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updated: 7/19/2011 11:12 AM

Local tax group says schools could cut debt levies

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  • A taxpayer watchdog group says some local school districts have enough cash to pay off bonds, lowering tax levies for debt repayment. Bonds often are issued to pay for construction work.

      A taxpayer watchdog group says some local school districts have enough cash to pay off bonds, lowering tax levies for debt repayment. Bonds often are issued to pay for construction work.
    Gilbert R. Boucher II | Staff Photographer Jul

By Jeff Engelhardt
Daily Herald correspondent

A suburban taxpayer watchdog group has issued a report calling on local school districts to give money back to residents by paying off debt from the extra cash they have, cutting taxes levied.

Northwest Suburban Taxpayers United found that 15 local school districts had $42 million in what it considers excess annual debt service costs. Four of those districts -- Arlington Heights Elementary District 25, Schaumburg Township Elementary District 54, Elk Grove Township Elementary District 59 and Palatine-Schaumburg High School District 211 -- accounted for $24.5 million of the extra costs.

Those four districts have so much cash on hand they could pay off their debt, stop collecting debt service tax and still have resources left over, said Roland Ley, president of the taxpayer organization.

"These results show very poor financial management practices and policies, and total disregard for taxpayers who are footing the bills," Ley said in a written statement. "How many people keep their extra cash invested at 1 percent while maintaining loans that have interest costs between 4 and 6 percent?"

District 54 and 211 superintendents disagreed the cash should be considered "excess," saying it has been a crucial part of the long-term plan to becoming debt free.

Schaumburg District 54 had the highest amount of excess cash in the debt service fund at $7.9 million. But that cash, said Superintendent Ed Rafferty, is going to construction costs this year and will finally make the district debt-free in November.

Ric King, assistant superintendent of business for District 54, said the board decided to use the $7.9 million instead of collecting a $9.4 million debt service extension tax -- which would have cost taxpayers more. He said the $7.9 million has accumulated over many years, both from interest and the additional charges counties put on each levy.

While the budget has been balanced the past few years, Rafferty said this maneuver would finally wipe out the district's debt, which started with large construction projects in the early 1990s to the 30 buildings in the district.

Ley said the district would have been able to pay off its $17 million in debt last year and still have money left over, so there was no reason for any additional debt service levy.

"He can say they are paying off all the debt by November, but why wait?" Ley said. "I know they think they are being conservative holding on to this money, but why have this debt when you can pay it off and give some money back to the taxpayers?"

Dave Torres, associate superintendent for business at District 211, said keeping reserves is key to keeping tax levies low and schools operational.

District 211 has reduced its debt service levy by $16.7 million since 2007. Torres said that reduction was possible because the reserves allow the district to pay off roughly half the debt and then levy the other half.

Last year the district paid off $10.7 million in debt while only collecting $5.7 million from taxpayers in debt service, he said.

"We've been doing exactly what this group has been asking for and reducing our tax levy since 2007," he said. "The difference is (Ley) wants it zeroed out, but that would cost more in the long run."

Torres said 85 percent of the district's revenue comes from property taxes, and because they do not know when that money will come in from year to year, it is important to keep a reserve.

Still, Ley said in these economic times it makes more sense to eliminate all debt if school districts are able to.

"I understand their side of it a little bit, but we're suffering," he said. "Our tax bills go up every year and they keep levying taxes when they don't have to. They can, but they shouldn't."