$5.7M Grant May Pay Down Building Debt, Dist. 202 Officials Say

A one-time federal grant worth $5.7 million has the potential to save about $2.1 million in land payments over the next 10 years, Plainfield School District 202 officials said Wednesday.

Under the federal education jobs bill, the district can be reimbursed for $5.7 million for fiscal year 2011 salaries and benefits and can be reimbursed against future salaries and benefits in fiscal year 2012. The funds would be used for compensation and benefits necessary to retain existing employees, to recall or rehire former employees and to hire new employees.

District administrators are recommending the grant money be used for salaries and the unbudgeted money that results from the grant go toward paying down debt on land the district bought to deal with Plainfield’s explosive residential growth.  That land was used to build Plainfield East High School, JFK Middle School and Eichelberger Elementary School, and land payments now are being made from capped revenue sources.

By looking at the long-term picture, the district has a unique opportunity to improve its fiscal climate and save more jobs in the long run, Supt. John Harper said.

“We recognize that this is a non-renewable source of revenue,” he said.

In the district’s plan, it would restructure current debt that will deliver savings over time.

Now, the district pays about $500,000 a year in land payments, but is expected to have balloon payments of principal and interest in the years 2015 through 2020. In those years, the payments could rise to as much as $2.3 million per year before decreasing to about $1.9 million per year in 2020, according to the Susan Krautstrunk, the district’s director of finance.

If the district uses the surplus money from the federal grant, it can restructure the debt so that it only pays about $711,000 annually through 2020, resulting in a savings of about $2.1 million from its current land commitment, Krautstrunk said.

Having the balloon payments from 2015 to 2020 would also be detrimental because it is expected that by then more major capital improvement projects would be needed on schools built during the village’s tremendous growth period, Harper said.

Restructuring the land payments will both stabilize them and give the district the capacity to issue life safety bonds in 2015 and pay them back in about five years, Harper said.

Using the money to avoid layoffs would increase the deficit because of its compounding nature, Harper said.

The district’s financial advisors have said that the deficit is expected to continue until at least 2016 and district officials have said that more cuts are going to be needed next year.

According to PMA Financial Network, the district is expected to have a $6.2 million deficit in fiscal year 2012, a $7.3 million deficit in fiscal year 2013, a $7.7 million deficit in fiscal year 2014, an $11.4 million deficit in fiscal year 2015 and a $16.8 million deficit in fiscal year 2016.

Harper said that since the federal money is not renewable, the district needed to explore options that benefit its financial situation in the long term, which will save more future jobs.

The board is expected to discuss the federal grant money at Monday’s school board meeting, when it also is expected to approve its budget deficit elimination plan.