With cash reserves in its education fund sinking to a little more than a quarter of a million dollars, the Komarek School District 94 Board of Education on July 10 agreed to sell $2.4 million in working cash bonds.
The board will hold a public hearing on the bond issuance at its meeting scheduled for Sept. 11 at 7 p.m. at the school, 8940 W. 24th St. in North Riverside. If no petition is presented to the board prior to that hearing, the board will vote to move ahead with the bond sale, which officials say is needed to prevent cuts in services, or to ask for a property tax referendum.
“We’re doing it in a way so the property tax impact is negligible,” said D94 Superintendent Neil Pellicci.
The bonds would be paid off over a period of 20 years and also would extend existing bonds, issued in 2006 to pay for building improvements, to 2031.
According to Bill Hepworth, public finance banker with R.W. Baird, the district’s bond underwriter, homeowners presently pay 23 cents per $100 of equalized assessed value to pay the debt service on the bonds issued in 2006. The tax impact to the owner of a home in the district valued at $200,000 is $141 per year, according Hepworth.
With the new bond issuance, the tax rate for the bonds would rise to almost 26 cents per $100 of equalized assessed value, raising the tax impact to $156 per year, a $15 increase.
At the end of June, the district’s education fund, which pays for day-to-day expenses such as salaries and programs, was down to $268,000 – barely enough to cover the district’s payroll, said Pellicci.
As a result, the school board voted to permanently transfer $375,000 from its operations and maintenance fund to the education fund in order to pay district expenses until new tax revenues begin coming in.
If the working cash bonds are issued in September, the school board will immediately transfer $900,000 to the education fund to create a larger reserve.
Pellicci said the board is asking for the bond issue as a bridge to 2016, when the tax increment financing (TIF) district created in 1993 by the village of Broadview for the shopping center at Cermak Road and 17th Avenue expires.
“We want to take part of the bond issue to bolster the ed fund and spread it out until 2016-17, when the TIF comes off the Broadview mall,” said Pellicci, noting that Broadview officials have told him they are not intending to extend the TIF district.
“We’re counting on that coming off,” Pellicci said.
When that TIF expires, D94 figures to receive hundreds of thousands of tax dollars annually from that property. In 2011, the Cermak/17th TIF took in $3.75 million in incremental property taxes. Until the TIF expires, those incremental dollars can only be used to fund improvements within the TIF district.
In 2016, when the TIF expires, those incremental dollars will be split between the various taxing bodies, including D94, whose borders include the TIF district.
According to Ares Dalianis, the school’s district’s attorney, the Cermak/17th TIF includes two elementary school districts, Komarek District 94 and Lindop District 92. About 58 percent of the TIF lies within D94, he said.
Based on 2011 figures, if the TIF expired this year, the district could have received an additional $650,000 in property taxes – which represents about 15 percent of the district’s total 2011 tax levy.
The school board has been kicking around the idea of a bond issue since early 2012 as board members began to see revenues falling far short of budget projections. The 2011-12 budget projected overall revenues in the education fund at $4.42 million. But by the end of June 2012, just $4.17 million, or about 94.5 percent, had been collected.
Local property tax revenues dropped year over year from $2.9 million in 2010 to $2.6 million in 2011. Meanwhile, the district’s corporate personal property replacement tax revenues were budgeted at $600,000 but came in at $423,000.
General state aid, which was budgeted at $218,000, came in under budget at $186,000, while return on investments – pegged at $30,000 – came in at $4,000.
At the same time, expenditures in the education fund at the end of June 2012 were over budget by $370,000. Almost three-quarters of that overrun can be traced to three sources – larger-than-expected health and dental insurance premiums, teacher salaries and costs related to special education.
Almost $200,000 in cost overruns could be traced specifically to special education programming.
The largest annual expenditure, teacher salaries, won’t change drastically next school year since raises are determined by a contract that expires in June 2013. Health insurance costs, however, are not expected to be as high as initially predicted. The district had projected health insurance premiums to jump 10 percent in 2012-13. However, said Pellicci, it looks like that increase will be more like 4 percent.
Some expenses, such as new technology equipment, were paid for through the operations and maintenance fund. And the district will try to trim other expenses, such as supplies.