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updated: 2/26/2014 9:35 AM

District 203 looks to save by repaying loan early

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A list on the wall of Naperville Unit District 203's Chief Financial Officer Brad Cauffman sheds a little light on one of the district's aims: save money.

Cauffman's list of money-saving ideas includes two topics the school board recently began discussing.

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One includes avoiding years of interest payments on a loan the district took out in 2008 by repaying the bonds early, and Cauffman said the board has committed to exploring that possibility.

Another involves keeping $3 million in property tax money the district usually refunds to property owners and using those funds to help pay off the loan. That would mean the owner of a $350,000 home would not be refunded about $95.

The school board is set to consider keeping the additional $3 million in taxes at its meeting at 7 p.m. Monday, March 3, in the administrative center, 203 W. Hillside Road. A vote is not scheduled until the following board meeting on March 17.

District 203 borrowed $10 million in 2008 and $33 million in 2009 to help fund construction and renovation projects on several schools, Cauffman said. The 2008 loan is not scheduled to be repaid until 2028, costing the district a total of $17.29 million.

Each year, District 203 pays roughly $400,000 in interest on the 2008 loan. The loan's structure allows it to be paid back in 2018, but Cauffman said if the district waits until then, it will have to spend $1.5 million on interest in the meantime. The 2009 loan cannot be paid back early, Cauffman said.

"By jumping in and paying them off early, it's going to save a substantial amount of money," Cauffman said about the 2008 bonds.

Discussions with bond holders will determine how much District 203 is able to save by paying back the loan early.

If an early repayment plan is worked out, the district will need roughly $10 million on hand to seal the deal. That's why administrators are recommending the school board use its taxing authority to keep roughly $3 million in property taxes it has collected and then given back to property owners four out of the past five years.

The district gained the ability to levy for about $3 million a year -- as one portion of its total property tax levy -- when voters approved the 2008 and 2009 loans to fund school construction and renovation. Instead of voting each year to collect the funds, it is assumed the tax will be assessed.

If the school board wants to use other funds to make loan payments -- as it has in four of the past five years -- board members can vote to refund the tax levy tied to the loans.

But this year, Cauffman is recommending the board vote to keep the revenue and use it to cover about one-third of the cost of paying off the entire 2008 loan early. Cauffman said administrators do not recommend the board pay off the loan this year without keeping the $3 million in property taxes designed to help pay for it. That might require dropping too close to the 10 percent operating reserve the district maintains by policy, he said.

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