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posted: 9/11/2013 5:59 PM

Geneva school eyes applying $5 million surplus to debt

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The Geneva School District 304 finance committee heard this week the district may be able to use as much as $5.2 million surplus from the district's education fund to pay part of its debt bill in 2013 and 2014.

They also again heard a suggestion from a co-founder of a watchdog group that it reduce its property tax levy so that such a surplus doesn't build up, but instead stays in the pocketbooks of taxpayers.

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"My whole issue on this is abatements, in my view, are not saving the taxpayers anything,'" said Bob McQuillan. " ... that surplus is being paid for by the taxpayers, correct?"

District policy is to keep $15 million in reserves in the education fund. That would cover about two months' worth of expenses. Anything above that, as of the end of a fiscal year, the board has been applying to debt payments.

The policy goal is to lessen the increases in the property tax levy for debt. Without using the education fund surpluses via abatements, the debt levy will climb from $18.73 million for taxes collected in 2014 to $24.92 million for taxes collected in 2020, dropping to $19.2 million in 2026, when all current debt is due to be paid off.

The district owes $276.65 million in principal and interest.

The district will set the 2013 tax levies in December, and has until March 2014 to decide whether to abate any of them.

Committee member Kelly Nowak suggested the district consider setting the education fund surplus benchmark even lower. The committee also discussed how the district has a working cash fund that can be used to cover bills when cash flow dips, and that maybe that fund should be drawn down some.

Donna Oberg, the district's assistant superintendent for business services, said the surplus is unusually high this year, because for a change the state paid all of its general aid reimbursements by July. The fiscal year ended June 30, and audited numbers are due shortly.

None of the debt is callable for refinancing until January 2017.

But the district could flatten payments by extending the debt another three years. That, however, would add $21 million to the bill, according to Elizabeth Hennessy of William Blair and Co. LLC, the firm the district hires to analyze its debt each year. Her report is available at v3.boardbook.org/Public/PublicItemDownload.aspx?ik=34308011.

"From where I'm sitting, the longer you can put off doing that refunding the better you are, as long as you have the surplus," Hennessy said.

"I think paying off the principal is the best, rather than stretching it out," Nowak said.

The district could stick the surplus in an earmarked escrow account, and use it to defease some of the debt in 2017. That wouldn't flatten the payments, Hennessy said, but it could reduce some of the debt cost.

Nowak told McQuillan that the board did not increase its operating funds tax levies as much as it legally could have in 2012, and that she thinks the board will continue to look at increasing those levies less than allowed. "Where we have erred and we have taken too much is because this is not a perfect science," she said, pointing out that levies are set in December for taxes for a school budget that begins the next July.

"No disrespect, but we always have excess funds," McQuillan replied.

"It seems like the issue of the district is to over-levy and have excess funds."

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