Portions of the roofs of all three high schools in Proviso Township High School District 209 were repaired this fall, but the district still has around $53 million worth of capital projects requiring maintenance and repair over the next 10 years, according to a survey of “life safety” and capital needs presented by Legat architects. Of that money, $16.7 million would be for “life safety” projects.
How to borrow enough money to pay for them was the subject of a presentation given by financial advisors Steve Larson and Brad Townsend of Ehlers & Associates at the D209 school board meeting on Dec. 11. The financial advisors gave five options to the board, none of which generated an enthusiastic response.
The district received around $2.05 million this year in grant funding from the Illinois Department of Commerce and Economic Opportunity (DCEO) and the Illinois State Board of Education to address life safety issues.
But that sum is not enough to catch up to long-overdue repairs and replacement of systems like plumbing, electrical and tuckpointing.
Complicating the issue, the district still owes $83,889,534 from bonds issued in 2004 and 2008 to retrofit a former Loyola Memorial Hospital office building and turn it into the Proviso Math and Science Academy. That debt won’t be retired until 2026.
In 2012, D209 paid back principal of $3,855,000 and interest of $1,857,975 on this debt. Because there is so much outstanding debt, the district can only borrow relatively smaller amounts at a time. Property tax caps limit the total D209 can borrow, and that amount increases very slowly at a rate determined by the Consumer Price Index (CPI). This rate is traditionally around 2 percent. So the only way the district can borrow more is to pay off old debt and edge up the CPI rate.
The financial advisors told the board they are allowed to levy taxes for a specific life safety fund. They also pointed out that interest rates were at historic lows and contractors were hungry for work, which meant the district could negotiate good prices.
But board members were not enthusiastic.
“I will not support any option that involves raising taxes and/or asking taxpayers to approve a referendum for more taxes,” board President Emanuel “Chris” Welch texted after the meeting. “Our community is a community of working families and raising taxes is just not an option. I’m willing to consider other options that do not involve raising taxes.”
The first option presented to the board would borrow the first $10 million the first year by issuing General Obligation limited tax bonds, which the Ehlers representatives said would raise taxes by around $7 per home assessed at $150,000. Also known as a “backdoor referendum,” the move would pass automatically unless it were challenged by petitions submitted within 30 days by a number of residents that equaled 10 percent of the voters in the last school board election.
Board member Dan Adams expressed concern that raising property taxes was too hard on the families in the district. “Where does it end?” he asked, hypothetically.
The second option presented by Ehlers was a similar bond issue, but with a lower interest rate because it was “guaranteed” by a revenue stream. Townsend pointed out that the current school budget allotted $2 million for capital repairs. Dedicating half of those funds to new general obligation bonds was a way to borrow $8,600,000 over 10 years, starting in 2014, Townsend said.
But board member Brian Cross pointed out that the board could not guarantee there would be an extra $1 million every year to dedicate to the loan. “I see trouble if the state is in deeper and deeper trouble, and we have pensions hit us, and transportation [cuts] hit us.”
The third option presented was the issuance of debt certificates, which are loans with higher interest rates, not requiring a tax increase.
The advisors also floated the fourth option of a referendum, which was immediately shot down by Welch.
“We haven’t had a referendum in this district since the 1950s,” he said. Actually, there was a referendum, which didn’t pass, in the early 1990s.
The fifth option was labeled “cash basis/pay as you go,” which has been the district’s method for the past couple of years. The disadvantages of this option are having less accumulated capital to work with and not being clear which repairs are possible years in advance.
The first step in any sort of bond issue is to try to raise the district’s credit rating, said Townsend. The district currently has a Standard and Poor rating of BBB+. The Ehlers team suggested submitting to a new credit rating agency, such as Moody’s to see if that could be raised.
That may happen because the district has balanced its budget for three years, said Finance Oversight Panel President James Popernik.
“The district may be able to get a better rating because they’ve improved,” he said. The rating review would cost betweeen $6,000 and $10,000.
Popernik said he would recommend the first option: general obligation bonds, but he wanted to hear what other FOP panelists would say. “This seems like the only realistic option to me.”
Life Safety repairs bring buildings to code
Walk through the two oldest high schools in District 209 and the age of the buildings is evident. Dated bathrooms, drafty windows and crumbling facades are a part of the ambiance for students at Proviso East and West. The difference couldn’t be more stark when compared with Proviso Math and Science Academy, a recently retrofitted office building with modern classrooms, labs, bathrooms and auditorium.
The two older schools have significant maintenance and replacement needs that are categorized as “Life Safety” repairs, said Legat Architects in a report issued to the board. Life Safety repairs involve bringing the building up to current health and safety codes. They may be funded by a unique levy, separate the district’s Operations and Maintenance fund. Since 2010, districts are allowed to transfer fund surpluses from Life Safety to Operations and Maintenance as capital projects are started.
The oldest campus, Proviso East, was originally built in 1910, with additions added in the 1930s and then again in the ’50s and ’60s. Proviso West was built in 1958 with additions added in the ’60s and ’70s.
Finance Oversight Panel President James Popernik said deferring maintenance in a school district is a false economy. “If you’re not proactive on maintenance, you end up always playing catch-up and it costs more,” he said.
But the board has downplayed Life Safety repairs in the past.
“Life Safety? Are our schools dangerous?” board President Chris Welch asked hypothetically of a representative from Legat at the Oct. 9 board meeting at Proviso West High School. The architect shook his head. But that firm supplied a list of repairs, which included significant overhauls in mechanical, electrical, plumbing and physical conditions at the district’s two campuses.
The board also delayed choosing a financial advisor for months. School board member Readith Ester said she felt the short list of advisors had been fed to the board by members of the financial oversight panel.
According to the report, Proviso East requires electrical upgrades, masonry tuckpointing, floors and ceilings, plumbing upgrades and mechanical upgrades totaling $964,370 in the next five years. Proviso West needs new doors and windows, flooring abatement, tuckpointing and electrical upgrades totaling $2,385,000.
Proviso Math and Science Academy requires no Life Safety work, according to the firm, but they recommend parking lot and elevator upgrades as well as some sewer and mechanical capital improvements.
“We are aware of the capital needs of our district and we have some important decisions to make,” Welch said.