U-46 will not take out loans for debt payment
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The state’s second-largest school district will not have to take out short-term loans to cover a debt payment due Saturday.
The Elgin Area School District U-46 school board had authorized up to $30 million in tax anticipation warrants to make the $34 million debt payment.
Finance officials feared the district would not be able to make the payment unless the state made good on $12 million it owed the district from the 2009-10 school year or Cook County started to funnel revenue to the district from second-installment 2009 tax bills.
Luckily for U-46, both of those things happened.
“The state paid us $12 million from (fiscal year 2010) during the first two weeks of December and Cook County sent us a tax distribution of $19 million on the 15th, so we will not need to issue the TAWs,” wrote Dale Burnidge, director of financial operations, on Monday.
Tax anticipation warrants work like payday loans for school districts, without the exorbitant interest rates. They are repaid with property tax revenues. While issuing the loans is not unusual, repeated issuances are usually a symptom of serious cash flow issues and financial dire straits.
While the district is in the clear for now, U-46 is trying to avoid getting into a similar time crunch in the future. Finance staff plan to present a plan early in 2011 for restructuring the district’s debt, which would allow the district to make smaller payments but for a longer time (and potentially at a higher overall cost).
Much of the debt the district is now paying off was originally incurred during a high-growth period in the early 2000s that saw the construction of South Elgin High School and other buildings.
