District U-46 considers borrowing $25 million

Elgin Area School District U-46 did not have to borrow to make it through 2010. But the New Year? That's another story.

The U-46 school board on Monday will discuss a proposal to issue $25 million in working cash bonds.

Proceeds from the bonds act as a cash reserve the district can dip into during the year to cover payroll and other regular operational costs.

Because of delayed state payments to U-46 ($16 million at last count), finance officials in U-46 think there's a strong chance the district will run out of cash for regular expenses during the spring.

“It really has to do with the cash flow problems with the state,” said Dale Burnidge, director of financial operations. “It puts us in a position where we may need to borrow.”

Late last year, the school board authorized up to $30 million in tax-anticipation warrants, short-term loans repaid with property tax revenues, to cover a debt payment due Jan. 1, 2011.

But because the state made good on $12 million it owed U-46 from fiscal year 2010 and Cook County distributed $19 million in property taxes, the district did not have to take out the loans.

Still, finance officials say that if the state remains behind on payments for the current school year, U-46 could run out of cash by the end of May. That includes the $74 million currently in the district's working cash fund.

“Because of our operating deficit and the cash needs during the year, we borrow from that (fund) during the year,” Burnidge said.

It is too early to know whether the district will end up needing the bonds. The Illinois General Assembly is mulling an income tax increase that would allow the state to make good on payments owed to schools.

This month, U-46 will start receiving additional state aid secured by a 2010 bill that should result in the district getting an additional $15.5 million.

A public hearing on the working cash bonds is tentatively scheduled for Feb. 28, with the board set to vote on issuing the bonds on March 7.

U-46 residents can force the issue to go to the voters, but the hurdle is high. They must submit a petition with the U-46 board secretary signed by at least 10 percent of registered voters in the district.

If that doesn't happen within a specified 30-day window, the district can issue the bonds without voter consent.