Batavia school board thinking how to repay debt

Batavia school trustees have some decisions to make soon about how much of the district’s reserves to spend on repaying money it has borrowed.

If the district wants to stick to its policy of maintaining a stable overall tax rate in the face of declining property values, either more of the operating tax needs to go to debt instead of operations, or it needs to draw down its cash reserves, Kris Monn, the district’s assistant superintendent for finance, pointed out.

Monn said he expects a $2.11 million deficit between operating revenue and expenses for the budget year that ends June 30, slightly less than the $2.5 million originally budgeted. That does not include, however, money transferred from reserves to make a payment on the district’s debt.

“Going forward is where things start to get a little interesting,” Monn said.

In making the projection for the 2011-12 budget year, Monn assumed state and federal payments would stay constant, except for federal economy-stimulus payments that expire. He also expects salaries and benefits to stay level. He put in a 4 percent increase in cost for services such as maintenance of office equipment, school busing and school lunches.

He also assumed the Consumer Price Index would be about 2.5 percent, and that the district’s equalized assessed valuation would decline 5 percent. When asking taxpayers to borrow $75 million in 2008, the board promised to keep the overall tax rate at $4.69.

In May 2010 the board refinanced $2.87 million of its debt, extending the loans out eight years to get lower payments. Doing so, however, increased the cost to the district. It eliminated current principal and interest payments for some bonds issued in 1998, 2003 and 2008, and the 2011 maturity of some of the 1998 bonds. Doing so means taxpayers will pay an extra $600,000 on the loans.

If the district does not again restructure some of its debt this spring by changing the terms to a longer payoff, the deficit will widen, and the reserve fund will drop to $10 million at the end of the 2012 budget year, Monn told the school board this week.

Monn worries about lowering the reserves that much, as that cash covers bills while the district awaits tardy payments from the state for some items, such as transportation reimbursement.

And by the 2012-13 budget year, the district would have to consider devoting more of its operating taxes to debt payment, if it keeps the overall tax rate the same.

By then, the district will have new contracts with several of its unions. Monn plugged in a 2.5 percent increase. That would take the fund balance down to $2.7 million, he said.

“There are two strategies we really need to iron out,” Monn said. They are to “close the gap” between expenses and revenues, and decide whether to restructure debt again or keep paying some of it out of reserves.

The board’s finance committee, consisting of trustees Matt Winkle and Joseph Purpura, favors avoiding further debt restructuring.

“What we do realize is that we cannot restructure at the rate we are restructuring debt now,” Winkle said. “We can’t continue to push it on to future generations. We have to start paying some of that debt now.”