The Riverside District 96 school board on Sept. 20 is expected discuss taking out a $10 million bank loan to help fund major life-safety and other improvements at all five of its schools. The work is projected to take place during the summers of 2012 and 2013.

Superintendent Jonathan Lamberson said last week that the school board will likely seek to issue the debt before the end of 2011 in order to take advantage of low interest rates.

“The reality is that if we want to have a bank-qualified loan and we’re limited to $10 million and no one knows where [interest rates] will go … that we may have an opportunity to do it some time before the end of the calendar year to take advantage of these historically low rates.”

Lamberson said the district will seek a AAA bond rating in order to qualify for interest rates that could be as low as 2.2 to 2.7 percent.

The board’s finance committee met Sept. 7 to discuss possible funding options for the project, which is projected to cost $24.5 million. The finance committee is expected to recommend issuing $10 million in bonds to be paid off over 10 years.

According to the district’s bond counsel, Tammie Beckwith Schallmo of PMA Securities, the bank-qualified debt can be issued without a petition challenge being mounted to force the bond issue to a referendum.

The finance committee also considered issuing alternate revenue bonds, but decided against that option. Alternate revenue bonds could have been open to a back-door referendum challenge.

In addition, said Lamberson, such bonds are backed by general tax obligations. If the district should somehow be unable to cover the debt service, such bonds “have the possibility to flip to the bond and interest fund and be outside of the tax cap. The board didn’t feel that was appropriate.”

The debt service as well as the rest of the construction costs would be paid for out of the district’s cash reserves, which have skyrocketed since the passage of a tax referendum in 2004.

Although the district has not yet received its audit of the 2010-11 school year, Lamberson said the district has between $25 million and $27 million in reserve that can be used toward the improvement project.

Lamberson did not yet have a projection of what the district’s cash reserves would look like when the debt is paid off in 10 years. He said the board expected to get that information from Schallmo by the Sept. 20 meeting.

Information provided to the finance committee on Sept. 7 indicated that the board would pay $14 million from its cash reserves during the second year of the improvement project in 2013.

The debt service on the 10-year bank loan would be approximately $1.15 million annually, according to Schallmo. The district expects to generate cash surpluses of $925,000 per year through 2016, Schallmo said.

In June, the school board approved directing the district’s architect to begin working on designing improvements to Ames School, Central School and Hauser Junior High. Last week, Lamberson said the district would also complete improvements at Hollywood School and Blythe Park School.

“We’re trying to take a holistic approach,” Lamberson said.

The school board has yet to decide which of the many improvements contemplated for those two schools will be implemented.

Among the changes proposed at Hollywood School are moving the main entrance to accommodate a new classroom, extensive plumbing and electrical repairs, installing new ventilators and an air conditioning system, a new fire protection system, chairlifts, and replacing technology infrastructure.

Changes proposed at Blythe Park include several fire protection measures, repairing plumbing and electrical systems, adding air conditioning, creating additional instructional space and modifying the basement area for a combination music, art, cafeteria space.