Newspaper for Oswego and Montgomery, IllinoisRestructure school district's bond debt?
| New advisory panel hears options; told of looming 'wall of debt'
| by Lyle R. Rolfe
| 1/10/2013
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Members of the Oswego School District's recently formed Advisory Finance and Operations Committee discussed possible ways for the district to cut costs Monday night, but no decisions were made.
The various ideas will be discussed in more detail at future meetings.
Robert Lewis, managing director and senior vice president of PMA Securities, explained how the district could refinance or restructure some of its outstanding bond issues to help cut costs for the short-term.
He said restructuring could provide near-term property tax relief for the next three years.
Lewis added that he would recommend only three years because a permanent long-term restructuring is inefficient in the current bond market. Also, three years would allow the district adequate time to review other options for tax relief and to evaluate the objectives of the plan, Lewis said.
Three years also would allow the district to adjust to changing local and national economic conditions, he noted.
Lewis warned against restructuring too much debt because it is costly.
He noted that the district has 15 outstanding bond issues of two types.
One allows the district to recall or refinance a bond issue after a set number of years to get a lower interest rate if the market has changed. The initial rate for these bonds is slightly higher, he said.
The other type is for a set time and rate. The time is usually 20 years, the maximum allowed by state law, he said. The bonds cannot be recalled or refinanced.
Lewis presented four options, to show how the district could lower the levy for the next three years to create tax relief for property taxpayers.
But Lewis noted that the options showing a decrease are really just delaying any increase for three years, so taxes would go up much higher at the end of the three years.
When this was explained, committee members said they did not prefer these options because that would not be fair to the residents.
Lewis summarized by saying that any tax rate restructuring would create a future wall of debt service that would result in a large percentage increase in tax payments, unless an alternate revenue source would be identified.
He said further restructuring could be even more costly since the debt service peaks are higher in future years.
Mike Scaramuzzi, a school board member and committee co-chairman, said they might save a small amount of money restructuring but in the long run the cost would be higher.
He compared restructuring to paying a home mortgage with a credit card.
Lewis agreed that none of the options he presented would save the district any money.
Dr. Paul O'Malley, assistant superintendent, told committee members about various information directories that will be beneficial to them during their discussions and recommendations.
They include state records on General State Aid (GSA) given to school districts based on each district's average daily attendance numbers. He noted that the state's allocation of GSA to Oswego has been reduced by $4.1 million this year and said it is one of the district's major revenue sources.
He also talked about a summary of state grants the district received. Some state grants have been eliminated and others are starting to dwindle in the amounts sent to the district, he noted.
Without these funds, it may be necessary to reduce or eliminate some programs, he said.
A survey was done of the district's per pupil operating expenses for kindergarten through high school compared with other districts. He said Oswego has been the lowest for the past two years. The method of determining these cost is set by the state, he added.
O'Malley noted that debt is added into these figures, which would boost Oswego's cost because of the large amount of debt they have.
There also was some discussion about the land-cash ordinance, which determines how much money residential developers must give to school districts to help offset the cost of building schools needed for children coming from new subdivisions.
Land-cash fees are set by the communities in the district.
Superintendent Dr. Matthew Wendt said he has heard from residential developers who are considering building in the district.
He said an Oswego village official has agreed to attend a committee meeting to discuss the land-cash ordinance. If the committee agrees to it, Wendt said he will ask officials from the other communities in the district to also attend a meeting.
"My understanding is that those fees have not been changed for a number of years, so they should be looked at," Wendt said.
O'Malley said copies of existing land-cash agreements with Oswego, Aurora, Montgomery, Plainfield, and Joliet will be given to committee members for review.
He also will give members copies of a state report showing the district's ratio of pupils to certified staff members, a pupil-administrator ratio and a salary scale for administrators. He said it is difficult to compare salaries between districts because each has its own administrators and titles.
Expect 1,000 more
students in three years
Committee Member Lee Hoffer noted the district has many young administrators while many others have older people in these positions, which also makes it difficult to compare salaries.
O'Malley said the district has the highest pupil to certified staff ratio, and the pupil to administrator ratio is near the highest of comparable districts.
All of these reports will be placed on the district's website so they can be accessed by the public, he said.
Other items to be discussed at future meetings include setting up a preventative maintenance program for the district's buildings. Most are quite new now, but will need repairs in the future, so money should be set aside for this, O'Malley said.
Wendt noted that within the next three years they will add an estimated 1,000 more students to the district.
He has asked for figures to show how many students are in every classroom in every school so they can determine whether they can increase class sizes until new buildings can be added to the system. He said most of the growth will be at the elementary level.
He explained that they have to move students to buildings where there is space. This will increase transportation costs, but it will be cheaper than new buildings, he added.
"We have options and we need to have discussions on these things," Wendt added.
One committee member suggested increases in sales taxes to help the school district, but others cautioned against going too high because it can force shoppers to go to towns with lower taxes. Currently the school district does not receive any sales tax revenues.
Committee member Greg O'Neil said the district will have to move away from the 180-day school year to keep up with increasing costs. He said they don't have enough money in the community to do everything the administration wants to do.
Another committee member said they need to consider putting more high school classes online to reduce costs and others said they will need to increase fees for various activities.
Brent Lightfoot, board member and co-chairman of the committee said all of these items will be placed on future board agendas for discussion.
The committee will meet next at 5:30 p.m., on Monday, Feb. 4 in the District Administration Center, 4175 Ill. Route 71, Oswego, across from Oswego High School.
All meetings are open to the public.
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