Aurora Christian staying true to vision through tough times

It's a new school year for Aurora Christian School, now in its 34th year.

With it comes a new lesson for students, staff and parents - the effects of a deep recession on private school financing.

But leaders are confident they'll make it through troubling times and come out the other side better for the experience.

The issue

"Where there is no vision, the people perish," reads a Bible verse posted in the curriculum office of the school's high school and middle school campus on Sullivan Road in western Aurora.

People have had a vision for the nondenominational school since 1975, when it started with 82 students in grades kindergarten through nine, in loaned space in the Claim Street Baptist Church in Aurora.

As it grew, it rented more space, in First Presbyterian Church in Aurora. It bought a former tool-and-rivet factory on Illinois Street in 1976, added on to it in 1986, purchased the former Benjamin Franklin Junior High School on Blackhawk Street in 1978. And in the 1990s, it made plans to build a new high school west of town, on Deerpath Road near Orchard Road, off the East-West Tollway.

But then a good deal came along.

In 2004, it moved the middle-and-high-schoolers out of the Blackhawk building and into a former Chicago Sun-Times distribution warehouse on a 26-acre campus on Sullivan Road, adding a gymnasium, then in 2008 a $2 million football field, paid for by donations, including $500,000 from an anonymous donor. Last year's football team enjoyed it while en route to a state championship game for the first time.

The school was able to spend less on the Sullivan Road site - and get 20,000 more square feet - than if it had built on Deerpath Road.

To do that, it borrowed $18.26 million.

It did so by selling tax-exempt adjustable-rate demand revenue bonds. These are a financial instrument often used by churches and private schools to raise money for building projects. The terms allowed the school to put off principal payments until 2012.

The bonds were also backed by a letter of credit from a third-party bank, guaranteeing that if the school had trouble making the payments, the bank would make them. The school's properties were collateral.

To make the interest payments on those bonds, the school began selling off, bit by bit, the 116 acres on Deerpath Road near Orchard Road and the tollway. Some land was sold to the Total Living Network television company; some was sold for strip shopping centers.

"In that market what we did was reasonable," said Paul House, the school's superintendent, noting parents did not like sending their kids to an "old building" on Blackhawk that had asbestos problems.

Economy crashes

All was good until 2007, when the real estate market crashed. The school couldn't find buyers for its remaining Deerpath Road land. And earlier this year, the bank, pressured by the downturn in the economy, threatened not to renew the letter of credit when it came due in June.

"It just came together. The world economic crisis has caught us," House said.

"It's time to squeeze everybody," said Nick Calamos, a parent volunteer on the school's new finance committee, explaining that banks are less risk-tolerant now than they were in the days when real estate was booming.

The lack of a letter of credit would have given the school's creditors the right to demand full repayment immediately. Since ACS doesn't have $20 million in a bank account, the bank could have seized its properties.

And that scared people, coming at a time when another private school in the area - Driscoll Catholic High School in Addison - was in the news because it was closing, due to financial problems.

"Perception is everything. Two or three people saying, 'The sky is falling' does not help," House said, fearing people perhaps would not enroll or re-enroll if they thought the school was going to close. That would cause tuition income to drop, which would only compound the financial issue.

Would ACS, now with 900 students in preschool through 12th grade, be around this fall?

By God, yes

"Our doors are still open, and will stay open," said Jay Schutt, one of several parents volunteering on the new finance committee.

Meeting since the spring, the group has helped steer the school from closing.

It persuaded the bank to issue a three-year letter of credit, so that it still doesn't have to make a principal payment until 2012. Officials hope by then the real estate market will turn around, and they can sell some of that Deerpath land.

"They worked with us and were accommodating," said Calamos, senior vice president/head of investments for Calamos Investments, based in Naperville.

The bank, however, has asked for a few things in return.

The school now has to pay its operating expenses, bond interest, letter of credit fees and bank charges with operating income, not asset sales. The bank is also requiring the school to make efforts to cut expenses and raise income.

"The goal was to show them the plan. You don't want to be dumping assets at these (low) values to buy time. It is unfortunate it (the letter) came due at this time," Calamos said.

To that end, the school eliminated seven of its approximately 70 teaching positions this fall, though four teachers were planning to leave anyway, House said. It is also calling on parents to volunteer more at the school, doing things such as supervising before- and after-school care programs; helping in the lunchrooms, offices and libraries; taking care of setup and teardown for school events; and landscaping.

"We're a family here; people are stepping in and doing more and more to help," House said.

The school is now putting aside money regularly in anticipation of paying the principal.

"We are continuing. We are going on," House said.

"The bottom line is the students, not the buildings, not the grounds, but the students. We're the best-kept secret in the Fox Valley."

Hurt: School has called on parents to volunteer more