U-46 mulls $30 million in short-term loans

Elgin Area School District U-46 officials are hoping for an early Christmas present from Cook County to avoid having to take out up to $30 million in short-term loans.

The school board this week reviewed a proposal for the loans, which would allow the district to make a $34 million debt payment due Jan. 1, school officials said.

The board is set to vote on the matter Dec. 6.

If the board approves the measure, the district would be able to issue up to $30 million in tax anticipation warrants by Feb. 1.

Tax anticipation warrants are like payday loans for government bodies, although they don't carry the same exorbitant interest rates. They are borrowed against future tax receipts and paid back with property tax revenues.

“We don't want to borrow unless we have to,” board President Ken Kaczynski said. “It's a cash flow situation. It's to meet our everyday cash obligations.”

The state is about $22 million behind in payments to U-46 for the current and previous school years, district officials estimate. On top of that, Cook County sent out the second installment of 2009 tax bills late meaning U-46 may not start to see revenue from those bills until late December, dangerously close to the Jan. 1 deadline.

But newly minted Director of Financial Operations Dale Burnidge says he doesn't think U-46 will have to borrow the money.

“The state has said that they will pay the fiscal year 2010 money by the end of the year, and we should be getting some distributions from Cook County in the second half of December,” Burnidge said. “If we had either one of those, we should be OK.”

U-46's cash flow issue may require more than just a one-time infusion. Burnidge said the staff is looking at options for restructuring debt, which would allow the district to make smaller, more manageable payments but for longer potentially increasing the long-term cost of the debt.

Much of the debt stems from the spate of construction that created South Elgin High School and other buildings amid rising enrollment earlier in the decade.

“They didn't count on a recession this severe in the middle of the repayment plan,” Burnidge said. “With the interest rates being so low ... it's something we're considering. We'll probably bring something to the board the first quarter next year.”

Loans: U-46 also may restructure its debt