Post by concerned2 on Apr 27, 2010 10:49:23 GMT -6
School districts may get state OK to issue bonds for buildings without voter approval
Strapped for cash and taking their lumps on tax-increase measures, school districts in Chicagoland are increasingly skirting requirements for voter approval of building projects by issuing bonds that don't require a referendum and then shifting that money from fund to fund.
Even after a state Appellate Court ruled last year that such maneuvers were improper, the Hinsdale Township High School District 86 board reached into a rainy-day fund for $4 million to install artificial turf at its two high school football fields.
Because the court held that another district inappropriately used working cash bonds on a building project, the Hinsdale board didn't transfer the money directly. Instead it parked the cash in the district's main education fund before moving it to building funds.
"Money-laundering," one outraged school board member called it.
According to court filings, 95 school districts in Cook, DuPage and Will counties sold nearly $800 million in working cash bonds between 2000 and 2008 for building projects through these "back-door" means of avoiding referendums. Nearly 75 percent have been in Cook County.
State legislators are now considering a bill that would permit school districts to transfer working cash bond money to any school fund, allowing the controversial practice to become the norm. The legislation, which would be retroactive, was crafted by firms that specialize in school law and a nationally recognized bond counsel, Chapman and Cutler, which has advised schools on the practice.
State Rep. Paul Froehlich, D-Schaumburg, who served on a school board in Schaumburg District 54 from 1989 to 1993, voted against the bill, which was approved by the House and could come to a final Senate vote as early as Tuesday.
"I see it as an amnesty bill," he said. "It's giving amnesty to those school districts that didn't follow the law."
Critics of the legislation say a fund created to help districts pay bills when the state is late on its payments — as it is now — could be gutted by school districts with a proclivity to overspend. State Board of Education officials estimate 44 percent of districts will spend more than they take in this school year. As for taxpayers, the legislation would take away their right to vote down building projects through a referendum.
John Izzo, an attorney with Sraga Hauser, which represents about 100 of the state's 869 school districts, helped draft the legislation and testified in favor of it in Springfield. He says the Appellate Court decision simply interpreted "an ambiguous provision" of the school code differently from how Chapman and Cutler and school attorneys had done in the past.
School districts could potentially be ordered to pay hundreds of thousands of dollars, if not millions, in tax refunds if the law is not changed.
"That's money that right now means more teacher layoffs, more cuts in services, at a time when school districts can least afford it," Izzo said.
The ruling also opened the door for board members who authorized questionable fund transfers to possibly face fines.
Izzo added, "We have to abide (by the Appellate Court) decision, but of course the courts have to abide by the legislature if the legislature changes the language."
The State Board of Education, which last year said the Appellate Court ruling only confirmed its "long-standing position," says it's neutral on the bill.
"The state is behind $1.25 billion in payments to districts, and we're facing a $1.3 billion proposed budget shortfall for next year," said state board spokeswoman Mary Fergus. "We don't want to hinder districts if this is something they need to do during historically tough economic times."
Opponents of the legislation say there's more at stake here.
"This was done to keep the bond business going because it took away the risk of a referendum (defeating a building project)," said Jim Rooney, an attorney representing tax objectors who first raised the legal issue when they sued West Chicago School District 33 in 2000. District 86, Community Unit School District 201 in Westmont and Lombard School District 44 — all of which faced similar lawsuits — agreed to be bound by the West Chicago case, which eventually was heard by the Appellate Court.
School advocates, meanwhile, argue that the financing method does not take away voters' rights to object to building projects.
"The public votes on which school board members will use the limited resources they have in the most efficient way," Izzo said. "It's an exaggeration or distortion of the law to say that you have to go to the public every time you fix a roof or remodel a kitchen. It doesn't say you have to go to voters for every decision."
Rooney said the working cash method of financing capital projects originated in the late 1990s in DuPage County, then spread to parts of Cook and Will counties. His tax objection cases in Cook, DuPage and Will counties argue that in 2008 alone, taxpayers paid more than $130 million for working cash bonds that funded building projects. He said school districts and supporters of the legislation are trying to protect themselves from having to pay refunds to his clients.
In Hinsdale, former District 86 board member Richard Skoda said he believed the money transfer was meant to be a temporary loan that would be paid back once the next state payments roll in.
District 86 is one of the most frequent users of the process, having taken out more than $24 million in working cash bonds since 1998 for capital improvement needs. On May 18, the district passed a resolution to move $4 million out of the working cash fund and into the education fund. It resolved the same day to create a new fund, called capital projects, and eventually move the money there. It was a two-step process, but the board and its attorneys found a way around the Appellate Court decision.
School district attorneys say if the legislation doesn't pass, schools will continue the financing method whether it be as a two-step process, three steps or even four steps.
"If (the bill) doesn't get passed, in the future, school districts will just do it a different way," Izzo said. "It won't change how they do it."
Tribune reporters Michelle Manchir and Joe Mahr contributed to this report.
nahmed@tribune.com
Get more stories like this. Sign up for home delivery today.
Strapped for cash and taking their lumps on tax-increase measures, school districts in Chicagoland are increasingly skirting requirements for voter approval of building projects by issuing bonds that don't require a referendum and then shifting that money from fund to fund.
Even after a state Appellate Court ruled last year that such maneuvers were improper, the Hinsdale Township High School District 86 board reached into a rainy-day fund for $4 million to install artificial turf at its two high school football fields.
Because the court held that another district inappropriately used working cash bonds on a building project, the Hinsdale board didn't transfer the money directly. Instead it parked the cash in the district's main education fund before moving it to building funds.
"Money-laundering," one outraged school board member called it.
According to court filings, 95 school districts in Cook, DuPage and Will counties sold nearly $800 million in working cash bonds between 2000 and 2008 for building projects through these "back-door" means of avoiding referendums. Nearly 75 percent have been in Cook County.
State legislators are now considering a bill that would permit school districts to transfer working cash bond money to any school fund, allowing the controversial practice to become the norm. The legislation, which would be retroactive, was crafted by firms that specialize in school law and a nationally recognized bond counsel, Chapman and Cutler, which has advised schools on the practice.
State Rep. Paul Froehlich, D-Schaumburg, who served on a school board in Schaumburg District 54 from 1989 to 1993, voted against the bill, which was approved by the House and could come to a final Senate vote as early as Tuesday.
"I see it as an amnesty bill," he said. "It's giving amnesty to those school districts that didn't follow the law."
Critics of the legislation say a fund created to help districts pay bills when the state is late on its payments — as it is now — could be gutted by school districts with a proclivity to overspend. State Board of Education officials estimate 44 percent of districts will spend more than they take in this school year. As for taxpayers, the legislation would take away their right to vote down building projects through a referendum.
John Izzo, an attorney with Sraga Hauser, which represents about 100 of the state's 869 school districts, helped draft the legislation and testified in favor of it in Springfield. He says the Appellate Court decision simply interpreted "an ambiguous provision" of the school code differently from how Chapman and Cutler and school attorneys had done in the past.
School districts could potentially be ordered to pay hundreds of thousands of dollars, if not millions, in tax refunds if the law is not changed.
"That's money that right now means more teacher layoffs, more cuts in services, at a time when school districts can least afford it," Izzo said.
The ruling also opened the door for board members who authorized questionable fund transfers to possibly face fines.
Izzo added, "We have to abide (by the Appellate Court) decision, but of course the courts have to abide by the legislature if the legislature changes the language."
The State Board of Education, which last year said the Appellate Court ruling only confirmed its "long-standing position," says it's neutral on the bill.
"The state is behind $1.25 billion in payments to districts, and we're facing a $1.3 billion proposed budget shortfall for next year," said state board spokeswoman Mary Fergus. "We don't want to hinder districts if this is something they need to do during historically tough economic times."
Opponents of the legislation say there's more at stake here.
"This was done to keep the bond business going because it took away the risk of a referendum (defeating a building project)," said Jim Rooney, an attorney representing tax objectors who first raised the legal issue when they sued West Chicago School District 33 in 2000. District 86, Community Unit School District 201 in Westmont and Lombard School District 44 — all of which faced similar lawsuits — agreed to be bound by the West Chicago case, which eventually was heard by the Appellate Court.
School advocates, meanwhile, argue that the financing method does not take away voters' rights to object to building projects.
"The public votes on which school board members will use the limited resources they have in the most efficient way," Izzo said. "It's an exaggeration or distortion of the law to say that you have to go to the public every time you fix a roof or remodel a kitchen. It doesn't say you have to go to voters for every decision."
Rooney said the working cash method of financing capital projects originated in the late 1990s in DuPage County, then spread to parts of Cook and Will counties. His tax objection cases in Cook, DuPage and Will counties argue that in 2008 alone, taxpayers paid more than $130 million for working cash bonds that funded building projects. He said school districts and supporters of the legislation are trying to protect themselves from having to pay refunds to his clients.
In Hinsdale, former District 86 board member Richard Skoda said he believed the money transfer was meant to be a temporary loan that would be paid back once the next state payments roll in.
District 86 is one of the most frequent users of the process, having taken out more than $24 million in working cash bonds since 1998 for capital improvement needs. On May 18, the district passed a resolution to move $4 million out of the working cash fund and into the education fund. It resolved the same day to create a new fund, called capital projects, and eventually move the money there. It was a two-step process, but the board and its attorneys found a way around the Appellate Court decision.
School district attorneys say if the legislation doesn't pass, schools will continue the financing method whether it be as a two-step process, three steps or even four steps.
"If (the bill) doesn't get passed, in the future, school districts will just do it a different way," Izzo said. "It won't change how they do it."
Tribune reporters Michelle Manchir and Joe Mahr contributed to this report.
nahmed@tribune.com
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