The District 200 school board may have voted in April to move forward with Project One, the $32.6 million beginning phase of Imagine OPRF capital improvements that include renovating or constructing 76 general education classrooms, reconstructing the south cafeteria and relocating the library, among other enhancements — but the work will not be funded by issuing debt certificates.
That was the unanimous recommendation that the Oak Park and River Forest High School board expressed during a May 19 Committee of the Whole meeting.
At a meeting on April 23, where it voted unanimously to move forward with Project One despite the financial uncertainty related to the COVID-19 pandemic, the board directed administrators to consider how added debt might spread out “the responsibility of this project to future citizens and taxpayers,” board member Jackie Moore said at the time.
During the April meeting, district officials explained that numerous potential factors, including a freeze on property taxes, the state shifting the cost of pensions to local districts and a loss of state education funding could translate into District 200 losing roughly $42 million from 2022 through 2025, said Rob Grossi, the district’s outside financial consultant.
But despite the gloomy financial forecast, officials and administrators agreed, the district would probably never be in better financial shape to fund much-needed capital improvements than now, when D200 is debt free, has a AAA bond rating and has a fund balance of roughly $100 million. The district’s stellar financial condition, coupled with historically low interest rates makes now a good time to borrow, officials have said.
But during the May 19 meeting, board members expressed reservations about funding Project One with debt, arguing that possible borrowing should instead be applied to other needs.
“My understanding is that Project One is coming from reserves,” said board member Ralph Martire, adding that the district may need to issue debt certificates to fund the cost of routine maintenance costs in the future.
“My understanding of the debt service was that it was just putting us on a rational basis of issuing debt to cover ongoing maintenance needs, which is the standard operating financing procedure of a well operated school district and one that comes at no additional levy cost for taxpayers.”
Board member Craig Iseli said that “right now, there’s no sense of borrowing now for risks that are there, because none of them have actually happened and, from my perspective, there’s no reason we can’t allow them to happen and know what they are and then borrow, because we have a big fund balance. We actually have a cushion that gives us that time to watch these things happen before we have to act.”
Earlier in the meeting, district administrators had asked that the board borrow $20 million worth of debt certificates, which are paid by the district and not by issuing new taxes, over 15 years. Total interest on the debt would be $3.2 million and annual payments would be $1.6 million, district officials said.
Cindi Sidor, D200’s chief financial officer, said the money made available through issuing the debt certificates would need to be spent within a three-year timespan. She added that this scenario, which was one of 12 options — that ranged from $20 million to $40 million and 10-year payment periods to 20-year payment periods — was the best option for the district’s budget.
Grossi also said that issuing debt certificates gives the district optionality, meaning that “if we push the cost of a portion of the projects out beyond the next five years, then the district will have more time to adjust to the impact of the financial crisis, either by gradually making reductions in its operations or by waiting for an economic turnaround that will happen at some point over the next decade.”
Grossi said that if financial circumstances for the district prove rosier in reality, the bonds can be paid off within seven to 10 years and further costs associated with interest payments avoided.
Sidor said that if the district were to issue the debt certificates, she would recommend that they utilize Grossi’s firm, Crystal Financial Consultants Inc., as a municipal advisor; Chapman and Cutler LLC as bond counsel; and Raymond James and Associates as underwriter, a firm that the district has been working with since at least 2017.
But all board members agreed that the timing for issuing new debt was off, particularly since there are still many unknowns related to COVID-19’s financial impact.
“I don’t think we have the information we need to be making this kind of decision just yet,” said board member Gina Harris.
“We should not borrow a penny for Project One,” said board member Tom Cofsky. “We have no debt, which is wonderful. But we’ve absorbed all the expenditures, so we’re spending just as much. But in doing so, in my opinion, we’ve robbed from money that needs to be spent on our facilities.”
Board member Jackie Moore said the discussion the board had at the May 19 meeting “dealt with the best way to take on that debt and how.”
Matt Baron framed the discussion in terms of what he said has been District 200’s past practice of overtaxing residents.
“The reality is our mathematics on all of this is screwy, because we have too much money in the bank. That is an enviable problem. A lot of school districts would love to have that problem, but it came at a cost. And the cost is that we’ve had people in this community for years who have overpaid,” Baron said. “For us to issue more debt for future users to pay for future use of the school makes sense in a sensible world and in a sensible history, but we don’t have that.”
Baron said the only way he would support issuing more debt was if “we go with some kind of abatement,” adding that the district will still be able to borrow money down the road.
“Banks will still loan money in the future,” he said. “And if and when we get to that point and we have actual figures in front of us instead of projections, I think that’s a more appropriate time to look into that.”
Board President Sara Dixon Spivy said that holding off issuing more debt in order to offset concrete costs related to COVID-19, as opposed to anticipating unknown risks associated with the pandemic, “feels much more strategic. To have the information well in advance of when we may need it or act on it is really helpful for making this decision going forward.”