Cary District 26 mulls tax increase

The costliest option Cary Elementary District 26 is considering to raise cash through higher taxes would more than double the district's debt over the next 14 years and push the bond rate so high that it wouldn't return to current levels until after 2024, according to the district's own projections.

But the cost of doing nothing is an estimated $5.5 million in additional budget cuts through the 2013-14 school year, continued short-term borrowing just to meet payroll and the possibility of a state takeover.

District officials are weighing those scenarios as they decide whether to ask voters for more money in a November referendum.

"That's what makes it so tough," school board President Chris Spoerl said this week. "All the options are severe. There are no obviously great options here."

Just last year, voters shot down the district's request for $17 million in bonds. The board decided not to try again in February's primary election.

But since then, the state of school funding has grown dire, with the Illinois treasury failing to make millions in promised payments to districts. The state still owes District 26 about $2 million for the school year that ended June 30, Spoerl estimated.

The delayed payments, combined with declining enrollment and years of board-approved budget deficits, have left District 26 barely able to pay vendors and teachers. The district had to issue millions in short-term loans this year just to cover day-to-day expenses.

Next year, Director of Finance and Operations T. Ferrier projects the district will reach its limit on short-term borrowing, endangering its ability to pay bills and risking a state takeover.

District administration has proposed three tax increase options:

• Option 1 would increase the limiting rate, the tax rate that covers basic operational expenses, by 40 cents per $100 of equalized assessed value annually for three years. It would also increase the bond rate by 19 cents, allowing the district to issue $20 million in working cash bonds.

• Option 2 would increase the limiting rate by 40 cents, but would not affect the bond rate.

• Option 3 would increase the bond rate 19 cents, but leave the limited rate unchanged.

Option 1 would, of course, be the most expensive. The district's bond counsel estimates debt would rise to $69.5 million by 2024, compared to the $29.9 million in debt the district would have without a tax increase.

The district estimates option 1 would cost the owner of a $300,000 home an additional $1,300 in taxes over the next three years. Since the bond tax rate would not fall back to current levels until after 2024, it would cost much more than that over the life of the bonds.

But option 1 also would allow the district to restore $3.9 million in programs, address infrastructure needs, eliminate short-term borrowing, restore fund balances and stop deficit spending.

Option 2 would cost the same homeowner an additional $1,100, but would not end borrowing or enable the district to bring back programs until after the 2014-15 school year.

Option 3 would cost the owner of a $300,000 home an additional $166, but would end the need for borrowing and, combined with additional cuts through the 2013-14 school year, allow the district to stop deficit spending.

The board's Finance Committee will discuss the alternatives July 12. The committee reviewed the options in June and forwarded them to the full board without a formal recommendation.

But the board last week punted the decision back to committee after it appeared members were deadlocked on whether to even place a question on the November ballot.

The board has until Aug. 30 to decide whether to go to referendum this fall. The district could wait until the spring 2011 election, but then it would not be able to reap the benefits until the 2011-12 school year.

The board voted earlier this year to close Maplewood School, lay off about 80 teachers and eliminate art, music and physical education in a bid to erase a deficit expected to grow to $6.6 million next year.